Houston Nov 4, 2015 (Thomson StreetEvents) -- Edited Transcript of Carrizo Oil & Gas Inc earnings conference call or presentation Wednesday, November 4, 2015 at 3:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Chip Johnson Carrizo Oil & Gas, Inc. - President and CEO * David Pitts Carrizo Oil & Gas, Inc. - VP, CFO, CAO andTreasurer * Brad Fisher Carrizo Oil & Gas, Inc. - VP and COO * Andy Agosto Carrizo Oil & Gas, Inc. - VP of Business Development * Jeff Hayden Carrizo Oil & Gas, Inc. - VP of IR ================================================================================ Conference Call Participants ================================================================================ * Neal Dingmann SunTrust Robinson Humphrey - Analyst * Will Green Stephens Inc. - Analyst * Brad Carpenter Cantor Fitzgerald - Analyst * Brian Corales Howard Weil Incorporated - Analyst * Mike Kelly Seaport Global Securities - Analyst * Leo Mariani RBC Capital Markets - Analyst * Brian Gumble Simmons & Company - Analyst * Jeff Grampp Northland Capital Markets - Analyst * Ron Mills Johnson Rice & Company - Analyst * Marshall Carver Heikkinen Energy Advisors - Analyst * Ipsit Mohanty GMP Securities - Analyst * Chris Stevens KeyBanc Capital Markets - Analyst * John Nelson Goldman Sachs - Analyst * Dan McSpirit BMO Capital Markets - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. Welcome to the Carrizo Oil & Gas third quarter 2015 earnings call. (Operator instructions) As a reminder, this conference is being recorded Wednesday, November 4, 2015. I would now like to turn the conference over to Chip Johnson, President and CEO. Please go ahead, Sir. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [2] -------------------------------------------------------------------------------- Thank you, moderator, and thank you all for calling in for the third quarter of earnings call. Our Management team is pleased to report another outstanding quarter for the Company. Our net oil production of 23,573 BOPD was up 6% sequentially and represents a record level of oil production for the Company. Our team has also done an outstanding job with our expense reduction initiative such as our saltwater disposal program which started to bear fruit during the third quarter. And we expect to see results from some of the other expense reduction initiatives this quarter and in 2016 which should further enhance our margins. We've also recently taken a number of steps to strengthen our balance sheet and liquidity position which David Pitts will discuss. As a result, the Company is well-positioned to navigate the current environment, capitalize on attractive acquisition opportunities and reaccelerate production growth once commodity prices improve. Now I'll turn it over to David to talk about the quarter and then I'll come back around with an operations update. -------------------------------------------------------------------------------- David Pitts, Carrizo Oil & Gas, Inc. - VP, CFO, CAO andTreasurer [3] -------------------------------------------------------------------------------- Thanks, Chip, and good morning, everyone. As Chip mentioned, oil production for the quarter was a record 23,573 barrels per day. Gas and NGL production for the quarter were 51,710 Mcf per day and 3,757 barrels per day, respectively. Third-quarter production exceeded the high end of guidance for all products, primarily due to the continued strong performance of our Eagle Ford assets. Third-quarter revenues of $106 million included $95 million of [treatable] crude oil. During the quarter we realized 95% of NYMEX for oil which was above the range of our guided realization primarily due to better-than-expected differentials in the Eagle Ford. We realized 59% of NYMEX for gas which also exceeded the high end of our guidance and our NGL price realization of 21% of NYMEX was within the guidance range. I'd also like to commend our operations team on the excellent job they did during the quarter driving down costs and improving efficiencies. Earlier this year, we began implementing several cost reduction initiatives including the saltwater disposal system in Eagle Ford that has substantially reduced the amount of water being trucked to disposal sites. This has reduced our LOE per BOE from 5% to 10% versus our first quarter rate, more than offsetting the impact of a larger percent of our wells being on artificial lift. The initiatives resulted in our total costs and expenses for the quarter of approximately $40 million or about $12.20 per BOE below our guidance and down from $12.50 per BOE in the prime quarter. We have also recently undertaken various initiatives to reduce our overhead expenses which we currently expect to reduce cash G&A by about 15% in 2016. For the quarter we reported a GAAP net loss which included an $813 million pretax [selling test] write-down primarily due to the low commodity price environment. I would like to note that this write-down was not the result of PUDs being removed from our books as all of our PUDs remained economical at the current SEC price tag. Our adjusted net income, which excludes the impairment charge, was $10.4 million or $0.20 per diluted share which exceeded consensus earnings estimates of $0.11 per diluted share. Drilling and completion capital expenditures for the quarter were $122 million, over 85% of which was in the Eagle Ford. We ended the third quarter with net debt to adjusted EBIDTA of under 3 times. In October we completed an equity offering that resulted in approximately $239 million in net proceeds, a portion of which was used to repay borrowings outstanding under our revolver. Pro forma for this equity offering net debt to adjusted EBIDTA would have been under 2.5 times for the third quarter. Included in the press release is our fourth-quarter and full-year 2015 guidance table. In October we increased full-year crude oil production guidance based on our estimated third quarter production. Given the continued strong performance from our primary operating areas, we are again increasing our crude oil production guidance for 2015. For the fourth quarter 2015, we expect to realize 91% to 93% of NYMEX for oil, 18% to 23% of NYMEX for NGLs and 53% to 58% of NYMEX for natural gas. [DD&A] guidance for the fourth quarter is $19.25, $20.25 per barrel, which is lower than previous quarters due to the third quarter [ceiling test apparent]. Absent any further impairments, we believe this is a good number to use going forward. We currently have hedges in place for two-thirds of our oil production for the fourth quarter 2015, consisting of collars of 16,200 barrels per day with $50 floors of $67 ceilings. In addition to these positions, we also continue to receive the benefit from the offsetting crude oil hedge transactions we entered into in February of 2015. These transactions locked in an additional $39 million in cash flows for the fourth quarter. For natural gas, we have hedges in place of approximately 55% of our estimated fourth-quarter natural gas production. These hedges consist of swaps on 30,000 MMBtu per day at an average price of $4.29. Since the end of the second quarter, we've added additional hedges for 2016. We now have hedges covering about 18,000 barrels per day for the first quarter of 2016 which represents approximately 74% of current quarter forecast of production. These hedges consist of swaps on 8,000 barrels per day at an average price of $60 and collars on 10,000 barrels per day with $52 floors and $73 ceilings. For the full-year 2016, we now have hedges covering about 14,800 barrels per day, which represents over 60% of our current quarter forecast of production. These hedges consist of swaps on about 9,300 barrels per day at an average price of $60 and collars on about $5,500 barrels per day with $51 floors and $75 ceilings. In addition to these hedge positions, we will receive $45 million cash flows during 2016 relating to the offsetting hedge transactions. During October our banking syndicate led by Wells Fargo completed their fall borrowing base redetermination, which resulted in an unchanged volume base of $685 million. This amount is lower than the $725 million forecast we provided in early August as a result of two subsequent decreases in the bank price stack that occurred during the second half of August. While the fall redeterminations across our industry have been less eventful than many on the street may have expected, we have noticed some industrywide concerns about the potential impact of the spring determinations. Based on the current price deck, we expect our 2016 spring redetermination to result in a borrowing base that is either unchanged or slightly higher than our current $685 million borrowing base. Also in connection with our fall redetermination, our net debt to adjusted EBIDTA covenant was increased from 4.0 times to 4.75 in 2016 and 4.375 in 2017. Now I'll turn the call back over to Chip for an operations update. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [4] -------------------------------------------------------------------------------- Thanks, Dave. In the Eagle Ford we are producing from 250 gross or 219 net wells with two drilling rigs running and one 24/7 frac crew. During the third quarter, [reezers] drilled 20 gross or 18.5 net operated wells and completed 21 gross or 17.5 net wells. Crude oil production from the play was more than 20,700 barrels a day for the quarter, an increase of almost 10% versus the prior quarter. At the end of the quarter, we had a 25 gross or 23.2 net operated Eagle Ford wells waiting on completion equating to net crude oil production potential of approximately 8,700 barrels per day. We currently expect to drill approximately 70 gross or 63 net operated wells and frac, 67 gross or 60 net wells in the play during 2015. We plan to start a frac holiday at Thanksgiving and continue until the first week of January. Our year end drilled and completed inventory should be around 29 gross or 26 net wells. Our drilling inventory in the Eagle Ford is currently based on accommodation of 330 foot and 500 foot spacing and we continue to test multiple initiatives aimed at significantly increasing our inventory. We continue to be encouraged by the results from the remaining 330- foot tests and we recently brought our initial 165-foot stagger-stack test online. Four additional stagger-stack tests are currently underway. We also drilled our first infield well between existing mature wells and recently began flowback on our first upper Eagle Ford well. These initiatives have the potential to more than double our Eagle Ford drilling inventory and we expect to provide an update on the results in early 2016. We're also continuing to test a number of completion optimization techniques, most notably diversion systems such as Halliburton's access frac. The goal of these is to increase frac complexity which should lead to improved well productivity. To date we pumped diverters in more than 25 wells and have seen clear evidence of diversion during completion operations. While we need to see more production history to draw a firm conclusion, we have seen better productivity from wells that have used access frac. As such, we're optimistic these techniques will have a positive impact on EURs. In the Delaware Basin, we're currently drilling our third operated well, the Fortress State 1H. Our first well, the Mustang State 1H began flowback in October. We're encouraged by the early results as pressures continue to build while the oil production rate continues to increase. So far, the well's production appears very similar to the closest offset well which was drilled by BHP. We currently plan to spud two additional gross wells in the Delaware Basin this year. We're actively pursuing acreage acquisitions in the Delaware Basin and currently have offers outstanding on almost 30,000 additional net acres. While we don't expect to win every bid, we're optimistic that we will be able to materially increase our acreage position in the play. In the Utica, we've been encouraged by the performance of our two-well Wagler pad. The wells have been online now for more than 170 days and the condensate gas ratio has remained strong at about 225 barrels per million cubic feet, exceeding the [type] curve in our investor presentation. We don't know if this changes our EURs, but we should improve our IRRs at this point. In the Niobrara, we are producing from 121 gross or 51 net wells with nine gross or 5.1 net wells waiting on completion at the end of the quarter representing about 1,300 net BOPD of potential initial production. As a result of a material drop in completion costs in the DJ Basin over the last few months, we elected to frac an additional eight gross Niobrara wells from our inventory. We continue to monitor industry wells, targeting the deeper Codell formation and currently plan to participate in a non-op test by early next year. The Codell has the potential to materially increase our drilling inventory as approximately 50% of our Niobrara position could be prospective for the Codell based on offset operator activity. For the fourth quarter, total Company oil production is expected to range between 24,100 and 24,500 net barrels of oil per day. For gas and NGLs, third-quarter production should range roughly between 72 million and 78 net million cubic feet equivalent per day. Our 2015 drill and complete project narrows to [480 million to 490 million] due to Eagle Ford efficiencies leading to more drilling activity than planned, as well as the decision to frac four additional net wells in the Niobrara. 2015 land CapEx [writes] $55 million to $45 million as we expect to close a larger number of acquisitions before year-end. Looking out into 2016, our focus remains on managing our balance sheet and maintaining the flexibility to respond quickly to commodity price changes. Given the current outlook for commodity prices, we would mostly likely maintain the two-rig program in Eagle Ford as well as drill a handful of wells in the Delaware Basin in 2015. This should allow us to deliver double-digit oil production growth while reducing CapEx by more than $100 million from 2015. If commodity prices weaken further from here, we have the flexibility to significantly dial back our 2016 program, yet still hold our fourth-quarter oil production flat through 2016. We've run a number of different pricing scenarios for 2016 and keeping it around $45 per barrel of oil, we estimate that we could construct a free cash flow positive plan that holds full year 2016 crude oil productions flat with the fourth quarter of 2015. To summarize the near-term catalyst, the Eagle Ford 330 foot down- spacing stagger-stack tests of upper Eagle Ford are ongoing and we should have results that we will discuss in the first quarter. Delaware Basin wells, two are flowing back now and we should have data we can talk about that later in the fourth quarter. Industry Codell tests in the Niobrara are very intriguing at this point. They seem very profitable, which could add a fourth later to our Niobrara potential. And then the potential acquisitions in the Eagle Ford and the Delaware Basin that we're working on could happen before the end of the fourth quarter. With that, we'd like to turn it over to questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you. (Operator Instructions) Neal Dingmann, SunTrust. -------------------------------------------------------------------------------- Neal Dingmann, SunTrust Robinson Humphrey - Analyst [2] -------------------------------------------------------------------------------- Chip, what else can you say on the Delaware well? On that first one I think you mentioned in the press release that all three, you've targeted the A, is that the plans going forward next year or will you start to test some of the other zones? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [3] -------------------------------------------------------------------------------- It probably depends on exactly where we drill. In the area where we drill now, we would probably stay on the Wolfcamp A. B is gassier and C is gassier. So the A is our target now. -------------------------------------------------------------------------------- Neal Dingmann, SunTrust Robinson Humphrey - Analyst [4] -------------------------------------------------------------------------------- And what can you say as far as -- I know you mentioned the big packages as far as potential deals still out there. The area you're still looking at, is it in that same approximate area or are you also looking a bit south of that? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [5] -------------------------------------------------------------------------------- We are looking in the area where we are drilling. We are also looking all along the Pecos River and everywhere between the Pecos River and where we are drilling now. We are basically in Reece, Culberson County, and that's a big area. -------------------------------------------------------------------------------- Neal Dingmann, SunTrust Robinson Humphrey - Analyst [6] -------------------------------------------------------------------------------- And last one. I couldn't resist getting that Utica one is. But what would you need when you're looking at pricing. Obviously the Wagler wells have held up quite nicely. Your thoughts about -- is it more about an absolute level of what you need over there to come back or is it still just a relative versus what you're seeing in the Eagle Ford and Delaware to make you come back to the Utica? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [7] -------------------------------------------------------------------------------- I think at this point we'd say it's just relative performance at this point. The breakeven price on the Utica goes down every day that we stay at this condensate gas ratio we're producing at now. Now that we have condensate stabilization in place with our own system, we're getting a much better handle on the economics and the yields and the Utica looks better and better, but it still can't compete with the Eagle Ford until we have more data. -------------------------------------------------------------------------------- Neal Dingmann, SunTrust Robinson Humphrey - Analyst [8] -------------------------------------------------------------------------------- Agreed. Thanks, Chip. Nice quarter. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Will Green, Stephens. -------------------------------------------------------------------------------- Will Green, Stephens Inc. - Analyst [10] -------------------------------------------------------------------------------- I appreciate the color you provide on 16. I assume that two rigs in Eagle Ford and the Delaware, that the Delaware activity would be a pretty good base level assumption for next year given where you guys have improved cost to and added the additional hedges. At what point would that program seem maybe too conservative? Is there a level where you guys would feel comfortable adding to that program from where it currently stands? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [11] -------------------------------------------------------------------------------- Well, I think we probably still stay with our $65 a barrel number. Because we know at $65 per barrel, we can hit certain debt to EBIDTA targets by the end of 2016. But even at $65 per barrel, I think we want to see -- we want to know why that happened and I think that involves the Saudi's in our opinion. We need something firm that shows that the oil supply is being reduced and deliberately. -------------------------------------------------------------------------------- Will Green, Stephens Inc. - Analyst [12] -------------------------------------------------------------------------------- Great. And then you mentioned spending a good portion towards the back half of this year on acreage acquisitions in the Eagle Ford and Delaware. I take that to mean that there's more freeing up out there or should I assume that you guys are maybe also a little bit more open to creating some more opportunities for yourself, given the balance sheet strength you guys have provided yourselves with? Is that a fair characterization? Do you feel like there's more opening up right now in terms of the land market or is it just -- should we take this as being you guys are more open to finding opportunities now? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [13] -------------------------------------------------------------------------------- Well, I'd say it's both. We've seen the bid ask Delta come in and the sellers are a little more reasonable than they were six months ago. I believe also we've gotten a better handle on where we can pay more per acre and so we're willing to pay a little bit more based on the quality of the acreage than we were spending before. -------------------------------------------------------------------------------- Will Green, Stephens Inc. - Analyst [14] -------------------------------------------------------------------------------- Great. I appreciate the color there. -------------------------------------------------------------------------------- Operator [15] -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [16] -------------------------------------------------------------------------------- Thanks for your time today. I was hoping we could shift up to the DJ. That is some 30,000 per stage completion bid. I was hoping you could provide some more color on this. Was this a bid you received from a service provider with whom you had a relationship or was this from another service provider out there in the DJ that came to you? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [17] -------------------------------------------------------------------------------- It was from a service provider in the DJ. That's all I'm going to say. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [18] -------------------------------------------------------------------------------- Okay. Fair enough. I think you said these eight completions are in area one. If you can extend this rate on these completions beyond these eight wells, would it change the economics of area one enough that the DJ would start attracting some of your operated DNC spend in 2016? -------------------------------------------------------------------------------- David Pitts, Carrizo Oil & Gas, Inc. - VP, CFO, CAO andTreasurer [19] -------------------------------------------------------------------------------- We're looking at that now, but first we will try to push on Eagle Ford frac costs to come down too, but if we could get a lot of fracs at these costs with the drilling cost reductions we've seen in the DJ, it might start competing. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [20] -------------------------------------------------------------------------------- Okay. Great. And then, Chip, in your prepared remarks you mentioned the acquisitions opportunities that are out there. And obviously you've talked about the Permian before and you've mentioned the Eagle Ford now today. I didn't know if you had any bids out on any larger Eagle Ford packages as well or is it some of the blocking and tackling that we've seen on some of the bolt-on acquisitions from you in the past? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [21] -------------------------------------------------------------------------------- It's mostly bolt-ons. I don't think we've bid on any of the big packages that are out there right now. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [22] -------------------------------------------------------------------------------- Okay. Fantastic. I appreciate your time. Thanks, guys. -------------------------------------------------------------------------------- Operator [23] -------------------------------------------------------------------------------- Brian Corales, Howard Weil. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [24] -------------------------------------------------------------------------------- Chip, I was hoping you could give a little detail on the production uplift that you're seeing from these frac optimizations in the Eagle Ford? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [25] -------------------------------------------------------------------------------- From the diverter. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [26] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [27] -------------------------------------------------------------------------------- Oh, from the diverter. This is Brad Fisher. We've pumped diverter on numerous wells and at this point we're really not going to comment on the production increase. But what I can say on a qualitative basis is that we've seen significant increase or significant betterment in our reservoir energy that's being delivered by these fracs and that is showing up in the form of flowing pressures. So we still need more time to evaluate whether that's going to translate into long-term EUR performance, but we're definitely seeing a higher energy level delivered to the surface by using these diverters. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [28] -------------------------------------------------------------------------------- Does that mean kind of a shallower decline that you're seeing or you actually are seeing a production uplift? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [29] -------------------------------------------------------------------------------- We produce our wells very conservatively, so we are on a choke management program so we cap our rates on most of our new wells. At this point, it's really just about a productivity that we're seeing on the well and we have to have some time to see if this is going to translate to improved EUR. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [30] -------------------------------------------------------------------------------- Okay. And then staying on the Eagle Ford. With these stagger-stacks at 106 foot spacing, have you all done the stagger-stack, I can't remember, with wider spacing before? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [31] -------------------------------------------------------------------------------- We have one well that had much wider spacing, but we have different tests going on right now. It ranges from 165 to about 270 effective spacing in a map view. So we're trying several different things at once to see if we can find the right spacing quickly. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [32] -------------------------------------------------------------------------------- Understood. And, Chip, if you are a gambling man, do you feel confident on the tighter spacing? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [33] -------------------------------------------------------------------------------- I'm sure one of them is going to work. I just don't know if we can get all the way to 165 feet or not. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [34] -------------------------------------------------------------------------------- Got you. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [35] -------------------------------------------------------------------------------- We only have a month of production data at this point. -------------------------------------------------------------------------------- Brian Corales, Howard Weil Incorporated - Analyst [36] -------------------------------------------------------------------------------- That's helpful. Thank you. -------------------------------------------------------------------------------- Operator [37] -------------------------------------------------------------------------------- Mike Kelly, Seaport Global. -------------------------------------------------------------------------------- Mike Kelly, Seaport Global Securities - Analyst [38] -------------------------------------------------------------------------------- Chip, I was hoping you could give us a little bit more flavor for the 30,000 acres in the Delaware that you have got bids outstanding on and just curious if this is comprised of several smaller deals, if there's a couple blocky ones involved in there. What the range of acreage prices could be, and I've kept it at under $5,000 in the past an acre. And then a follow up on that, I was curious how you're thinking about funding it too? With the equity raise you did, you got leverage looking pretty comfortable here going into 2016. If some of this is going to cost you a little bit more, how do you find it? Thanks. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [39] -------------------------------------------------------------------------------- Well, to start at the beginning, I'd say we have a couple of blocky deals and then six or seven small deals and they range from acquisitions of acreage and producing properties to acreage leasing to farmouts. We're trying everything we can with as many different companies and landowners as we can. The price that we are paying really hasn't gone up a lot over our current cap, but we've found we're probably offering closer to the cap on more acreage as we've gotten better data on the play. As far as capital for this, the equity offering was essentially $100 million that we might be able to spend on acquisitions and then that gave us about another $100 million next year to drill on those acquisitions if we had to. So we don't have to do any of that right now, but that was kind of how we were going to pay for it. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [40] -------------------------------------------------------------------------------- Okay. Appreciate that. And then just be interested to hear some more color on the 2016 progression and actually a look into 2017 too. And what you get for 2016 is definitely impressive in terms of the ability to keep Q4 volumes flat within cash flow at that $45 oil price. Just curious how this does set you up going into 2017 then? Does 2016 look great because you are burning through a lot of the ducks and then 2017 might be more challenging? Just curious what your model says going into 2017? Thanks. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [41] -------------------------------------------------------------------------------- That is still a work in progress, but the 2016 maintenance CapEx case we've worked on tries to stay flat all year so that we don't produce everything in the beginning of the year and then we put 2017 in a bind. So that way we'd still have good production in fourth quarter 2016. The ducks would come down some, but we're still trying to maintain a healthy inventory of ducks to make operations in logistics possible. But I think we could do essentially in 2017 what we do in 2016 and not lose any acreage in the Eagle Ford and very little in the Permian. -------------------------------------------------------------------------------- Brad Carpenter, Cantor Fitzgerald - Analyst [42] -------------------------------------------------------------------------------- Perfect. That's what I was looking for. Thanks, guys. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [44] -------------------------------------------------------------------------------- You obviously talked about your frac holiday here. Just trying to get a sense of how many fourth quarter Eagle Ford completions should we expect and roughly what do you think the CapEx is in the fourth quarter given the holiday? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [45] -------------------------------------------------------------------------------- We're working on that right now. Hang on. 12 net fracs. 12 net fracs in the Eagle Ford. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [46] -------------------------------------------------------------------------------- Okay. And I guess just looking at the Utica. Obviously you guys don't have any activity, but I think you only have these two Wagler wells produce. I know you've drilled some other wells in the past. Are there plans to bring those on at some point? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [47] -------------------------------------------------------------------------------- Well, the Rector well has a longer pipeline run to get that on, so we're not planning on doing that right now. The Brown well has been on. We've been producing that, but we're probably going to shut that in. I think we've gotten a lot of data on that or tired of flaring the gas, so until we have a pipeline on that well, we'll shut that in and just produce the two Wagler wells. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [48] -------------------------------------------------------------------------------- All right. Is there any visibility on when you could bring these on? Is it going to be sometime next year? What's going on with the midstream situation? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [49] -------------------------------------------------------------------------------- We have -- the Wagler wells are hooked up on a temporary MarkWest line and we basically quit trying to figure out how to hook the rest of them up until we get more data on the Waglers in terms of condensate stabilization and what the right way to do that is. So I think that's all we're going to do for the next year is those two wells. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [50] -------------------------------------------------------------------------------- Okay. That's helpful. And you talked about a number of cost reduction initiatives. You disclosed a 15% reduction in 2016 G&A. Just curious, is that a year-over-year reduction or is that an absolute $1 reduction or $1 per BOE reduction? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [51] -------------------------------------------------------------------------------- That's a 15% decline in absolute dollar levels from our current annual guidance. -------------------------------------------------------------------------------- Leo Mariani, RBC Capital Markets - Analyst [52] -------------------------------------------------------------------------------- Okay. Thanks, guys. -------------------------------------------------------------------------------- Operator [53] -------------------------------------------------------------------------------- [Brian Gumble], Simmons & Company. -------------------------------------------------------------------------------- Brian Gumble, Simmons & Company - Analyst [54] -------------------------------------------------------------------------------- I wanted to touch on the Eagle Ford first. (Inaudible) the upper Eagle Ford well that you mentioned was on flowback. Any anecdotes you could give us there as to how the drilling went? Any surprises along the way that may be helpful in figuring out how that well is going to roll? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [55] -------------------------------------------------------------------------------- Brian, this is Brad Fisher. As far as from a drilling standpoint, it drilled exactly like the lower Eagle Ford wells. We had no problems drilling or completing it. -------------------------------------------------------------------------------- Brian Gumble, Simmons & Company - Analyst [56] -------------------------------------------------------------------------------- Great. And then, Chip, when you talk about 2016, you talk about three Eagle Ford rigs, and a handful of Permian wells, would the handful of Permian wells be under the assumption that how much of the additional 30,000 net acres gets done. Is that assuming you stay where you are and then incremental wells would be additive as you add acreage in the fourth quarter early next year? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [57] -------------------------------------------------------------------------------- That could be or we could still stay at, say, six Permian wells and just shift those around from wells we had planned to drill to new things, new areas, if we put together some farmouts. But we have not figured that out yet. -------------------------------------------------------------------------------- Brian Gumble, Simmons & Company - Analyst [58] -------------------------------------------------------------------------------- But you did mention that the equity deal gives you about $100 million of flexibility if you do want to do that as far as new drilling on acreage that you pick up? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [59] -------------------------------------------------------------------------------- Right. No. We will have dry powder available if we get some of these deals done and then it will just depend on oil price and on the capital efficiency of that CapEx. Right now, it looks like the Wolfcamp A could have the same capital efficiency as some of our Eagle Ford wells. So at that point you can almost interchange some of the dollars, but we need more data in the Wolfcamp to be confident of that. -------------------------------------------------------------------------------- Brian Gumble, Simmons & Company - Analyst [60] -------------------------------------------------------------------------------- Can you remind us what those first couple Wolfcamp A wells cost? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [61] -------------------------------------------------------------------------------- The first one was a science well, so it was pretty expensive. The second one was much quicker. And now we've moved an Eagle Ford rig, our Pioneer 79 rig, out to the Delaware Basin and we're drilling faster. So basically what we're saying is we think we can drill and the cost will be about what the best industry wells out there are coming in at. -------------------------------------------------------------------------------- Brian Gumble, Simmons & Company - Analyst [62] -------------------------------------------------------------------------------- Thanks, guys. -------------------------------------------------------------------------------- Operator [63] -------------------------------------------------------------------------------- Jeff Grampp, Northland Capital Markets. -------------------------------------------------------------------------------- Jeff Grampp, Northland Capital Markets - Analyst [64] -------------------------------------------------------------------------------- I want to touch on all the efficiencies that you are highlighting in the Eagle Ford and obviously I know that the Wolcotts have continued the trend down. I was just wondering with the recent drill-time improvements and everything you're doing, how costs are comparing to the most recent numbers you guys have quoted, which I think was around $4.8 million or so in the Eagle Ford. -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [65] -------------------------------------------------------------------------------- This is Brad Fisher. We continue to see efficiency increases out in the Eagle Ford, particularly in terms of the number of wells we are drilling per month. Last quarter we averaged 2.4 wells per rig per month, which is up over 1.8 which we averaged last year. So we're really seeing the impact of these new Gen-three rigs that we brought on at the end of Q1. From a well-cost standpoint, we continue -- we are kind of in the chipping and painting for discounts. We are still able to nick a few percent here and there from the service companies, but I think we're seeing the bottom on service cost reductions. I think last quarter we announced that our typical well, which is a 25.5 stage well, we're drilling for about -- drill and complete for $4.8 million. We are in the $4.6 million, $4.7 million range on that right now. We continue to see some reductions, but they are smaller on an incremental basis. -------------------------------------------------------------------------------- Jeff Grampp, Northland Capital Markets - Analyst [66] -------------------------------------------------------------------------------- Okay. That's real helpful color. And then wondering -- and you guys always do a great job of laying out your engineered drilling inventory across all your plays. And I know we're still early in the Delaware, but wondering have you guys put anything together internally on that front or when you guys would feel more comfortable communicating what type of inventory you guys think you have assembled out there? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [67] -------------------------------------------------------------------------------- I think we'll probably have that the first quarter. At this point, we don't have it. We are still working on just one layer in the Wolfcamp A and until we know if we can do a couple in the A and the B, economics are good enough -- we just can't say yet. -------------------------------------------------------------------------------- Jeff Grampp, Northland Capital Markets - Analyst [68] -------------------------------------------------------------------------------- Okay. Understandable. Thanks for the color, guys. -------------------------------------------------------------------------------- Operator [69] -------------------------------------------------------------------------------- Ron Mills, Johnson Rice. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [70] -------------------------------------------------------------------------------- Going back to the Eagle Ford. On the wells you use the diverter on, just out of curiosity and maybe for you, Brad, what's the incremental cost for that just so once you start talking about it we get a sense as to benefit of the potential uplift versus the [series] even in the increase in cost? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [71] -------------------------------------------------------------------------------- The nice thing about the excess frac is the cost. It runs us about $1,250 a stage. So for the incremental benefit that we're seeing right now in terms of productivity index of the well, it's a very low-cost improvement here. We don't need to see much benefit for this to pay out. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [72] -------------------------------------------------------------------------------- And then to follow up on Brian's question there, it sounds like, based on the way you typically flowback your wells, it's one where if it generates improved pressure then that sets up the opportunity for higher EURs through just a flatter decline. Am I understanding that correctly? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [73] -------------------------------------------------------------------------------- That's exactly right. Yes. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [74] -------------------------------------------------------------------------------- Great. And then, second, in the Niobrara, Chip, just curious in terms of your thoughts there. I know you are completing some wells due to the costs. You recently added about 1,300 acres which helped you add some longer lateral opportunities, but where does that stand in your portfolio? Is it something that, given the Eagle Ford, that hopeful expansion in the Permian that that becomes a potential source of proceeds over time? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [75] -------------------------------------------------------------------------------- Yes. We've indicated that to the market, that we'll probably run some sort of process to see what we could sell it for. We've had several inquiries from PE-backed companies that want to look at it and make an offer. So we don't have to sell it, but right now it would probably make sense to see what it is worth and see what somebody might pay for that and see if we can find an outlier or time it where we were able to sell that and move that capital into the Permian or the Eagle Ford for a similar-sized acquisition. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [76] -------------------------------------------------------------------------------- Okay. Great. And then one last one on the acquisitions / leasing front, particularly on the bigger. Are any of those related to bigger marketed deals where, from a timing standpoint or you're hopeful to have some additional information on that process by year end? Or all we also looking in the early 2016 when you may have more data on the Eagle Ford completions? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [77] -------------------------------------------------------------------------------- Can you say that again? -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [78] -------------------------------------------------------------------------------- What I was trying to ask is on the acquisition front, are you doing it as a form of processes where, from a timing standpoint, we may get information on acquisitions later this year or is it more likely to hear about potential acquisitions in the early part of next year? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [79] -------------------------------------------------------------------------------- I think it will be this year. I think a lot of companies are doing things for their balance sheet and trying to get deals done by year end, and so that's -- I think we will get something -- either we will get them done by year end or they might not happen for a while. I think we'll have some results by year end. There are some big marketed deals out there that go into next year that we haven't even started talking about yet, but we'll look at everything out there. -------------------------------------------------------------------------------- Ron Mills, Johnson Rice & Company - Analyst [80] -------------------------------------------------------------------------------- Perfect. Thanks. Everything else has been asked. -------------------------------------------------------------------------------- Operator [81] -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisers. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [82] -------------------------------------------------------------------------------- Most of my questions have been answered, but do you see yourself drilling longer laterals in the Eagle Ford in 2016 versus 2015? Can you give us a feel for that? -------------------------------------------------------------------------------- Andy Agosto, Carrizo Oil & Gas, Inc. - VP of Business Development [83] -------------------------------------------------------------------------------- Marshall, hey, this is Andy Agosto. No, I think based on what we know about the program right now for 2016, it's going to look pretty similar to what we did in 2015 in terms of average lateral line. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [84] -------------------------------------------------------------------------------- Okay. And what percentage of your acreage do you think is thick enough for the stagger-stack? If it's successful, over what percentage of the acreage could it work? -------------------------------------------------------------------------------- Andy Agosto, Carrizo Oil & Gas, Inc. - VP of Business Development [85] -------------------------------------------------------------------------------- Well, the areas we are testing now would be representative of virtually the entire acreage position. The results that we get -- look at the first five to six tests we think we can extend that to a very high percentage of the acreage position. I don't have a specific number for you, but it's high. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [86] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Operator [87] -------------------------------------------------------------------------------- (Operator instructions) Ipsit Mohanty with GMP Securities. -------------------------------------------------------------------------------- Ipsit Mohanty, GMP Securities - Analyst [88] -------------------------------------------------------------------------------- Thank you. Quite a few have been answered, but if I can just push in a couple. Your quarter guidance suggests that gas is going up 4Q over 3Q. Is that just Marcellus easing or the curtailment easing or anything else? -------------------------------------------------------------------------------- Jeff Hayden, Carrizo Oil & Gas, Inc. - VP of IR [89] -------------------------------------------------------------------------------- Yes. This is Jeff. Fluctuations in gas are almost always a function of how much we choose to curtail in the Marcellus. That's exactly what is going on. Prices are usually a little better in the winter, so we are assuming there are going to be fewer curtailments. -------------------------------------------------------------------------------- Ipsit Mohanty, GMP Securities - Analyst [90] -------------------------------------------------------------------------------- Sure. And then this is a larger question on the Eagle Ford. Given that you are poised to increase your inventory through the [latest] tests you are doing in the Eagle Ford, I'm questioning the need for increasing acreage by acquisition? Is that being opportunistic? Are you seeing prices easing in the Eagle Ford? If you could talk about that, please? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [91] -------------------------------------------------------------------------------- Well, we are opportunistic about Eagle Ford acreage in our area. The economics of buying that acreage and then drilling on it is the most profitable thing we have in the Company right now. We've never paid big prices to buy acreage in the Eagle Ford, so we've never gone to the $30,000 or $40,000 per acre as some of the prices in the DeWitt Carnes area have gone to. We are offering sometimes $1 or $2 a barrel essentially for PUDs when we make Eagle Ford acquisitions. -------------------------------------------------------------------------------- Marshall Carver, Heikkinen Energy Advisors - Analyst [92] -------------------------------------------------------------------------------- Okay. Thank you. -------------------------------------------------------------------------------- Operator [93] -------------------------------------------------------------------------------- Chris Stevens, KeyBanc. -------------------------------------------------------------------------------- Chris Stevens, KeyBanc Capital Markets - Analyst [94] -------------------------------------------------------------------------------- Just a follow-up on a previous question in the Permian. I know your initial focus is on the A bench out there in Culberson County and the C and the D bench are much gassier. But is there any material difference in the C and D bench on your acreage relative to maybe a little bit further north in Culverson where some other operators are focusing some of their attention with some pretty good results to date? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [95] -------------------------------------------------------------------------------- There probably is. There's more B activity north of us. It's probably not as cooked and not as gassy. We have a thick C bench. We're in several B wells with very small working interests with another operator right now, so we're getting good data on that. But generally as you move further west, you just get gassier and where we are -- where we are drilling right now, the A is the oiliest. If you go a few miles east of there, E gets oily enough to be very profitable. We had got acreage that goes across and goes about 10 or 15 miles from east to west. -------------------------------------------------------------------------------- Chris Stevens, KeyBanc Capital Markets - Analyst [96] -------------------------------------------------------------------------------- Okay. And sticking with the Permian here. Can you talk about your completion design on the first well out there and if you're doing anything different than some of the offset peers are? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [97] -------------------------------------------------------------------------------- Chris, this is Brad Fisher. We are basically carrying over what we've done in the Eagle Ford into the Permian with the only difference being that we've increased same concentration from about 1,600 pounds to close to 2,000 feet per foot. But we're using the same stage spacing of 240 feet. Six entry points across that stage interval. Very similar fluid system as well. -------------------------------------------------------------------------------- Chris Stevens, KeyBanc Capital Markets - Analyst [98] -------------------------------------------------------------------------------- Okay. And finally, any thoughts on how the Utica fits into the portfolio longer-term? I know you're considering marketing the Niobrara, but is that an option for the Utica as well? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [99] -------------------------------------------------------------------------------- It might be. It seems like in the Utica we should either get bigger or get smaller once we know what the economics are. There is potential to add to our acreage position, especially as some of our peers move east to try to satisfy their firm transports that they've signed up for. We are seeing a dropoff in activity in the condensate window that we could take advantage of if we like the economics. But right now we only have five months of data on our two wells that have the most data. So we just need more time. -------------------------------------------------------------------------------- Chris Stevens, KeyBanc Capital Markets - Analyst [100] -------------------------------------------------------------------------------- Thanks a lot. -------------------------------------------------------------------------------- Operator [101] -------------------------------------------------------------------------------- John Nelson, Goldman Sachs. -------------------------------------------------------------------------------- John Nelson, Goldman Sachs - Analyst [102] -------------------------------------------------------------------------------- Good morning and congratulations on the quarter. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [103] -------------------------------------------------------------------------------- Thanks. -------------------------------------------------------------------------------- John Nelson, Goldman Sachs - Analyst [104] -------------------------------------------------------------------------------- I wanted to go back to the comments on the $200 million of equity offering about 50% of it split to drilling. Is there any kind of rule of thumb or amount you would think of needed for infrastructure to allow that drilling to take place? Or how we should think about a potential split there, investment there? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [105] -------------------------------------------------------------------------------- In general, we probably used the same kind of infrastructure numbers we use in the Eagle Ford, which is, say, $200,000 to $300,000 per well. Where we are drilling right now, the Permian, there is a lot of infrastructure in terms of gas plants and pipelines and existing systems that we can tie into. Ultimately, we are going to need water disposal capability and systems, but that might be one or two years down the road. -------------------------------------------------------------------------------- John Nelson, Goldman Sachs - Analyst [106] -------------------------------------------------------------------------------- Great. And then it has come up a couple times, but coming back to the balance, the portfolio balance versus increasing the share count decision that has happened over the quarter. Could we play devil's advocate and say you potentially did evaluate selling some of the assets that aren't currently competing for capital in your portfolio, but just saw better value reflected in your stock and sort of executing that financing decision? Or were we missing something in making that extrapolation? -------------------------------------------------------------------------------- Brad Fisher, Carrizo Oil & Gas, Inc. - VP and COO [107] -------------------------------------------------------------------------------- No. It was just all about timing. In order to go through a process and evaluate what we could sell some of our assets for just takes a long time and we were starting to make some inroads on acquisitions that we didn't want to wait for and we just wanted to have a strong balance sheet. Goldman Sachs says oil prices could drop a lot, so we're trying to be ready for that. -------------------------------------------------------------------------------- John Nelson, Goldman Sachs - Analyst [108] -------------------------------------------------------------------------------- Great. That's all for me. Thanks, guys. -------------------------------------------------------------------------------- Operator [109] -------------------------------------------------------------------------------- Dan McSpirit with BMO Capital Markets. -------------------------------------------------------------------------------- Dan McSpirit, BMO Capital Markets - Analyst [110] -------------------------------------------------------------------------------- Just a few questions on the Delaware Basin. What kind of drilling obligations are attached to deals being considered and how much of the current 26,000 net acres leased today is held by production? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [111] -------------------------------------------------------------------------------- Of what we have today, it's probably about 20%, 25%. Some of these are three-year leases. A few are five-year leases. What we've had good luck doing is putting big tool units together with state acreage and private acreage and basically getting more time to get everything done by putting large areas together that allow at least 7,500- foot wells to be drilled. So going forward, we try to keep track of that, obviously, as we go, and not overcommit to next year. But in some cases we might get some acreage that we decide next year we just don't want to drill and we will extend it instead, which is pretty easy to do. -------------------------------------------------------------------------------- Dan McSpirit, BMO Capital Markets - Analyst [112] -------------------------------------------------------------------------------- Okay. Great. And one follow-up. How much more acreage could be circled and likely be transacted on above and beyond the 30,000 net acres referenced in the press release? -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [113] -------------------------------------------------------------------------------- Well, we are talking with bigger companies that have 200,000 acres that isn't being drilled right now. Ultimately those are the kind of targets that are out there. Obviously that won't ever happen that all of that will be available, but that's what we're working on is just trying to get access to the acreage that the bigger companies aren't drilling. -------------------------------------------------------------------------------- Dan McSpirit, BMO Capital Markets - Analyst [114] -------------------------------------------------------------------------------- Great. Have a great day. Thanks. -------------------------------------------------------------------------------- Operator [115] -------------------------------------------------------------------------------- There are no other questions at this time. (Operator instructions) And there are no other questions at this time, Sir. I will turn it back to you. -------------------------------------------------------------------------------- Chip Johnson, Carrizo Oil & Gas, Inc. - President and CEO [116] -------------------------------------------------------------------------------- Okay. Thank you. And thank you all for calling in. Just to talk about our catalyst again. The Eagle Ford downspacing and stagger-stack tests are ongoing and we should be able to talk about those probably in the first quarter. Maybe all at once. The Delaware Basin tests are now -- two wells are flowing back and we should have some results on those in the next -- well, in this quarter. The Codell tests in the Niobrara are ongoing, mostly from Whiting. We are following all of that and we will be reporting out on that. The acquisitions we are trying to do in Eagle Ford and the Delaware Basin, we think that will happen by the end of the quarter just because most of the companies we are dealing with would like to get things closed in this quarter. So maybe we will have some answers on that. Again, I'd like to thank the team for an outstanding performance during very difficult times. The focus on cost-cutting in every area is paying off with better margins and lower planning and development costs, and that, combined with our strong balance sheet, our hedges and our asset quality, put us in a very enviable position. So thank you very much. -------------------------------------------------------------------------------- Operator [117] -------------------------------------------------------------------------------- Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.
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