Diamond Offshore Drilling Inc (DO) 2011 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Diamond Offshore Drilling third quarter 2011 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions) Thank you. I would now like to turn the conference over to Mr. Darren Daugherty, Director of Investor Relations. Sir, you may begin your conference.

Thank you, Paula. Good morning, everyone. Thank you for joining us. With me on the call today are Larry Dickerson, President and Chief Executive Officer, John Vecchio, Executive Vice President, Gary Krenek, Senior Vice President and Chief Financial Officer, Moe Plaisance, Vice President, Marketing and Michael Acuff, Vice President, Marketing.

Before we begin our remarks, I should remind you that statements made during this conference call may constitute forward-looking statements that are inherently subject to a variety of risks and uncertainties. Actual results achieved by the Company may differ materially from projections made in any Forward-looking Statements. Forward-looking Statements may include, but are not limited to, discussions about future revenues and earnings, capital expenditures, industry conditions and competition, dates the drilling rigs will enter service, as well as management's plans and objectives for the future. A discussion of the risk factors that could impact these areas in the Company's overall business and financial performance can be found in the Company's 10K and 10-Q filings with the SEC. Given these concerns, investors and analysts should not place undue reliance on Forward-looking Statements.

Forward-looking Statements reflect circumstances at the time they are made, and the Company expressly disclaims any obligation to update or revise any forward-looking statements. After we have discussed our results, we will have a question and answer session. We ask that you please limit it to one question and one follow-up so that we can open the floor to as many people as possible. And now, I'll turn the meeting over to Larry.

Thank you, Darren, and welcome also to our third quarter conference call. I'd like to talk just a little bit about the contracts that we've signed in the quarter. They have been disclosed all along as we report our contract backlog every two weeks, but it's an appropriate time to look back upon them, and I think we summarized them in the press release and -- that we added 14 new contracts with 18 rig years and $1.3 billion of revenue backlog. And I think those really, if we look at them by market, I think Mexico is significant for us.

We signed four contracts in this period, running up here to just a few days into October. The summit which had already been down there achieved a 2.7 year extension at a nice rate, and then we brought two rigs out of Brazil, the Yorktown and the Scepter. Yorktown will be going down there. Yorktown is a semi for 2.5 years at a rate in the 180s, and then the Scepter, a newly constructed jack-up which had been working in Brazil. We had some permit issues down there, so we arranged to be released. We'll come up here and work this end of the market, hopefully while they get everything straightened out down in Brazil. And then these two rigs were also joined by the Ocean Titan, a 350-foot unit that had been working in the Gulf of Mexico which obtained 2.1 years of backlog. So, Mexico has been building for some time with bidding contracts out and -- but actual activity has been down, but the ongoing depletion of their fields and the needs to get some work done have continued to push them in this direction. And so its been very beneficial for Diamond and I believe some of our competitors as well who put a number of expected work, and that's an important market.

In the North Sea, we signed our two floaters that we have in there, the Ocean Nomad and the Ocean Princess to contracts that take us through the winter. The Nomad is working for BG, and the Ocean Princess signed a 600 day approximate contract with Inquest, which will start shortly. Then in Brazil, most of our backlog came from extensions to existing contracts, Petrobras took the Ocean Valor and Ocean Baroness contracts which had been three year contracts, and they had an option to extend them to 5 years, and they took advantage of that, so it added quite a bit of backlog. And then also our other good customer down there, OGX put one year extensions on each of the Quest and the Star.

So, those four markets -- or three markets, Brazil, North Sea and Mexico have been very strong for us. That really reduces our Gulf of Mexico fleet now to just three active rigs, two floaters and one jack-up. We have one floater that's down, just coming out of the shipyards. We only have two rigs working today. The permit situation is certainly improving, and we see some optimism out there in some of the big contracts that have been signed; however, on the coal face when we deal with customers on a day-to-day basis, we still deal with many people that don't know the permit situation that are waiting on permits. It's not at a smooth flow situation, which we really need to encourage ongoing work and sort of start and stop. So, hopefully we'll continue to make progress in there, but at the end of the day, we just don't have room any rigs left in that market.

The Ocean Victory is a rig that we have that's a 5,000 foot capable rig that's drilling in the 3,000 foot level and really, there's very, very few rigs left there in that category. I think we're talking -- we've got our Ocean Saratoga is there as well, and I believe Nobel has one unit. And then other than that, most of the rigs there are either jack-ups or they're ultra deep water units. So, we see some opportunities there because there's just lack of competition to work that market, but it's still impacted by the permits. And net-net, at the end of the day, our US payroll has declined from prima condo until today by some 600 positions for us alone. I'm sure that has knock on among our suppliers and what not, and the same thing is true for many of our competitors. And that's just unfortunate; however, our rigs have relocated overseas and continue to have nice jobs to work on.

Moving forward, we are comfortable that we've been doing a very good job of managing cost and revenue efficiency in terms of the amount of unplanned down time where equipment breaks ticked up this quarter from just absolute record results in the previous two quarters, but it was still well below what we would normally budget to happen. We've had some surveys start this quarter, and we'll have quite a few more in Q4, which Gary will go into in some greater detail as he gives some guidance on that. But that's my general opening statement, and I'll certainly return, and we've got the marketing guys return to some of your questions in greater detail. But Gary, why don't you go ahead and take the -- your portion.

Okay, thanks, Larry. For the quarter just ended, we made net income of $256 million, or EPS of $1.85 on revenues of $862 million. That compares to last quarter where we made $1.92 of earnings on revenues of $870 million. So, we had a slight decline in the third -- from Q2 to Q3, only slight despite the fact that our planned rig down time increased from 24 days in Q2 to 304 days in Q3, so we're very pleased with the results that came in for Q3.

Going into some of the results and individual line items in Q3, looking at the expenses, the big one, contract drilling expense, we guided in our last conference call to between $395 million to $410 million, and actuals came in at $391 million. Our beat was even a little bit better than that considering the fact that we expensed the Yorktown's [mobe] that Larry talked about from Brazil back to the Gulf of Mexico in the third quarter, cost us about $9.5 million that we had not anticipated. So, if you take that into consideration, we were down about $15 million below our expectations. A couple of reasons for that. One, our survey's cost on the four rigs that we had in the shipyard in Q3 came out better than expected. And then as Larry said, just continued cost controls out there in the fleet. Q2, our normal operating costs were actually a little bit higher than what we had expected. Again, we're happy to report Q3. That came back down and came in lower than what we expected.

Another line item that had a difference was interest expense. We had expected approximately $22 million worth of interest expense and recorded $16 million. The difference there is capitalized interest. We did not believe that we would capitalize interest on our new build drill ships in 2011, that would begin the first part of next year; however, there were some milestones reached in the shipyard which caused us to begin capitalizing that interest a little bit earlier than what we expected. I would tell everybody that the final date of delivery of those rigs still remains the same for the first two rigs, which is mid 13 into 13, but it did change a little bit of the accounting of what's going out there in the shipyard.

Looking forward to the fourth quarter, for the first nine months of 2011, we had 495 days of planned down time for surveys and shipyard work and [mobe], et cetera. As you can see by looking at our rig status report that we released early this morning, we are anticipating 550 days in Q4, so we're going from 495 the first 9 months to 550, just a result of timing of surveys, et cetera. We have five yards -- five rigs in the shipyard for survey in the fourth quarter and another four rigs that will either be [mobeing], preparing for contracts or undergoing acceptance testing. So, those days do go up dramatically, and this will affect both our revenue and cost lines in Q4.

Getting down to some of the specifics for the fourth quarter, contract drilling expenses. Again, as always, we release our normal daily operating cost earlier in the year. You need to start with that as your base number. In addition to those costs, the five rigs in the shipyard undergoing surveys will incur costs between $4 million and $10 million each, and this will add another $22 million to $28 million to our cost. We have amortized mobe cost goes up slightly in Q4 to $27 million. We also will expense the Scepter that Larry talked about will be coming from Brazil back to the Gulf of Mexico to undergo some contract prep work. We will expense that [mobe] which will be $8 million to $10 million of additional cost in Q4. And then finally, our major expense projects historically are higher the second half of the year, particularly Q4 as we wrap up this year's projects, and so we're expecting to see an increase of $5 million to $10 million in that -- for that reason. Also, from when we originally did our daily cost, labor costs have gone up slightly here as the year has gone on, and that will add another $4 million to $6 million. Anyway, you add all of those things up, we believe contract drilling expenses for Q4 will come in the $410 million to $420 million range. And again, I'd caution everybody to remember that's for contract drilling expenses only, reimbursable cost will be in addition to this amount, and of course the reimbursable costs are always offset almost dollar for dollar by reimbursable revenues.

Just a few other housekeeping notes. G & A, we believe, will continue to be $17 million to $18 million per quarter. Depreciation expense guidance stays the same as before, $101 million to $104 million for Q4. Interest expense, we should capitalize about $7 million in Q4, which will give us a net interest expense of $15 million. And our tax rate, we believe will stay consistent from prior guidance and be in the 21% to 24% range and finally, maintenance capital also remains the same, the guidance remains the same at $300 million for the year 2011. And with that, I'll turn it back to Larry.

Okay, so I think we're ready for questions, Darren.

Operator? Let's open it up to questions.

(Operator Instructions) Dave Wilson of Howard Weil.

Good morning, gentlemen. Quick question on the revenues during the quarter. They came in a little higher than what I was anticipating, and I just wanted to know in the fleet status report sheet you give the bonuses, modeled at 50% down in Brazil. How are those bonuses versus kind of guidance? Were they a little higher than what you kind of guided to in the fleet status report, are they coming in at the higher end, and do you think that will be the case going forward?

Hey, Dave. It's Gary. They weren't substantially higher. We were somewhere in the 60% range, but that did not have that big of impact. I think bigger impact we did record some demobe revenue on the Yorktown coming from Brazil back to the Gulf of Mexico, that was about $24 million for the quarter. And the other thing, as Larry pointed out, our unplanned rig down time, the down time we incur just due to normal repairs, while not as good as last quarter, which was the best I've ever remembered, still came in better than what we normally expect to see.

Okay, thanks, and then as kind of a follow-up and just regarding some of the outlook for some of the rigs that are being actively marketed now, the Whittington down in Brazil, can you give us an outlook for that one and maybe the Guardian in the Falkland Islands as well?

I'll let Moe Plaisance answer that. On the Guardian, you met with our customers there?

Yes, I think we have 2 additional wells from where we're at right now with the Guardian, and we're actively marketing it in the UK. And our expectation is that we should pick up something fairly soon once we leave Falkland, so I think certainly the Guardian, I think we're going to keep it going. Whittington, we have -- we are drilling a well right now in northern Brazil for Petrobras. Our expectations after that, we have some shipyard timing, we'll have to see where we go from there.

Right, I guess on the Guardian, what we've seen is that we're drilling for some smaller companies that are -- tend to take these wells one at a time. But they certainly realize that once the rig leaves to mobilize, again, it's very expensive. So, I think there's, based upon whatever they discover, there's always the opportunity until we get a term job somewhere else that they would continue to extend the rig from one well to another. So, it's hard to pinpoint when that date would be.

Okay, great, thanks. And if I could get one more in here real quick, I'm sorry, but in regards to the 4 stack midwater rigs, I know there's varying levels of investment that would be needed to get those rigs back to work. But at some point, does it make any sense anymore to put money back into those rigs, or is it possible to just retire and scrap the rigs? I know it's hard in this business to never say never, but do you get a sense we're getting closer to that point, maybe?

I think we're certainly looking at a couple of the rigs of opportunities where we could put some money in them and return them into the active market. We're pleased with day rates in a wide range of areas. I don't think we're at the point of bringing all 4 back, but we would do it 1 at a time and see how the market takes that. I would expect that a couple of those rigs, new era, perhaps the Epoch are just fairly small and that the logical place for those rigs would be to be resold to a different operator who might focus on either countries that would accept those kind of operations or a different level of customers than we typically would work for.

Okay, great. Thanks for that and thanks for the time. I'll turn the call back over.

Robin Shoemaker of Citigroup.

Yes, thank you. I just wanted to get your view on Brazil, the recent tenders there and just generally, the ultra deepwater market. Obviously, you've got a couple of new builds that you've committed and one that's not committed, but just would appreciate your commentary on the ultra deepwater market and how many -- the rig availability next year after Petrobras takes as many rigs as they ultimately may take in this tender.

Yes, Robin. This is Michael. In general, we see the ultra deepwater and the deepwater market both gaining momentum. You've seen recently several announcements in the past couple of weeks, and we're seeing this throughout the 5,000 feet and above. We're seeing throughout the whole market, the tightening as we go forward. It appears that a lot of the operators are trying to position themselves, like you say, for 2012, in particular late 2012 because availability in early 2012 is really getting tight now, so we see it as really positive. We think Petrobras could take anywhere from 4 to 6 rigs probably off the market in this latest tender. And then when you sit and look going forward, you only have a handful of new builds available now in '12, less than 5. So, it's really looking positive for us, and we think we're positioned well to take advantage of some of that.

And then in terms of what you see build versus buy of new generation rigs? You've bought some a couple years ago as I recall that were under construction and of course, you've ordered some new rigs here recently. How do you view that tradeoff today?

I think the -- when we bought those rigs, that was a unique circumstance where the credit markets were frozen, and so the owner was unable to continue to roll his financing, so he brought it to market. We didn't have a big backlog at that time of shipyard orders, and we were ready to move quickly. So, they came out in a series of 3. We bought the first 2 at decent rates, and we participated in the bidding the third round, but the cost of the rig had escalated over $100 million from the first unit, so we didn't do that. So, I don't see many of those things lined up today, and I see a lot of well capitalized people that would buy rigs.

We certainly saw Trans Ocean expose quite a bit of money when Aker was recently sold, so I don't know that, that has appealed to us. The new construction market has had attractive prices, and so we moved on that and have 3, and we're pleased to have 2 of those already put to bed at rates that are right in the range for what was just recently announced for some of the ultra deepwater rates this last week. So, we're pleased with that, and we'll remain flexible. I won't rule out one or the other, but it's difficult to see, unless the market got really bad, that there would be opportunities to buy existing rigs out of the shipyard.

Okay, that's clear. Thanks a lot.

John Lawrence of Tudor, Pickering, Holt.

Good morning guys. Just a question on the Monarch here. Looks like it's going to work in Vietnam for BP, but post that contract in the options, should we expect a pretty nice uptick in the rate there?

I expect it.

John, we do. We're in discussions with a couple of different operators right now. One for a particularly significant job. So, yes, the short answer to your question is yes, and I think we'll be pleased with what we see.

Well, the rate that we're working on is not the strongest, but it -- that rate quoted does not include the fact that we've got a full mobe from the customer, a significant mobe to relocate it all the way to the Gulf of Mexico, more than half way around the world, I guess, when you look at the routing. And if you put that into the day rate, then it's a very, very strong day rate.

Okay, great. Thanks, guys. And then just a follow-up on the Whittington, you had some commentary there, but ultimately, does that rig stay in Brazil, or does it move somewhere else?

I would think the rig moves somewhere else. We took the Yorktown out of -- made an arrangement with Petrobras where we moved that time to another rig and let it go. And so my sense is that their midwater requirements, which are significant -- they have significant production in midwater, but is there. But I'm not sure that it's at the point to retain the Whittington, so I would look for that rig to come out.

Okay, great. Thanks a lot, guys.

Douglas Becker at Banc of America Merrill Lynch.

Thanks. Wanted to follow-up on the new build question. My recollection is that you have an option expiring shortly. We're seeing the day rates rising for all ultra deepwater rigs. What's the latest thinking on the potential exercising of that option?

Well, we've got a little bit more time, and we're still analyzing it and we like to gather all the data that we can, what the rates are, what the number of rigs are that are in construction, who we would be in competition with, when it was delivered. And so we're looking at that, and we'll start making a call and let everybody know which way we go.

Okay. Does that expire at the end of October? Is that the current timing?

About then.

Okay, and could you say with the day rates rising, are you shifting a little more favorably disposed to that, or?

I'm sorry, I can't give you a hint on that.

Okay, and then Michael, you highlighted the tightening of the ultra deepwater as well as the deepwater market. Where do you see the discount for moored floaters versus DP units today, and how do you see that involving in the tightening market?

Well there still is a discount compared to the ultra deepwater BP, but what we have seen is -- we've got several customers who have deepwater or even some in the ultra deepwater programs, and yet they will also have some more mid water type programs. So, the flexibility that the moored right gives you there has really improved the market for the deepwater market. But there is still somewhat of a discount. We see it tightening though, and if you look around the world at the various deepwater markets, the units, there's just not many available left. You look at southeast Asia, the Gulf of Mexico, as Larry mentioned, where the Victory is, even west Africa, that market is tightening up fairly quickly. So, '12 and '13 look good for those markets.

And I'd point out, although we would take a discount on revenues, the operating cost on these moored units are also -- it's not dollar for dollar, but it's a significant reduction versus a full marine crew DP unit.

Fair point. So, if we think about margins, any margin differential you'd throw out as the discount today and what that might go to?

Well I think on the top line, we're looking at $50,000 to $75,000 a day seems to be -- it's all dependent upon each job. So, that's sort of there, of course we don't get that much cost reduction, but we get $20,000 a day. Everybody is mentioning at least (laughter). So, set the target too low.

Okay. Thank you very much.

It's conservative, you know?

Understood. Thank you very much.

Geoff Kieburtz of Weeden & Company.

Thanks very much. Just a question, as we've seen these fixtures recently and the rates move on the deepwater up over $500,000. How do you see this playing out over the next several quarters? Do you think that we're going to see rates continue to rise, or are we going to start to see the term of these contracts getting longer?

Yes (laughter). I'll let marketing speak to that, but the other factor is the delivery of new rigs and the rollover of existing rigs, so that's a downward pressure.

Jeff, I think it depends a lot on the program or the operator. When you talk about development programs, usually those have more term involved with them. And then the exploration programs, sometimes the operators will pay a significant premium but take a shorter term on those. So, it's a mix, and like Larry said, I think we're going both -- we're moving up into the right as both rate and term goes, as operators try to secure rigs. But it's very dependent on what their program looks like and what phase they're in.

And I would say that the recent announcements, the rates have some amount of premium just for near term availability and the fact that there's not a lot of near term availability, so that maybe different if somebody stepped up and contracted out (inaudible). On the other hand, our 2 that we contracted with Anadarko were right in that period, so --

Right. And right now as you look at your contract portfolio, roughly speaking, what's the mix between development and exploration?

I would say probably 60% on the development and 40% exploration, but it just depends. In southeast Asia, we're doing a lot of exploration, in Brazil you're doing more development, so it's region-dependent also.

Okay, great. Thank you.

Scott Burk of Canaccord.

Hi. I had a question, a follow-up question on the down time for the coming quarter. Looking through the down time that you guys exposed, it looked like most the rigs that you had scheduled through the third quarter did have their down time or their preparation time, but then that got extended into the fourth quarter. Is there anything going on with the shipyards where it's taking longer to get stuff done, or is it just an issue that you had more things come up to do on those rigs, or is there any trends there that you can identify?

I don't believe there's a trend, Scott. You had, for instance on the Princess, we have additional time in the shipyard. Part of that is driven by the fact that our contract that we had signed, a long term contract doesn't begin until January 4 or 5, something 3, something like that. And so we're utilizing that additional time to do some painting on the rigs and things like that. If needed be, we could have come out earlier, but our customer's not ready for us. Same with Saratoga, we've extended a little bit of time on that because of the hurricane season and not having a job to go out to right away. I haven't seen anything that's shipyard dependent.

Okay, all right, that's helpful. And then just wanted to kind of circle back on the Victory. Do you think there's going to end up being more opportunities for that rig in the Gulf of Mexico, or do you think you'll end up moving internationally?

We've looked at it, and we've decided that it appears there's going to be several opportunities here in the Gulf of Mexico. As Larry said, there's not a lot of units that can cover the territory that the Victory can as far as water depth goes, and we're starting to see work lining up behind it. So, we're confident that the Gulf of Mexico is where that rig will be in the near future and see some good opportunities for it.

All right, very good, thank you.

Mike Urban of Deutsche Bank.

Thanks, good morning. I think most of my questions are answered. I had a question on your thoughts on the cash flow profile. Pretty good cash generation, certainly rest of this year and all throughout next year, but the way your new builds are structured, pretty good capital commitment coming in '13,and as you said earlier, trying to decide what you're going to do going forward with options and what not. Given the uncertain macro outlook out there, do you at some point proactively build cash ahead of those capital needs or access the debt markets? Just trying to get a sense of how you're thinking about the longer term situation vis-a-vis the, again the uncertain macro outlook?

We've got $1.1 billion of cash on our balance sheet, and our line just expired, and we can't see a need to use that. And so we're comfortable with our cash, we're comfortable with still -- we were comfortable this quarter in making our normal dividend and our special dividend at the rate we've been paying now for a couple things -- several quarters now. And looking forward to the capital delivery, I think we certainly have to roll over some of our existing debt that's expiring.

That doesn't occur until 2014 and 2015. We certainly would be opportunistic in the debt market, should we believe that interest rates are rising in the future, potentially could do something then. But as Larry said, as of right now and at least in the near term future, cash looks good.

And then more of a qualitative question that I've been asking a lot of late. Certainly no issues in the current market for offshore rigs around the world, upward pressure on rates as you've been talking about. In your discussions with your customers, again, given the macro backdrop out there, any sense of hesitation, any concern, saying let's maybe put off a discussion about a rig or a program or anything like that or is it still full speed ahead?

No, everything we've seen in discussions with customers, everyone is planning their business into '12 and '13 and we don't really see any hesitation from the operators at this point, with the commodity price where it is. Of course, that is a risk out there, but its not been something that has really been part of the discussions we've had.

Okay, great. That's all for me, thank you.

(Operator Instructions) Darren Gacicia of Vertical Research

Hey, thanks for taking my question. I was curious, when I look at kind of tender activity going out through next year and kind of some where it's coming from, it seems like most of the visible demand is coming from places outside of the Gulf of Mexico. It would strike me that maybe tender activity has been slower and the visibility lower because people didn't want to be long a rig and short a permit. Is there anyway you can kind of quantify maybe what you think the latent demand is for floaters and maybe even jackups in the Gulf of Mexico over the next, say, 12 months?

Well, we think there's pent-up demand for sure, that as the permitting continues to flow and gets a little bit better over time, we're seeing more and more operators. But you're correct in your assumption that, that balance they're trying to make of, do I commit now, and what's the permitting risk, those types of decisions that the operators have to go through. But both in ultra-deepwater and deepwater, we do see pent-up demand that once the flow gets back to quote-unquote normal, I think you're going to see more activity. The jackups, we're seeing some increase on the jackup side too. It seems like the permits flow a little better there. As you've probably noticed, we've put the Columbia back to work, and it appears that there's some follow on work that will be coming. So, our confidence there, along with Mexico, has really made us much more positive on the jackup market in this part of the world.

If you don't mind, can you expand on that a little bit in that, what's the order of magnitude on either -- you segment the market between sort of deepwater and up, midwater and the rest. The order of magnitude is maybe not visible demand of 10 to 20 rigs, 5 to 10, is there some sense of kind of -- because it strikes me that if rates are moving higher and people seem to be anxious to get rigs, that the latent demand that maybe is not seen is actually higher than most people anticipated.

Well, I don't want to quantify how many rigs we may see or we feel like is pent-up demand, but I think good indications are the recent signings with BP here in the Gulf of Mexico for the Cedro rig and then Hess taking the Atwood rig in that group, along with the [Insco] rig. So, you're starting to see several rigs being contracted for term work, so to me, that's a positive sign that the operators are positive in where we're heading from a permitting standpoint and shows in the requirement for additional rigs.

Oh, thank you very much.

Okay. Let's take 1 more question, let everybody get on with their day.

Judson Bailey of Jefferies.

Thank you, good morning. Follow-up on some of the deepwater commentary. Larry, you mentioned a spread or discount for moored versus some of the DP units out there. If I look at the rigs like the Monarch and the Endeavor which are higher quality moored rigs, do we assume then, given where we've seen some of the fixtures for some of the new build assets that something around 4.25 for those is a reasonable expectation for those rigs in 2012?

It would depend on the market. Missing those 2 rigs, the Monarch is new into the Pacific Basin, and we see lots of demand there, so I would -- we would be most hopeful that, that rig would land towards the higher end. The Endeavor is still working off a really old commitment in the high 200s. But the market there in the Mediterranean, although there's demand, I can't necessarily tell you that it's going to right away price right off of a new build because there's not a lot of new builds floating around in the Med itself drilling.

Okay, but safe to say though, for the better moored assets, the rates seem like they're now above 400 as opposed to some of the mid 300s that we saw just a few months ago?

Again, it depends on the term of the contract and who we're drilling, and there could still be some high 300s that pop-up as a fill in or something like that. But we're certainly looking for term work to cover those assets that would be in the low 400s.

Got you, okay, great. Thank you very much.

Okay, we thank everybody's interest, and we'll talk to you again next quarter.

Thank you. This concludes your conference. You may now disconnect.