VAALCO Energy Inc (EGY) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome today to your Vaalco Energy first quarter earnings conference call. All participants at this time are in a listen-only mode. Later we will conduct a question and answer session. We will give you instructions at that time. (Operator Instructions). Also as a reminder the conference is being recorded.

So with that we will turn the call over to our host and CEO of Vaalco Energy, Mr. Robert Gerry. Go ahead, sir.

Thank you, Bob, and good morning ladies and gentlemen and welcome to Vaalco's first quarter earnings conference call. Per usual please bear with me while I read through our forward-looking statement.

This conference call will include forward-looking statements as defined by the US security laws. Forward-looking statements are those concerning Vaalco's plans, expectations and objectives for future drilling completion and other operations and activities. All statements included in this conference call will address activities, events, or developments that Vaalco expects, believes, or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, drilling, completion and production timetables, and cost to complete wells. Investors are cautioned that forward-looking statements are no guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. These risks are further described in Vaalco's described in Vaalco's annual report on Form 10(K) and for the year ended December 31st, 2008, and other reports filed with the SEC.

Thank you for bearing with me on that and today I'm joined by Greg Hullinger who is our CFO and Michael [Sorgenfree], one of Vaalco's geo-physical scientists.

Before I turn the meeting over to Greg to take you through our financial statements -- I think probably a few comments are in order regarding our recent exploration program. Obviously it was a disappointment. The two dry holes onshore, Gabon, however, while extremely disappointed I think educated us in the interpretation of data which now can be applied to evaluating approximately eight other leads which still exist on our 250,000-acre onshore block. I think we may well shoot additional seismic to clarify and high grade these leads. Because without a doubt our two dry holes proved that oil is present on our block and we just need to really better define our data to nail down where these elusive structures actually occur.

So while disappointed we are not abandoning it. There are obviously things we can do there and it's just a question of timing of when we can get around to doing it. As for North Etame, it time it came in low ore to our prognosis. Some people have inquired out of our Southeast Etame block, it in no way it does or does it dampen our enthusiasm for the Southeast Etame prospect. I am going to talk more about Southeast Etame after Greg's presentation. And I will also discuss our future drilling program and other opportunities that are slowly coming Vaalco's way.

So with that I will turn it over to Greg to take you through our financials.

Thank you, Bobby. It's my pleasure to speak with all of you today. Vaalco Energy Inc. experience add net loss of $12.6 million or a minus $0.22 per diluted share for the first quarter of 2009. This compared to net income of $1.8 million, or 0.03 per diluted share in the same time period in 2008. The net loss for the current quarter can be attributed to two main factors. First one which Bobby alluded to was the cost associated with drilling four unsuccessful exploration wells. And a 55% reduction in the sales value of crude oil in the first quarter of 2009 versus the same time period in 2008. I'm going to address the dry hole costs first.

Vaalco was successful in one out of five exploration wells drilled during the recent program. The successful Ebouri appraisal well which we announced back on December 31st, was followed by four unsuccessful efforts. One if off shore Gabon, two in onshore Gabon and one in the British North Sea. Dry hole costs incurred during the quarter were $19.8 million. Exploration costs in total for the quarter were $20.5 million. The Company issued four news releases in the February through April time frame providing interested parties information on each of the four unsuccessful wells. In monetary terms, let me provide you with a recap.

First was the north Etame well in off shore Gabon where we issue add news release on February 17th. Vaalco's share of the well was $2.7 million and these costs have now been fully recorded into the books of the Company. $0.3 million of it was recorded in the fourth quarter of 2008 and $2.4 million in the first quarter of 2009. A week later on February the 24th, we announced that the [Ontue] well located onshore Gabon in the Mutamba block was water bearing. This well 100% Vaalco venture with estimated cost to be $10 million. $2.5 million of which was charged to expense in the fourth quarter of 2008 and $7.4 million charged to exploration expense in the first quarter of 2009. Only minor expenses are expected to be charged to expense for this well in the second quarter.

Next, the Vulcan northwest well in the British North Sea was determined to be noncommercial and a news release was made on March the 24th. Vaalco's share of this well was estimated to be $9 million of which $2.3 million was charged to exploration expense in the first quarter. $6.7 million is expected to be recorded on this well in the second quarter. Lastly we issue add new release on April 14th informing that the [Engongui] well in onshore Gabon was also water bearing. This 100% Vaalco well is expected to cost $13 million of which $7.7 million has been recorded in the first quarter leaving $5.3 million to be charged to expense in the second quarter of 2009. In summary, the four unsuccessful exploration wells totaled to a net Vaalco amount of $34.7 million of which $12.1 million remains to be taken as exploration expense in the second quarter of this year.

I will next take you through the rest of the important information pertaining to the financials of Vaalco for the first quarter of 2009. First quarter 2009 revenues were $21.3 million, compared to $42.2 million in the first quarter of 2008. During the first quarter of 2009 the Company sold approximately 503,700 net barrels of oil equivalent at an average price of $42.15 per barrel, as compared to 446,000 net barrels at an average price of $94.44 per barrel in the first quarter of 2008. At $42.15, this was a 55% decrease in the sales price of our crude oil period to period.

Operating income was a loss of $10.5 million in the first quarter of 2009 compared to operating income of $24.1 million in the first quarter of 2008. An important reminder is that crude oil sales are a function of the number and size of the crude oil listings in each quarter from the FPSO and thus crude oil sales do not always coincide with volumes produced in any given quarter.

With regard to production, crude oil production from the Etame, Avouma, South Tchibala, and Ebouri fields averaged 21,300 barrels of oil per day in the quarter ending March the 31st. This compares to 22,500 barrels of oil produced in the same period 2008. After bringing on the second Ebouri development in April of this year production has approximated 25,000 barrels of oil per day. Attesting to this is the actual average of crude oil produced over the first 11 days in May was 24,828 barrels of oil per day.

Capital expenditures for the 2009 first quarter or $18.6 million consisting of property and equipment additions primarily associated with the platform and drilling of the three wells in the Ebouri field. The three wells were of course the appraisal plus two development wells. Production expenses for the 2009 first quarter were $5.7 million, compared to $4.4 million in the first quarter of 2008. The increase reflects the new production costs from Ebouri as well as higher FPSO costs and related transport and support costs. I already talked about the $19.8 million of dry hole cost. This amount comprised a majority of $20.5 million of exploration expenses incurred in the quarter. The remainder was spend on seismic processing costs in Angola.

Income taxes which are always difficult to understand but income taxes for first quarter 2009 were $2.4 million, compared to $21.4 million in the 2008 first quarter. The decline in income taxes reflects the lower oil revenues as commodity prices declined, as well as a higher percentage of oil production allocated as cost oil versus profit oil. Let me try putting it in other words. During periods where capital expenditures are being made and crude oil prices are low, income taxes that we pay to the Republic of Gabon will be at their lowest point. Conversely when oil prices are high and capital expenditures are not being made, in other words, when the cost account is completed income taxes will be much higher.

Discretionary cash flow, which is a non-GAAP financial measure reflects the amount of cash generated by the Company that can be used as working capital to reduce debt or for future investment activities. Discretionary cash flow for the three months ended March 31, 2009, was $14 million, compared to $14.5 million in the first quarter of 2008. Net cash provided by operating activities was $2.8 million in the first quarter of 2009, compared to $14.3 million in the same time period in 2008.

Lastly, let me share with you some of the other financial indices. Production costs per barrel for the current quarter were $11.29. That compares to a year ago figure of $9.85. Depletion costs were very similar. For the current quarter they were $11.22 per barrel, same time period last year, $11.06. Cash and cash equivalents at the end of the period were $88 million currently versus $79.7 million at the same point a year ago. Working capital is $68.3 million and that compares to $89.1 million a year ago. Long-term debt is the same at $5 million representing that minimum draw that we have taken on the IFC credit facility.

Well, that concludes my review of Vaalco Energy Inc. first quarter 2009 financials and I will turn the conference back over to Bobby.

Thank you, Greg. And let me first get into our planned exploration program. You all may recall that one of our partners went nonconsent on the drilling of the North Ebouri appraisal well and the Southeast Etame exploration well. We have been in negotiations with them for a few months. And while the document has pretty much been agreed to, it has yet to be signed. But I believe it will be in the next few days. That nonconsenting partner will now rejoin the consortium as a full partner in the entire Etame marine concession. This means that they will now participate in the drilling of Southeast Etame, as well as receiving their share of production that was established from drilling North Ebouri.

While I really don't want to go into the details until the signatures are in place, the rough outline is that they will pay into the consortium approximately $28 million. That's in the form of to take care of penalties and basically the expenditures that they will or should have incurred had they participated in the original drilling of North Ebouri. This leads into, when are we going to drill Southeast Etame? They are back in. We are still discussing the timing of drilling Southeast Etame. Vaalco prefers to drill as soon as possible. Our partners are discussing that. There is some preference to postponing the drilling of Southeast Etame until 2010.

We believe at Vaalco at least that we should do it again as soon as possible. Those conversations are ongoing with our partners as we are trying to persuade them to see our side of the argument. It remains an exciting prospect. 20 million plus barrels of producible reserves. So Vaalco is enthusiastic to begin that process.

As far as our concession, the Etame marine concession is concerned, we at Vaalco here have been doing an upgrade of the various leads and prospects that we still have. And through this process we have about five prospects and at least 18 leads that we are examining and again high-grading. Some of these obviously will undoubtably fall by the wayside. But I just want to convey to you all that this concession has been very good to Vaalco and we believe that there is a lot more oil to be discovered here. So we continue to work it very hard.

At the same time we are searching for other opportunities that Vaalco can participate in. Obviously we've got a Angola. The belief there is that we will drill probably two prospects, but not again until 2010. The economic downturn I believe is affecting not only our partners in Gabon, but also our partner in Angola. And the management of all these companies are pushing expenditures out a little further in time. And so Vaalco for the most part has to agree to that even though in a few instances we keep pushing to get it done fairly rapidly.

Vaalco remains in a very strong financial position. Dry holes notwithstanding. We remain convinced that a transaction will come our way, that we can take advantage of due to the economic times. We have one group today in Gabon reviewing a new opportunity for us there. And we have another team in Angola today discussing with Senegal some additional opportunities that we may be able to participate there in Angola.

We also are reviewing a number of opportunities that are coming our way here in the United States in the North Sea. With our record in the North Sea, these are probably not going to be in the forefront of what we want to do at the moment. But never say never. There is unrest in the North Sea. Again, due to financial obligations that many small and medium-size company have undertaken there. So there are opportunities there and I believe we should at least evaluate them.

As Greg mentioned, of some good news is that certainly we're producing, in fact today I was looking at our morning report, yesterday we produced slightly over 25,000 barrels a day. So we are maintaining our production primarily with the added production from North Ebouri. I think again that the team here at Vaalco, while disappointed in our latest exploration program, is looking to the future. We have, again as I discussed, opportunities that are remaining on our Gabunese concession. And certainly we haven't touched yet our Angola concession. So I think that there are opportunities that are coming our way to add to substantial reserves to Vaalco's balance sheet for the benefit of our stockholders.

I'm sure you've got some additional questions that you'd like to have answered so with that, Bob, I'll turn it back to you to open it up for questions.

Thank you very much. (Operator Instructions) We have our first quarter here from the line of Steve Berman with Pritchard Capital Partners. Go ahead please.

Hello everybody. Bobby, if I heard you right it sounds like there's a possibility you may not drill any more wells anywhere in 2009 if certain things fall certain ways. Is that a correct statement?

Steve, from what I said that's probably correct. While it's extremely difficult to pinpoint timing of drilling at the moment, we are evaluating internally certain opportunities that we have not and will not discuss on this conference call. Should those materialize, we perhaps could very well drill this year. And I don't know if they will materialize. I would guess there is a 50% chance that at least one of them might. And we'll see.

But also probably we didn't discuss one other well that is on our horizon here. That's a horizontal well between our number one vertical well in Gabon. That I think we budgeted for this year $9 million approximately to Vaalco. That will be drilled, but it won't probably again be drilled until next year. The tree is being manufactured if you want in England and we should have a drilling rig in the first quarter of next year, but I'm not betting the ranch on it. But more than likely production in the second quarter. And that well should produce anywhere between 3,000 and 6,000 additional barrels to Vaalco.

Should this all happen, of course, we are going to start juggling. What goes into the FPSO and what rates. That's a good problem to have. When we drill Southeast Etame we will also have that problem. And the obvious answer is to continue to upgrade our FPSO to handle this additional production. But that's all good news.

I know investors want action immediately. We are pursuing action immediately and we just have to see if we are able to be able to produce that. Again, Southeast Etame it's discouraging that we can't drill that immediately. We are out voted at the moment, but we are trying to get our partners to agree to that because that could have significant value to Vaalco this year I hope that helps.

Can you remind us, what was the percentage of the nonconsent partner had?

It was roughly around 28%.

And in terms of acquisition opportunities, is your preference to do something that, that's producing and would be additive to reserves as opposed to --

That's my preference. Yes, I better leave it there, Steve. Yes, I think I said it last conference call at least in high commodity price scenario we just as soon drill for it. I think in this scenario if we can buy it I think that's the prudent way to travel. Obviously what we'd really like is to buy some production that has upside built in with it. Of course, the whole world is looking for that kind of a thing.

It seems that the opportunities for small companies certainly either, mainly in Angola, are fairly limited. I think we are very fortunate to be, to have the concession we do have there, a block five. The upside is pretty spectacular if we are right there. The -- for a small company, it's difficult in West Africa, but not impossible. That's why we have a team at the moment in Gabon. The government is anxious to see if Vaalco wants to participate in a new opportunity that the government is aware of there. And so we are enthusiastically evaluating it. The team just got there yesterday so we'll take a few months days to see.

But there are opportunities around. We bid on a project of production in West Africa. It went to, we bid on a piece of it. The whole package went to another group. So they didn't want to carve out the West African piece. So we lost out on that one. But we've got oar already in the water and are continually evaluating and looking.

And one more and I will let someone else go. In Angola, where do you stand with getting a rig or is that dependent on first agreeing with the consortium on what exactly it is you are going to drill?

A lot of it depend on the consortium but we are shooting to go drill in the first quarter of next year.

Are you.

We do not have a rig yet under contract. That may be good.

Okay. All right. Thanks. I'll let someone else go.

Thank you. Okay. Next we have from the line of [TJ Schultz] with RBC Capital. Go ahead, sir.

Hi, guys, good morning. Just on Mutamba. Can you talk a little bit more on your plans there? I know you talked about eight more prospects potentially and upgrading some seismic, just kind of what's limiting you as far as getting going on that if other things are getting pushed out?

We are still evaluating, TJ, what we discovered there. We drilled that on old 2D data that we had upgraded. We also shot some arrow mag over the area. Arrow mag was of some assistance but not enough. The 2D was not that good as it turns out. I'm reminded however by the scientists here that they were able to discover Etame with data that wasn't a hell of a lot better than what we drilled on in, onshore. So the jury remains to be out.

I think as far as I'm concerned that we need to do seismic there. I think one of the disappointments, we had some cost overruns and that wasn't good. We drilled in a lagoon. We contracted for that rig at a fairly high priced environment. I don't think that those wells should cost what they did. And so I think that will work to our favor. We probably need to do at least another 2D shoot probably. We will see what our evaluation comes up with. But I will feel more comfortable if we shoot some more seismic.

There is also a possibility there that we can find a partner. And I think that's probably the way to travel. You would think with two dry holes that may be difficult but I don't believe so. I think there are still some opportunities there with eight leads that could be turned into prospects. Each one of them perhaps having ten to 20 million-barrel potential that it is possible to find a partner not only to join in the seismic but perhaps even to promote to in drilling of a couple more wells there. So we haven't given up on it. In fact, we remain fairly enthusiastic about it.

Right. But as you prioritize things with some of the things you are looking at as far as acquisitions, and where does Mutamba fit in? When are you going to think about doing the seismic and how long a process would that take? And when would you possibly have some of these prospects high-graded?

It will probably take a year to shoot the seismic and process it. If so we are well into the middle of next year before even if we elect to go search for a partner probably well in the next year or so. I would have to say if we drill a well there that it would be late 2010 before that occurs. I think the, I think the next well we will drill is more than likely Southeast Etame. If that falls together. That's barring any conclusion to some other transactions that we are seriously looking at here internally that could come to fruition this year.

Understood. How much would that seismic cost approximately? Do you have an idea?

As I understand it probably slightly north of $8 million.

Okay.

We may even find a partner to share those costs.

Okay. Some of these opportunities you're talking about or referring to in Gabon or in Angola, are these onshore, offshore, some of both?

I don't think I am going to go there. The ones in Angola are offshore. Gabon is a mixture. Especially since what we've had with our dry holes offshore, Gabon recently, anything onshore that we are going to look at we are going to be very careful with.

Understood. Just briefly on current production, I know you said it's tracking close to 25,000 gross. Is this maintainable? I mean are there wells that are restricted here that can be opened up a little to maintain this or what do you see as far as declining rates there?

They can be opened up. Especially in Ebouri. We would prefer of course to produce them at a rate that wouldn't violate any perhaps coating of water or anything else like that. Right now it's going perfectly. But as Etame gently declines, we can continue to open up Ebouri.

Last thing, any more constructive thoughts on hedges? I know how you guys have thought about it in the past but with where oil has been reacting recently what are your thoughts on hedging production at least at these levels?

We talk about that continually but it seems to, I don't think we ought to hedge. It's, but we feel that most people that invest in Vaalco are looking for upside potential, that the price of the commodity certainly on the upside is what they are after. In my opinion, and I could stand corrected, even if you're hedged, if the stock market is going down or the price of oil is going down, you are going down, your stock price is. Granted, it ensures you of a cash flow. If you have a debt or if there's another reason you are trying to protect your cash flow. Now Vaalco spent a lot of money here in drilling exploration wells and with our production though at 25,000 barrels per day we are going to be replenishing that cash flow. So I don't think Vaalco ought to. If the investors want to hedge, I think they have the opportunity to do that.

Sounds good. Thanks, Bobby.

Thank you.

Next we have from the line of Jamie Wilen with Wilen Management. Go ahead please.

Hi, Bobby. Question for you. Russell is conspicuously absent from the conference call for the first time in a long time. Any significance to that?

Yes, he's one of the team that's in Angola.

Okay. The partner that is coming back into the consortium that's paying $28 million, that was a formulaic $28 million, there's no negotiation in that, or was there?

It was months of negotiation.

And does all that get paid into the consortium or does some of that get paid to the partners who had to front the money for these guys?

It all goes into the partners accounts that fronted the first part of the money. We got paid back for the work we did plus a penalty.

And how much is that? I mean we had to cover costs and, they don't get a free ride obviously. There must have been more than just a little bit of a penalty. How much extra are they ponying up now that they are back in?

Can I tell you that after they sign it?

Okay.

All right? I'm not trying to be coy.

Okay.

Put it this way. It was originally designated as a 500% penalty. They will pay less than that. But I don't want to quite tell you how much.

Okay. And as we look at our future drilling programs are we going to be shooting 3D over everything we do before we drill?

Probably not onshore Gabon. I think we just need a tighter 2D grid there. Terribly expensive shooting 3D there. It's in a jungle, it's in a lagoon. It's in all kinds of hostile surface environment. So it's probably going to be a tight 2D there. For the most part 3D will be shot where we are contemplating drilling.

Okay. And lastly in the North Sea the one asset we have there is we've been able to develop a large NOL for future utilization. Would that lead you to say if you are going to be in the North Sea you have an easier wedge to buy existing production and take advantage of the NOL than to actually through exploratory wells?

Yes, it's possible. We haven't seen what production deal in the North Sea that we feel comfortable with. There are a few exploratory opportunities there and there are obviously a few corporate opportunities there. The corporate opportunities appear to us to have a considerable liabilities associated with them, i.e. future capital costs and/or debt obligations that Vaalco is not comfortable with.

Having said all that, never say never. If the right production opportunity came along that Vaalco felt it could afford, we certainly would take a hard look at it. But it has to be pretty damn good in the North Sea to get us interested.

But, Jamie, you are right, the NOL that we have built up is an asset that we would take into the economics of a potential next venture there.

And lastly that your partners over in Gabon and Angola are a little bit hesitant about moving forward as quickly as you are. Is that an assessment that rig rates have come down and they are going to come down a lot more, is that what their hesitancy is about or is it truly that they are having financial difficulties?

It's a good question and I'm not 100% sure that I'm totally right. I think that, I think in Gabon our partners are not financially strapped, but they also have a number of obligations that perhaps were undertaken in a higher commodity environment or even in a higher service company environment. And are fighting a very high, I think, very high costs in some of the work that they are currently doing. And so really just would prefer conserving what they have to be drilled next year.

I know that's not a very good answer because I can't really -- they haven't come to us and said, help or we are broke or whatever. But so they are being fairly subtle. But we do know that they have some obligations at very high cost rates. So that's what -- we know it's not a reflection on the opportunities that we have with them. They just don't want to spend any more money right now.

Okay. Very good. Thanks, fellows.

Thank you. Next we have from the line of [Carl Connell with Connell Capital]. Go ahead, please.

Hi, good afternoon. Regarding Angola, is the Company's interested limited to block five?

I'm sorry, would you repeat it?

Is the Company's interests regarding Angola, is the Company's interests limited to block five?

At the moment it is.

And when do the permits expire for this block?

I think we have to drill a well by December 2010, next year.

Okay. And can you remind us what the interest is in this block or is it to be negotiated?

We have 40%. We actually pay 50% because the consortium carries Senegal for 20%. We have one other partner. So we both pay 50%.

Great. Thank you.

Thank you.

Thank you. Next from the line of Kenneth Pounds with Nutmeg Securities. Go ahead.

Thank you. Quick question, I notice that Harvest Natural is finally I guess ramping up their work in their offshore Gabon I guess it's called the [Desafu] field which is fairly close to Etame. Is there any potential for you all to work with them or there could be some kind of a meeting of the minds as far as all the experience you all have in offshore Gabon?

It's the Desafu concession which is directly South of us. Desafu was formerly a [SAS Oil] concession. I believe Harvest bought it from SAS Oil and other partners. We have had an opportunity to evaluate Desafu and weren't terribly excited about it. So I suppose Harvest has yet to approach us to show us a prospect there that we might be interested in. But we are always open of course if that occurs. We don't think we have seen anything there that terribly excited us. There may be a prospect in the Northern part of Desafu that we would consider. But nothing definitive yet.

I guess I was just looking at the map and it seems like there seems to be kind of a Southeast trend. There's obviously fields off of Congo and your Etame fields and you are going to drill Southeast Etame. So, it just seemed like maybe it was kind of as stride this trend. But.

Yes. Trendology isn't a bad thing but again each prospect has to stand on its own. And in our review of is that SAS Oil's sales document if you want when they originally got out of this and I believe there was another partner in there too. We couldn't come up with something that we felt strongly about. They could do that to Harvest and maybe they've done some additional work that would perhaps high-grade something there.

Well they are saying that they completed 1,000 square kilometer 3D and all kinds of others. Sounds like expensive technical studies recently.

Again -- Well, you're alerting me to something here, we will give them a call and sea if they want us to look at it.

Just curious because you have experience there and that seems to be where you are doing well. Okay.

They haven't call us though. Maybe they have other partners.

Okay.

Thanks a lot. Next from the line of [Neil Nelson with True Binds Incorporated]. Please go ahead.

I was wondering if the [mediella] carbonate which under lies Etame also underlies the Mutamba concession? And if it's actually possible to shoot 3D in any of the lagoons or is that too shallow for a toe to reign?

I am going to let Michael give a crack at this one.

If I understand your question correctly, you're asking does the mediella carbonate go onshore in Gabon?

Correct.

That is correct. Yes, it does and that is target for us there as well. If you can find it in the right [fasces].

With regards to shooting 3D in the lagoon areas of Mutamba, is that technically economical or possible?

It is possible it would be very expensive. The 2D cost us on the order of $40,000 to $50,000 a kilometer for 2D. You can probably multiply that fivefold, maybe a little bit more because we haven't got any quotes for 3D. In the lagoon would you have to go do some transition work, bring in Ocean bottom cable, something like that.

Okay.

Thank you. And then we have a follow-up question from the line of Steve Berman with Pritchard Capital Partners. Go ahead, please.

Maybe this is a question for Greg. But if you didn't drill any more wells in 2009 and without the development expenditures to develop any wells you're drilled up to now, what is Cap Ex look like for the rest of the year under that scenario?

There wouldn't be much Cap Ex left. As Bobby mentioned we are building the tree for the replacement well in the Etame fill. That's a bit of Cap Ex. The biggest part of our budget is really for Angola, for the well or wells to be drilled there, plus the wells that we are working on in offshore Gabon where timing is the consideration with our partners.

Right but just under my scenario where none of this happens in 2009, what's the dollar amount roughly for the rest of the 2009 for the second, third and fourth quarters?

Very little.

Greg, you say very little, does that mean $20 million or less or?

Yes, I mean it's probably less than five.

Capital cost.

Cap Ex, yes.

And with a nonconsent partner back, if just in terms of the math, if you are getting 25,000 barrels per day gross what should the net number be, if you just take 25,000 as a given?

Multiple it by 15% to lop off the royalty and then take our 28.035% on that resulting number and that would be close.

It is probably close to 6,000 barrels.

It's in that neighborhood.

Okay. Thanks, guys.

Great, Steve.

Thank you. And sirs, there are no other questions in queue. Please go ahead .

That's it?

That's all the questions.

Okay. Well, thank you all very much. And appreciate your presence and we will see what we can do here in the next few months. Again, thank you very much and we will sign off.

Thank you, sir. And ladies and gentlemen that does conclude your conference for today. Thanks for your participation and you can now disconnect.