EQT Corp (EQT) 2006 Q2 法說會逐字稿

Good morning.

My name is Denise and I will be your conference facilitator today.

At this time, I would like to welcome everyone to the Equitable Resources second quarter 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 period. [OPERATOR INSTRUCTIONS] Thank you.

Now it is my pleasure to turn the floor over to your host, Mr. Pat Kane.

Sir, the floor is yours.

Thanks, Denise.

Good morning, everyone, and thank you for participating in Equitable's second quarter 2006 earnings conference call.

With me today are Murry Gerber, Chairman, President and Chief Executive Officer, Dave Porges, Vice Chairman and Executive Vice President, Finance and Administration, and Phil Conti, Vice President and Chief Financial Officer.

In just a moment, Phil will review the second quarter financial results that we released this morning.

Murry will then update the status of the regulatory review of the Peoples and Hope Gas acquisition and the horizontal drilling.

Following our prepared remarks, Murry, Dave and Phil will be available to answer questions.

But first, I would like to remind you that today's call may contain forward-looking statements related to such matters as anticipated earnings per share, our pending acquisition of Peoples and Hope and the financing of the acquisition, the forecasted drilling program and sales volume of supply and other operational matters.

It should be noted that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in these forward-looking statements.

These factors are listed in today's earnings release, the MD&A section of the Company's 2005 Form 10-K, the 2006 second quarter 10-Q, which will be released today, as well as on our website.

I would now like to turn the call over to Phil Conti.

Thanks, Pat, and good morning, everyone.

As you saw earlier this morning, Equitable announced earnings per diluted share of $0.36 for the second quarter of 2006 compared with earnings per share from continuing operations of $0.47 in the same quarter last year.

The second quarter last year was dominated by a large gain from the sale of Kerr-McGee shares and contained various other unusual gains and losses, which complicate comparisons of the quarter over quarter results.

Details were provided in the second quarter '05 earnings report dated July 28, 2005, and we reviewed those '05 items several times on previous earnings calls so I do not intend to revisit them in any great detail today.

If you have questions on those matters, you can always contact Pat Kane.

Also, when comparing this quarter to last year's quarter, keep in mind the sale of Noresco at the end of last year, which resulted in earnings per share from discontinuing operations of $0.05 in the second quarter of '05.

Moving on to the results for this quarter, I would summarize by saying the second quarter of '06 was very solid from an operational and financial standpoint.

Starting with Equitable Utilities, the second and third quarter of each year are relatively uneventful quarters for our regulated utility businesses, particularly from a revenue perspective, due to the relatively few heating degree days.

However, Utilities operating income in the second quarter was up $8.2 million versus the second quarter of '05.

This improved performance occurred despite somewhat warmer weather and was primarily driven by one, pipeline revenue and income, which were higher as a result of the Equitrans rate case, which settled earlier this year and we discussed on the first quarter call.

Two, continuing reductions in bad debt expense, which I will discuss in greater detail in a minute, as well as an office consolidation impairment charge taken in the second quarter of '05, $3.8 million of which was taken at the Utility unit.

This year, in preparation for the acquisition of Peoples and Hope Gas, we were able to put to use some of the vacant office space that we had previously written off, but was still under lease.

As a result, we reversed $2.4 million of the impairment charges in the current quarter and we will again expense these lease costs as we incur them and they will become part of the expenses associated with the LDC acquisitions.

Sticking with the acquisition impact for a moment, Utilities also recognized $2.7 million of transition expenses in the second quarter, so basically the sum of the two acquisition-related items in the quarter was a net $0.3 million expense.

As I mentioned earlier, despite higher commodity prices, Utilities continues to make progress on its collection efforts, which positively impacted bad debt expense in the quarter.

The number of delinquent customers decreased by 17% and the absolute dollar amount of delinquent accounts receivables also dropped by 5% compared with the second quarter of '05 and we achieved that during a period when the average bill on our rolling 12-month basis actually increased by 14%.

As a result of our collections success, we reduced our bad debt reserves by about $2 million this quarter.

As you know, reducing bad debt has long been a focus of the Company and we are very pleased with this progress, especially given market conditions.

Moving on to Equitable Supply.

The Supply unit made good progress in the quarter by increasing sales volumes and I'll get into greater detail on that in a minute, as well as drilling 142 wells in the current quarter and 275 wells year to date, and those would compare to 107 wells in the second quarter of last year and 173 wells for the first half of '05.

Supply is on track in '06 to meet its sales target of 76 to 77 BCF equivalent, as well as its drilling target of 550 wells.

The production and gathering segments operating income of $65.4 million in the current quarter was up 3.6%.

That improvement was driven primarily by the increase in sales volumes to 19.1 BCF equivalent in a quarter compared with 18.5 BCF equivalent in last year's second quarter, and 18.3 BCF equivalent in the first quarter of this year.

Sales from new wells more than offset the natural decline from existing wells, as well as 0.6 BCF equivalent of sales from the Snowshoe, Ohio property that we sold last May, but still owned for the first two months of the second quarter of '05.

So while we are reporting a 0.6 BCF equivalent increase in quarter-over-quarter total sales volumes, to really understand our operational progress in the quarter, you would have to compare sales from properties that we owned last year and still own this year, and those sales were actually up about 1.2 BCF equivalent, or 6.7%, and we are very encouraged by that progress.

Gathering revenues were also higher as a 30% increase in quarter over quarter average gathering rates more than offset a 9% reduction in gathered volumes.

The reduction in gathered volumes reported in supply is primarily a result of the transfer of West Virginia gathering assets to Equitrans at the end of 2005, as well as the loss of gathered volumes associated with the Snowshoe, Ohio asset sale.

Partially offsetting the sales volume increase, operating expenses were a bit higher at Supply.

DD&A expense was higher as a result of our stepped-up drilling program, and production taxes continue to creep higher.

We also increased our reserves for certain contract disputes, which had a negative impact on G&A expenses in the quarter.

I will now move on to a topic that seems to be of a lot of interest based on recent discussions with investors and that is the Peoples and Hope Gas acquisition financing.

As discussed in past calls, we intend to fund the acquisition with a combination of equity, debt and potentially hybrid securities and asset sales.

We have also been pretty explicit about our intentions to minimize the amount of common equity issued while maintaining an investment grade credit rating.

So the question management is addressing is how strong of an investment grade rating do we need?

You may have noticed there are not very many companies out there with significant EMP businesses that have an A handle on their credit rating and it's become clear to us that the rating agencies do not view A as a natural credit rating for companies that are in that business.

So trying to maintain such a rating probably requires more equity in our capital structure than management feels is necessary.

We've had detailed discussions with the rating agencies to fully understand the impact of various mixes of financing sources, and have made significant progress in our analysis, but have not yet finalized our plans.

In addition, we are evaluating possible asset sales, which would also influence the mix and the amount of debt and equity financing required.

In any event, it is unlikely that the Company will issue any securities to fund the acquisition before receiving the required regulatory approvals.

Our bank group has offered access to bridge financing, which would insure our ability to close quickly after approvals are obtained, and we will keep you informed of our progress toward an ultimate financing plan as we get closer to closing the acquisition.

Just a quick update on the balance sheet at 6-30-06.

As you will see in the 10-Q released later today, our commercial paper balance was $78 million and our long-term debt balance was $766 million at quarter end.

We also had $118 million in margin accounts with our hedging counter parties at 6-30-06.

Both the CP and the margin account balance were down significantly from year end '05 as a result of lower forward prices for natural gas.

The result of all of that is that our net short-term debt position was actually a net cash position of $40 million.

Finally, you probably noticed that we did not provide updated EPS guidance in the press release this morning.

While the operations of our two businesses are clearly on track, as evidenced by performance in the second quarter, given the reality of continuing acquisition-related transition expenses, the uncertainty around gas prices, as well as any EPS impact related to a possible sale of producing assets, we are departing from our normal practice of reiterating EPS guidance.

This would not have been an issue back when we used to give core EPS guidance.

However, now that the Company has moved over the past couple of years to the practice of providing GAAP EPS guidance, we concluded that it would be difficult to accurately estimate our ultimate GAAP EPS in 2006 at this point in time, given all of the moving pieces.

As always, we will continue our practice of providing transparent operational data so that you can evaluate progress made by our Utilities and Supply businesses.

And with that, I'll turn the call over to Murry Gerber.

Phil, thank you very much.

Good morning, everybody.

I'd like to spend a couple of minutes, a little longer than I normally do, on the progress we're making on our growth initiatives in drilling, both conventional and horizontal, and mid stream, and on the LDC acquisition, and just to start off with full recognition that excessive exuberance on my part might be viewed as uncharacteristic.

I nonetheless feel that it's important that you know that I am very happy with our operational performance and our prospects for growth are extremely exciting to me at this point in time.

Let me just highlight a few things.

On the conventional drilling side, as Phil said, we're ahead of last year's pace on the vertical drilling.

I would like to make one note, though, on conventional.

This refers to the coal bed methane.

We have recently received approval from the Virginia Gas and Oil Board to decrease well spacing in the coal bed methane to 30 acres.

That is a very interesting and new development.

We are in the process of drilling about 20 wells in a pilot program and if on this reduced spacing, based on those results, we could potentially see a substantial increase in undrilled locations in the coal bed methane.

This could lead, if it works, to accelerated production and lower R over P, which would be very exciting, and it would increase proved reserves, not P2, P3, but proved reserves.

We're expecting substantial progress on this pilot this year, and we'll keep you tuned in to the progress on the next quarter's call and then throughout the rest of the year.

But this is a very interesting and exciting development, and stay tuned on that.

I'll give you a little bit more detail on the horizontal drilling program.

Our first plan here-- we have a five-well drilling program in the horizontal drilling that's planned.

We expect to drill our first horizontal well starting on August 15th or so.

Just for information, we'll be spudding the well with a key energy rig, a conventional rig to drill the vertical well, and then we're going to use a pulldown hydraulic rig to drill the horizontal section.

The first prospect is called the Tip-Top prospect.

It's in Brevitt County, Kentucky.

This is the shallowest of the areas we'll be testing and the shale has good organic content and very good pressure for this depth.

We'll be targeting the lower Huron section of the Ohio shale.

The TVD, total vertical depth of this well, is about 2,250 feet.

We're expecting the cost to be about 1.7 million.

Vertical wells, just so you know in this area, have estimated ultimate recoveries of about 250 million cubic feet.

We're going to begin location construction the first week of August and get that thing going on the Tip-Top prospect.

The second well we're going to drill is called a Hazard prospect.

It's in Perry County, Kentucky.

This will also be targeting the lower Huron section.

Again, the shale shows good organic content, good porosity.

It's a little more mature from a thermal maturity standpoint.

The expected total vertical depth of this well is about 2,900 feet, so a little bit deeper.

Interestingly, at the Hazard prospect, there is another zone that is potentially prospective and we're going to drill a third well from the same location as the second well to test that other section.

This is called the Cleveland section of the Ohio shale.

It's about 250 feet above the lower Huron.

So the interesting thing here is we'll have a couple of wells drilled from the same location, which, of course, for horizontal drilling is one of the benefits we see in a long-term, is to be able to drill multiple wells from the same location.

The fourth prospect is the Jenkins prospect in Letcher County, Kentucky.

This, again, will target the lower Huron.

It's a little bit deeper, 4,600 true vertical depth feet.

The wells in this area have EURs of about 325 million cubic feet and the last prospect is the Tilford prospect in Letcher County, again, Kentucky, the lower Huron section, and this is the deepest of the initial prospect areas, with an expected TVD of about 5,000 feet or so.

The first three prospects we own in fee, 100% working interest, 100% net revenue interest.

The Tilford prospect has an 87.5% net revenue interest to Equitable.

Just in terms of some of the details of the completions, on the first well we plan to use what's called the packers plus external casing packer system.

Schlumberger has a minority interest in this company.

This system allows us to have multiple stage hydraulic frack in the well without cementing the hole.

As you recall from discussions we've had earlier, one of the big issues we have in our horizontal shale program is our concern about damaging the shale in a low pressure environment so we're hoping that this technique will work.

We're expecting six completions in this first well and we're going to pump a lot of sand and a lot of water, 300,000 pounds of sand, 1,200 barrels of water and 3.7 million standard cubic feet of nitrogen over about a five-hour period.

The first wells have been designed to be cased through the curve.

That is to say, at that place that the well makes the turn from vertical to horizontal, we're going to case it.

This is a conservative thing to do.

It adds cost, but we're doing that to assure that we get, we don't have trouble on the first couple wells.

These shales are sometimes pretty soft and we don't want to stick anything down there.

But that adds 150 to $200,000 per well for the cost to case through that curve.

Hopefully we won't have to do that in the long-term, but we're going to do it in the first well.

These wells will be drilled with about a 700 foot radius on the curvature and then we'll reach out about 1,700 feet into the shales.

Again, we hope to drill shorter radius wells when we get a little bit more confident in the technology as we get up the learning curve, but the first wells we're going to do pretty conservatively.

So what are the goals for these first wells?

Well, the primary goal is to test the reservoir response and to calibrate our reservoir models for horizontal.

The key thing we need to be able to do is prove to ourselves that this works and prove to ourselves and the reservoir engineers that we can develop tight curves for horizontal wells in this shale, such that we can then book the reserves and then move on, hopefully, to making horizontal drilling a standard operating procedure for our horizontal play.

Beyond that, there are few things, obviously, we're looking at is evaluate our completion methods.

We're going on to map out our fracture system, using microseismic techniques, determine whether we've got the optimum number of stages, et cetera, et cetera, in our fracs, what's the right fracture fluid.

We're using foam.

Others have used slick water.

We're not going to use slick water this time.

We're going to try-- we're going to try foam for a number of different reasons, but we could switch that technique, if we don't get the results we want.

Obviously we want to get up the learning curve on drilling.

I mentioned that.

And we also got to identify what the best reservoir types are, so we'll be testing a few different kinds of lower Huron and another zone, as I mentioned, the Cleveland zone.

We expect, as I said, to spud the first well around the middle of August.

Our plan is to have the casing and packer system run in about 23 days and get the thing fractured and so hopefully 30 days or so after the drilling, we'll have some results if we don't have any big problems with the first well, and the rest of the wells are going to come closely on the heels of the first one.

We expect that all five wells will be at least spud and hopefully completed by the end of this year.

So we're very, very excited about this, this prospect and we're getting going.

We've got a good team on this.

A number of service providers and consultants that are working with us.

So it's a real big project and we're getting pretty excited about it.

Moving on to the mid stream and Big Sandy, we're still targeting second half of '07 for the startup of the Big Sandy pipeline and an early 2008 startup for the recapitalized Kentucky hydrocarbon compression and separation project.

Some of the salient points are that the total capital for the projects is now $191 million.

We mentioned that we have made some significant expansions, but I hadn't given that number before.

Just to update you a little bit on those issues of the expansion, we're anticipating firm commitments for throughput of Big Sandy to be about 155,000 decatherms a day.

That's a little more than I've discussed previously.

The pipe is going to be 20-inch coated steel.

We're getting it from U.S. Steel.

The project includes 9000-horsepower of compression, 69 miles of pipe to take the gas from Floyd County, Kentucky to the TGPL, Tennessee gas pipeline connection in Carter County, Kentucky.

The compression is all electric. 97% of the route has been surveyed for engineering and environmental considerations.

Right of way acquisition is right on track.

For compression, the vendor is Deering Pump and Compressor.

Two of the three have been ordered, and we're anticipating delivery in November of '06.

The third's to be delivered in 2007.

The nature and the geography of the route is pretty extreme.

Elevation differences between low point and high point is about 1,000 feet, but this pipeline route has been designed to minimize impacts on the environment and on population and on culture.

So we're doing the right thing here.

It's a great project, and we're on track.

On the Kentucky hydrocarbon expansion, I think I mentioned this previously, but total throughput capacities expanding from 70,000 to 100,000 a day.

We currently have 12,000-horsepower of compression on site, 10,000 gas and 2,000 electric.

That's for the current 70,000 a day.

This is going to be completely converted to an electric compression for the 100,000.

We're going to have 23,000-horsepowers with two new machines to move the 100,000 decatherms a day, but we'll also keep the 10,000 horsepower of gas for further expansion down the road if we need it.

The vendors for the compression are Cameron Compression Systems, which was formerly Cooper Cameron.

Again, these projects are well on track.

Pipe is, as far as the pipe for Big Sandy is concerned, it's ordered and it is in a just-in-time delivery status, so as soon as we get regulatory approval, we will be digging pipe immediately to put that pipe in.

So that will be really, really good and we're on track.

As far as Dominion acquisition is concerned, our transition planning and all the EQT and Dominion people on the project are doing a terrific job at the operational level.

We're still targeting regulatory approval by year-end.

Recall that Pennsylvania and West Virginia public utility regulatory bodies are involved, plus the FTC.

We remain convinced of the compelling merits of this transaction and we have filed documents to reiterate those points.

The transaction should lead to gas cost savings, lower rates over time, to eliminate the redundant capital.

It should increase jobs in the region and of course it's going to be accretive to our earnings in the first full year.

Unfortunately, as Phil said, we're not going to undermine the approval process by providing any data on synergies at this point and, as Phil said, we'll announce the financing plan when we get the regulatory approval.

So things are, things are busy here.

A lot of good stuff going on, and I'm feeling really good about our prospects for the next few years.

With that, I'll turn the conversation back to Pat and then we'll open the line up for questions.

Thank you, Murry.

That concludes the comments portion of the call.

Denise, can we please now open the phone lines for questions?

Thank you. [OPERATOR INSTRUCTIONS] And we have our first question coming from Carl Kirst of Credit Suisse.

Please go ahead.

Hey, good morning, everybody.

Hi, Carl.

Murry, I may have missed this.

The pilot program, the 20 wells on the 30 acres in the Appalachia, did you give a timing for how long it would take basically to go through that and obviously you seem hesitant to express magnitude, but I'll go ahead and ask anyway.

Okay.

I'm not going to answer the second part, but as far as the first part is concerned, we're expecting to get those 20 wells drilled this year.

Okay.

And here's why the concern, Carl.

I don't want to be-- and maybe this is consistent with I think what you expect from us, or should expect from us.

The issue on these, this in-fill spacing is how much of the new gas is going to be acceleration of reserves that are already there and how much is actually going to be new reserves from those wells?

And keep in mind, I believe there will be both.

But the pilot program is designed to test how much of each.

To the extent there are new approved reserves, because there certainly will be new production, accelerated production, but to the extent there are new reserves, I want to reemphasize, these are additions to proved reserves, not P2, not P3 and all those funny categories.

This is proved reserves, so that's why I'm pretty excited about it, but to answer your question, this year on the pilot, we need to look at the wells and make an assessment of how much is acceleration, how much is new reserve addition and we'll let you know when we figure that out.

Great.

One other question, if I could.

Just maybe a little bit of a nuance with respect to the financing of the acquisition.

The issue of possible asset sales, presumably these are non-core, and so I guess to a certain extent they should probably be independent of any acquisition.

So what I'm wondering is, is it possible we could actually see a non-core asset sale?

I don't want to say it's going to happen sooner rather than later, but it's not necessarily connected to the timeline of regulatory approvals like equity financing would be.

Is that fair?

Yes, it's-- I think that's a very fair assessment.

I think that Dave and Phil and I have been looking at, particularly at these prices, at what assets that for whatever reason our current plans don't have us developing in the near term because we've got better things to do, and I think Dave Porges made this comment on the last call, that it would be pretty darn silly if we had intentions to sell non-core assets to do that after the financing.

So we are, we're kind of going through that process right now and, and I think that's what Phil mentioned.

We're still evaluating it and we're going to certainly do that if we think it's appropriate.

Fair enough.

Good luck.

But it is independent, to your point.

Thank you.

Our next question is coming from Sam Brothwell of Wachovia Securities.

Please go ahead.

Hi, good morning, guys.

Hi, Sam.

Couple of quick ones.

Murry, obviously Big Sandy keeps getting bigger.

How big can it get?

Secondly, maybe you said this.

I jumped on the call late, but can you remind us kind of the timeline on the horizontal?

I know you're going to spud the first one in August, but just remind us how long that's going to take.

And I forgot my third question.

I can't, I can't help you with that.

But I will help you with the first, the first two.

The-- when we built Big Sandy to have a maximum throughput of about 210,000 decatherms per day, so that's, that's, I think that's the answer to your first question.

So it could go to that level, and as I mentioned, we currently are expecting to have throughput of 155,000 based on our dealings with producers and how we're moving gas through that thing.

On the horizontal, I did mention the timing with the five wells this year, we're hopeful that they will-- well, this is within our control.

Spudding the five is easy.

We're hoping that they will all be completed by the year-end also.

So that's the timing and I think the way to look at that program is we've got a five well program.

We're testing different depths, a little bit different thermal maturity, slightly different reservoirs.

We're starting out with a particular completion technique, but depending on the results there, we could move to a different completion technique, different prop, different frak fluids, et cetera, et cetera.

So that, I really, I just told you kind of what we're going to do on the first well, but that could change, and I think at that point we'll have a set of data that we can use to determine our path forward.

As I mentioned, this is going to be a bit of a journey.

It's an exciting journey, but it's going to take a little time to make it perfect.

So I hope that answers your questions.

Yes, and I actually remember the other thing I wanted to just check with you on.

In terms of some of the issues you may, or negotiations you're having, discussions and so forth, on getting the Dominion deal closed at the regulatory level, are you still comfortable that this is likely to happen around year-end?

We are still targeting regulatory approval by year-end, Sam, yes.

Yes, we are.

Okay.

And, and obviously we'll keep everybody up to date if that changes for whatever reason but that's our issue.

Keep in mind, regardless of what schedules are set or whatever, most of these cases, and particularly the recent ones, settle, and so it really is a question of when that settlement can occur with respect to the interveners on these cases but we're targeting year-end for regulatory approval.

Okay.

Thanks a lot.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] Our next question comes from Faisel Khan of Citigroup.

Please go ahead.

Good morning.

Good morning.

I just wanted to quick follow-up on Carl's question.

The closing of the transaction is not contingent upon any financing or asset sales, is that true?

That is correct.

Okay, and then when you talk about regulatory approval, that doesn't mean the actual closing of the transaction?

That's correct.

Okay.

Fair enough.

That's it.

Thanks a lot.

Okay.

Thank you.

Our next question is on a follow-up question coming from Carl Kirst of Credit Suisse.

Hey, guys.

Just a few other quick questions, if I could.

One, actually a clarification.

The 155 million a day that's on the Big Sandy, are those actually binding commitments?

Most are, yes, Carl.

Okay.

A lot of that is us, of course, but we have commitments from-- yes, as soon as we get it built, they sign up.

I mean we have to do our part, too, right?

Right.

Okay.

From the standpoint that we have a performance obligation to actually build the pipeline.

Is there any-- one of the reasons for the question, there was hints of another competitor coming into the area, one that possibly may not be FERC regulated and I'm trying to figure out to what extent, if there truly is kind of competitive pressures against this project.

Well, you're quite right.

There is a project called the Straight Creek project that's been put forward by Atmost.

We're not going to comment on the efficacy of that project or whatever, and you're quite right, they are trying to get unregulated status for that and I'm not going to comment on whether I think that's right or wrong, but that does not take away from what we're doing.

In other words, that should not be viewed as impeding our progress in any way.

That's very helpful.

Anything-- is there anything you can comment with respect to the progress of perhaps identifying anyone you might like to hook up with when you are assessing the deeper exploratory of the [inaudible] river?

You know, I didn't make mention of that today.

We have been talking to a number of people about that and-- yes, I just-- we're not to the point where I've got something I like yet.

Fair enough.

So -- but let me be clear.

And I made a little bit of a change last quarter when I said that on the horizontal we're going to go this 100% Equitable, and I'm very happy that we have decided to go down that road.

I did also reiterate, and I'll say it again today, this deep thing is a long-term project.

It's going to be a long time before it kind of gets going for us, or for industry in general, and in any event, it's risky enough that Equitable will take a partner for that.

I don't see us going at that 100% at this time.

You had mentioned earlier, maybe at AGA, that you were hopeful that you might identify someone by year-end.

I mean is that still something that you're hopeful or you got a lot going on?

I mean is--?

It's both those things.

We have a lot going on and I'm hopeful that we'll find somebody by year-end.

Fair enough.

Thanks, guys.

Thank you.

Our next question is coming from Mora Shaughnessy of MSS.

Please go ahead.

Hey, Murry, how are you?

Fine, Mora, how are you?

Good.

I was just wondering as you're thinking about the structure of the balance sheet, asset sales, equity, equity linked securities, and thinking about the fact that your regulated businesses will have a critical mass by the time the Dominion deal closes and the MPS that is already there, how are you thinking about the structure of the Company going forward?

You got to read Sam's piece on that, Mora.

I always read Sam's pieces.

Maybe Sam wants to comment.

You could have a dialogue going.

I don't know if we could patch him in maybe.

I-- it wouldn't-- you would expect us to be looking at these options, right?

I mean this is-- it's an obvious thing to look at, given all the noise around the market.

I would say that Dave and Phil and I haven't yet found the compelling reason to do that, all right, and it's not for lack of trying.

We have been trying to understand what the right structure is for the Company.

But we've-- we're sort of at a point where we're not sure yet that there is a compelling reason to do it for a lot of reasons.

But suffice to say that we're watching that very closely and if, for whatever reason, we think that there's more than a temporal reason, temporal dislocation in the marketplace or whatever that would make this viable, that if it is a long-term value-creating activity, we will pursue it, but at this moment, I haven't seen the compelling, real compelling reason to do it.

Dave, do you want to comment on this at all?

Keep looking.

We're very open minded.

Yes, we're extremely open minded.

We're looking for the right way to make it all work, given all the tax complications, et cetera, et cetera, et cetera, but at this moment, there isn't a compelling reason to do it.

And as a few of you pointed out, we really do need to close the acquisition first and that's, as we look at our priorities, closing that acquisition and pursuing the drilling opportunities that we have, both conventional and horizontal, those are what are at the top of our list right now.

So we are studying the other strategic issues, but we really need to attend to our top priorities right now as well.

Okay.

Fair enough.

Thanks.

Thanks, Mora.

Thank you.

And as a final reminder it, is star-one to ask a question.

Okay.

There appear to be no further questions at this time, so I would like to turn the floor back to Mr. Kane for any closing remarks.

Thanks, Denise.

That concludes today's call.

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Thank you, everyone, for participating.

Thank you.

This does conclude today's Equitable Resources conference call.

You may now disconnect your lines, and have a wonderful day.