Intrepid Potash Inc (IPI) 2011 Q4 法說會逐字稿

Good morning and welcome to Intrepid Potash fourth quarter and year end 2011 earnings conference call. (Operator Instructions). It is my pleasure to turn the call over to William Kent Director of Investor Relations. Mr. Kent, please go ahead

Good morning . Thank you, Joe, and thank you all for joining us today for our fourth quarter and year end 2011 earnings conference call. Participants from the Company include Bob Jornayvaz, Executive Chairman of the Board; David Honeyfield, President and Chief Financial Officer; Martin Litt, Executive Vice President and General Counsel and Secretary; Kelvin Feist, Senior Vice President of Marketing and Sales; and John Mansanti, Senior Vice President of Operation.

I would like to remind everyone that statements made on this call that are not historical fact or that express a belief, expectation or intention, including statements about our financial and operational outlook , are forward-looking statements within the meaning of the United States Securities Laws. These statements are not guarantees of future performance. A number of assumptions, which we believe are reasonable were made in connection with the expectations reflected in such forward-looking statements. The forward-looking statements involve risks and uncertainties, which could cause actual results to differ from our expectations.

For more information with respect to the risks, uncertainties and other factors which could cause our actual results to differ from our forward-looking statements, we direct you to our news release we issued last night and the risk factors and management's discussion and analysis of financial conditions and results of operation in our most recent annual report on Form 10-K and the subsequent quarterly reports on Form 10-Q as filed with the SEC. All forward-looking-statements are qualified in their entirety by such factors.

Our earnings news release, which is posted on our website, intrepidpotash.com, includes a reconciliation of certain non-GAAP financial measures to the most directly comparable GAAP measures, including adjusted net income and adjusted EBITDA. Both of which will be used on this call. All references to tons are to short tons of 2,000 pounds. I'll now turn the call over to

Thanks Will, and thanks to those joining us today to learn more about Intrepid's achievements in our fourth quarter and year end 2011 results. Our fourth quarter performance was quite good. We earned $0.33 per diluted share on net income of $24.9 million, and our adjusted EBITDA was $49.2 million. For the full year 2011 we earned $1.45 per diluted share on a 141% increase over 2010, and adjusted EBITDA was $211.9 million more than double are 2010 adjusted EBITDA. This financial performance is impressive and of equal importance are the steps that we have consistently taken each quarter as a part of a long-term strategy to grow our production , lower our operating costs, and ultimately grow our business.

Since we founded Intrepid Potash, we have made a serious commitment to reinvest in our business. We first acquired the Moab mine over a decade ago and have consistently reinvested our cash flows. We have work diligently since acquiring all of our assets to create a culture of innovation and operational discipline necessary to perform as a word class potash producer. We continue to invent , innovate, and commit the capital investment to modernize our previously under invested facilities. To that end we have invested nearly $0.5 billion in the business over the last 11 years to enhance the reliability and productivity of our operations. What is even more impressive is that even with this high level of capital reinvestment we have a debt free balance sheet with over an $176 million of cash and investments on hand at the end of 2011, and the support of a $250 million unsecured line of credit. Our solid financial health provides us with the ability to execute on our robust capital investment strategy as well as marketing our product with a focus on margin.

In the last couple of years we have executed on a number of transformational capital projects designed to increase our flexibility and create options to meet the needs of our diverse customer base. We have successfully completed the Moab compaction project in and under budget in late 2010. And it continues to perform very well and is delivering the benefits and marketing flexibility we expected. We then leveraged this knowledge gained from the project to bring the same level of flexibility to our Wendover operation through the installation of a new compaction facility that was completed again under budget at the end of 2011. In 212 we plan to expand our compaction capacities even further by beginning construction of our new North compaction facility. Once this latest project is completed, we will have the capability to compact 90% of our current and anticipated potash production.

In late 2011 we achieved an important milestone when we brought online the dense media separation component of our Langbeinite Recovery Improvement Project as we refer to as LRIP . As we move through this commissioning stage for this new asset our engineering and operations team continue to improve the process, design enhancements, and take all the necessary steps to achieve and potentially exceed the improved Trio production rates expected for this project. We have also made significant progress on the granulation component of this project, and anticipate have the LRIP fully operational in the first half of 2012. The ability to execute on these capital investment projects is a direct result of the focus and resources we have applied to developing an impressive internal engineering , technical and operating team. Completion of the Langbeinite Recovery Improvement Project will continue to move forward our goals of expanding production, lower per ton cost , and increasing marketing flexibility. I can't stress enough how positive the market has been for our Trio production as we continue to sell all we produce as fast as we produce it.

Looking to 2012 the final permitting of the HB Solar Solution mine appears eminent. The Bureau of Land Management NAPA review of the project is nearly complete with the publication of the notice of availability of the final EIS in the Federal Register on February 3, 2012. The schedule provided to us by the BLM shows the Record of Decision on project in the first quarter of 2012 just around the corner. The HB project is a game changer for Intrepid. We will increase our potash production by nearly 25% and these new tons will be among the lowest cost tons produced in North American. As I said before 2011 was a great year for Intrepid. We deployed nearly 50% more capital than in 2010. Our production of potash grew by 86,000 tons , our average net realized sales price for potash increased by 30% , and the cash we generated was reinvested to support our growth strategy. We enter 2012 with a tremendous sense of optimism. We have succeeded, and will continue to succeed in making substantial investments in the business to deliver value to our stockholders. I will now

Thank you, Bob. Favorable crop prices for corn, soybeans, and other commodities continue to offer farmers an opportunity for solid profitability in 2012. Ultimately the farmer can realize excellent returns on their crop nutrient investments this spring. Further tight stock to use ratios are translating into higher estimates for corn acreage in 2012 compared to 2011. We also expect to see an overall increase in productive land across all crop and associated competition for acreage. All these fundamental factors should contribute to strong nutrient demand this spring.

The fourth quarter was both rewarding and challenging. Our strong customer relationships helped our success despite some of the demand deferral that we saw in the latter half of the fourth quarter and into the beginning of 2012. We are starting to see signs of interest within the system as the spring season approaches. Last week we attended the TFI conference in San Diego. The most prevalent theme was risk averse retailer taking a guarded stance waiting for farmers to show interest in crop nutrients. While this means they are risking supply chain logistic challenges the dealers simply would rather not take a long position on product inventory. We believe that given the constructive crop environment and the overall fundamental it is not a question of if farmers will buy , rather how much and when.

Assuming current weather conditions hold the mid west will likely see an early than normal spring season. We also believe the application season will get started in the next few weeks in the southern plains. Texas and Oklahoma should see a marked improvement due to some good rainfall in the last few month that has helped to mitigate drought conditions and has improved buyer optimism.

We continue to see good demand in the industrial potash markets and consistent demand in the animal feed. The market for all grades of Trio is strong and we expect demand strength to continue as the market is currently under supplied. Based on this demand we raised the posted F.O.B price granular Trio to $340 per ton on January 30, 2012 . With that, I will turn the call over to David Honeyfield to provide some

Thanks, Kelvin. The growth path for production over the next 24 month is significant. With the completion of the commissioning for the Langbeinite Recovery Improvement Project by midyear , we expect to see an increase in Trio production to an expected annualized productive capacity rate for this facility of 270,000 tons. Adding to this first production from the HB Solar Solution mine is expected approximately 18 months after we begin construction. The HB Mine will increase our potash capacity by nearly 25% and significantly reduce our overall cost profile. These projects will have the net effect of not only increasing production, but also reducing our per ton operating cost. This increase Intrepid's competitiveness in the broader North American market.

If you review our fourth quarter and year end 2011 press release that we posted yesterday afternoon, you will notice that we have included a 2012 outlook that highlights where we believe certain operational metrics will be for both the first quarter and the full year 2012. Please review this data as it should help folks in there modeling efforts. In conclusion the fourth quarter of 2011 brought to close another successful year of growing our business and executing on our capital investment program. As Bob highlighted our capital investments are both beneficial at an operational level and from a competitive perspective. The capital investment program is a fundamental component of Intrepid's growth strategy, and is made achievable because of our strong cash flows and clean balance. Through our major capital projects we continue to move forward our goals of growing production, increasing flexibility, and maximizing margin. 2012 will be a significant year for Intrepid with the completion of the Langbeinite Recovery Improvement project, the start of construction of the North compaction facility , and the anticipated permitting of the HB Solar Solution mine.

These are great times at Intrepid. And we believe we are on a clear path to growing our business, and delivering value to our shareholders. We will now open the line for

Thank you. (Operator Instructions). The first question today is from Mark Connelly of CLSA. Please go ahead.

Curt in for Mark. After lagging potash prices for years, Trio appears to be more robust than potash last year and going into Q1 as well. What is driving the relative outperformance , and do you expect Trio to start closing the gap with potash pricing at a more rapid rate going

Thanks for the question, Curt, this is Bob. When you go back many, many year langbeinite used to be priced a little higher than potash. It is a great product where people need the magnesia and sulfur. And as we begin to see the market develop around the world we have really have focused on growing that market. Customers are seeing the benefit of it, and it is reflected in the demand and price. We are producing a product that the market really wants to see. At the same time we are going to keep pace somewhat with the price of potash, however, reflecting and expecting the needs of our customer. So I think we are going continue to just simply see robust demand , we are going to see strong and firm. I don't know that it is going to exceed the price of potash as it did over a decade ago, but I do believe the market is going to remain quite strong as we grow this market around the world, and we experience kind of ever continuing sold out

Do you think the increase tonnage from the LRIP will disrupt supply demand balance at all?

No. In fact we are going to have a hard time meeting the customer demand with the increase production . We continue to see that market grow, and we have done a great job of growing it both internationally and domestically. I just can't stress how much we are seeing that market grow. We are seeing our standard product sell as rapidly as our granular product and we are seeing price strength in our stand significantly above what we used to. We used to have to discount our standard and we are not having to do that any where near to the degree and some cases it is unpaired. So that market continues to grow world war . That is the exciting part is that we are out there growing a market. We are not by any stretch of the mind buying

Great . Thank you very

The next question is from Bill Carroll of UBS. Please go ahead.

Thanks. Good morning. Assuming approval for the HB project is granted as expected, how would you assess the potential risks to completion in terms of technical issues, cost over runs, and delays? At this point is it a largely civil engineering project?

Bill, that is great way to put it. This is Bob again. Let us not forget that we are going to be drilling wells to pump non potable water into an old potash mine. We have a lot of history and experience in drilling wells. We will then be pumping that brine that potash rich brine out of that potash mine into solar evaporation ponds that we operate at both our Moab and Wendover facilities. So once again we have a long track record of building and operating solar evaporation ponds. We will take that crystal from that evaporation pond and run it through a flotation plant. We currently operate three flotation plants throughout our different location, so we have a tremendous amount of expertise at operating flotation plants. So while there are always risks we feel like we have are the right team in place to master that and connecting all of those pieces together obviously pipelines. And once again we have built pipelines. We have built pipelines under rivers. We have built pipelines across and through mountains , so we feel very technically competent on every piece of this project. Once we have permitting in place, which appears to be just around the corner, that green light enable us to go forward. So once again I think your characterization of a civil engineering project is the right characterization. We feel like we have the right team in place to pull it

Okay. Thanks. Switching to Trio . It looks like Trio's cash cost of production after the first quarter at the mid points of your forecast range are about a $115 a ton. Is that a reasonable run rate beyond

Hi, Bill. This is Dave. I think what you are starting to see there is the fact that we are still in the commissioning face for that project, but as we talked about it is nearly a doubling of the production rate from the Trio facility and the operating costs are substantially the same. So I think if you just run through the math you see that those numbers end up coming in at pretty close to where you are suggesting.

Okay. Great ,

The next question is from Vincent Andrews of Morgan Stanley . Please go

Hi, this is Ted sitting in for Vincent today. I guess the question on I guess the outlook for potash prices whether it is in the Southwest or across the US it seems like prices have been able to hold steady here, but do you have an outlook of what could effect the market or kind of a base line view for 2012?

Ted, this is Bob again. We see firm agricultural economics, so when we look at the variety of crops that we service throughout our entire customer base we see very solid farmer economics. Now there is no question that we are seeing a bit of a stand off as we have seen before where farmers are waiting till the very end to make there purchase needs. And that there is no question that certain dealers, distributors could see a softening of prices and lower their prices in order to move things sooner. It is never fun when we see these stand offs, but the most important things we look at is what are the underlining economics underneath the entire variety of crops and the geographic that we serve. And so from Intrepid's stand point we see significant improvement due to the rainfall in our Texas and Oklahoma and Southern markets. We are seeing great economics to go to work on hay crops, we are seeing great economics within the corn market. So while prices due to this current stand of , if you will, could soften, we are ready for it. We have done a great job marketing through the fourth quarter , and if we do see some softening, we don't anticipate anything significant. So I hope that answers

Yes, that is helpful. As a follow-up it seems to defy logic that you could have another sort of potash holiday that we had a few years ago could we be missing something that soil tests are actually higher and farmers don't need to buy this stuff? And I know you guys are insulated from of this because of the markets you play in , but as a broader question about the potash market is it just a matter of time over the next couple of weeks or months or two or is there something else we could

Kelvin Feist I will let you.

Sure. Maybe I will just touch on the soil test. I think if you look across it is very geographical in terms of what is out there in the soil. What we know is a lot of areas had some significant soil depletion of their K values because they grew a very big vegetative crop , and in many areas they had pretty good yields. So I think the reality is what we see is the farmers look to maximize yield , he is looking to balance his nutrition and so he is looking at that soil test, but in many cases he needs to apply a similar number that he did to last year or previous years. So we anticipate a very similar number to be applied , and we are getting reports back from some dealers this fall that rates are the same or above historic levels. So that gives a little bit of a comfort in what they might

Great. Thanks

Next question is from Elaine Yip of Credit Suisse . Please go

Hi, good morning. It seems that based on your guidance you are expecting potash demand to return close to normal levels in 1Q and that seems to be more positive outlook than what we are hearing from some of your North American competitors. How much of your 1Q volumes have you booked already. What gives you confidence that you will kind of reach these normal run rates again?

Elaine, this is Bob again. When you talk about potash demand , what we are looking at is our natural geographic market as you know the market is much much bigger than what we serve. And so due to the drought that we saw last year in Texas and Oklahoma , we have seen rains that -- we virtually had no market whatsoever in Texas and Oklahoma last year. So due to changes in the weather in our specific market we are seeing improvements that lead us to believe that our market is going to be firm. So we are not necessary speaking to the larger market, if you will. Now, as we do kind of our domestic tour we are seeing firmness across the United States. Whether or not we see as big a market or as firm a demand I think that there is always the potential for the bigger market to see a little bit of slide in the second quarter, but I would stress once again in our very natural geographic market we are seeing what appears to be the beginning of a pretty

Okay. And then on your CapEx program as long as the prices are weaker than you anticipate, how do you anticipate funding your capital projects? Is it simply tapping into that large line of credit you have or would you look at other ways to raise capital?

Elaine this is Dave. What I would ask you to look at is let us just start with the cash that is on the balance sheet that we have at the end of the year. We are at a $176 million and then look at the cash flow generation that we are seeing each quarter that is a pretty significant amount of cash flow. Our capital forecast for this year is somewhere in the $225 million to $300 million range. Clearly there is always going to be the timing around permitting and such that may have an influence on that. That is why we have the wide range. But the big project are wrapping up. The Langbeinite project, starting the North compaction project, starting the HB project. We are doing some drilling in Moab, and we feel like we will fund each one of those out of the cash and cash flows. You should expect to see the cash balance come down through the year , but know that is what it is being used for the CapEx

Okay. Great thank you very much.

The next question is from Ben Isaacson of Scotia Bank . Please go

This is Shawn stepping in for Ben. Quick question for on you potash prices. Your competitors realize an average of $20.00 sequential decline in their average North American realized potash price. I am just trying to understand if the $8.00 increase for you was due to a shift in regional sales to higher net back markets. I was wondering if you could provide some color on that, and whether it is consistent in this quarter to date?

Well, let me give you a little bit of color, and then I will well will let David and Kelvin address some of the specifics. One of the things that Intrepid has always been able to focus on because of the location of our facility is being a little more nimble in the market place, and trying to meet specific niche pieces of the market as well as moving a substantial base load as well. I would just reiterate that we have a more localized market because of where we are. And our ability to service that diverse part of the market has served us well and is reflective in our net realized pricing. As to any differences I will let Dave address that real quick and how we sit.

Shawn, just to remind you if you look at how we compare to other North American producers our average net realized sales price in the fourth quarter was $97 higher than where they were, which I think really reinforces Bob's point as to really the geographic advantage we have. Like we have touched on I wouldn't be surprised that some of the competitive market forces out there might cause pricing to come down a little bit here in the first quarter relative to fourth quarter. But the point is it is pretty firm, and that geographic diversity that we have , and we serve different crops and different regions of the United States really plays in well to our

And let me go back to just reemphasize because it is very important to understand the importance of the compaction projects we took on. Our ability to go back and forth between a compacted product to serve the agricultural markets and a standard product to serve the industrial market and right size our product stream for each of those markets at any given point in time as served us very well. And we would ask you to continue to watch that difference in the realized price, because that is what investing in product flexibility and optionally does for us here at Intrepid. So we continue to create these great products like Trio as we continue to invest in our compaction capacity it give us market flexibility which allows us to focus on margin.

Great, thank you very much.

The next question is from Lindsay Drucker Mann with Goldman Sachs. Please go ahead.

Thanks. Good morning , everyone. I was hoping you gave the price list of Trio for January. Can you tell us what the latest price list was for potash F.O.B. calls that, and also when you intend to release your next price

Lindsay, this is David the F.O.B price for Trio is at $340 that was really driven off the demand strength we continue to see in the market . Our posted price for potash we haven't changed so that continues to be at $560 F.O.B Carlsbad. Clearly you can take a look at green market and see what is happening in the Midwest, and we will participate in the market in certain places. But I think the points around where our markets are and the strength of some of those local market is really the one I would try to take home

So based on a historic relationship between you pricing and what you see in mid west spot areas -- the spot market how would you think about kind of the short term negative impact on prices you might see in the first quarter?

I think you if you go through our previous filings we have said that our net realized price is always been in that 85% to 90% of the posted price , and we will be probably be towards the lower end of that. But I certainly feel like that is a still a range that holds true for us given the diverse markets that we take care

Lindsay, I don't want you to hear that we are in denial that there is a bit of softness in some of the markets, but that is how we see it as a bit softness in some of the markets not necessary all of the markets.

Can you just remind us if you get approval as expected this quarter what is the time line not to the CapEx spending but more importantly achieving your production targets. When should we start seeing full loaded capability start to flow-through?

Sure, Lindsay. It is about an 18 months construction cycle, so right out of the gate we start with the drilling program , getting pipeline done, constructions of the ponds and then the mill in 2013. We start to see the benefit of first production in the last half of 2013 that will be about a quarter of what the expected capacity is. 2014 we will have the benefit of another year's injection, another year's evaporation. We should see production somewhere in that 150,000 ton to 200,000 ton range during 2012 and then by 2015 is really when you see us at where we believe those maximum rates will be which are in excess of a (Inaudible) tons

Great thanks guys.

Next question from Joel Jackson of BMO Capital Markets . Please go

Hi, good morning. I wanted to go back to Trio . I wanted to know if in the quarter you had a mix shifted toward International sales of Trio on pricing and freight cost. And maybe you could talk about with the added supply of Trio starting this year where you expect to place those tons incrementally domestic versus offshore

Joel, let me start with kind of the mix of where it is going to go. The great thing is , I don't wants to sound too Pollyannaish, but we are really seeing the opportunity to put those tons pretty much anywhere we want to with some of the customers and relationships we have created. We have some verystrong customer relationships that we are going to service. It is almost as though we are on a allocation, if you will. So as we continue to grow our International markets we need to service those and service our domestic customers as well. I just can't reiterate how strong we are seeing that market around the world as well as in our backyard. And with that, I will let Kelvin Feist address with more

Sure. Joel, what we are seeing going forward is a very similar numbers in terms of the split between domestic and international sales. It really comes down to an allocation and trying to manage customer expectations as best we can. Very similar to what we reported. It may trend a little bit more toward domestic here maybe a 60/40 split of the volumes, but traditionally we are slightly less than that. That is sort of our plan and expectation going forward.

Okay. And can you also explain there was a bit of kick up in the byproduct credit in the quarter versus what you have done in the last year and a half maybe a little bit of color on that.

Yes, Joel, this is Dave. I would kind of ask you to look at that on an average basis. Most of the byproduct credit for us tends to come through in the form of magnesia chloride. So you can link that somewhat to the winter, but if you average that out over the course of the year I think we tend to see that $6 to $8 per ton byproduct credit. And that is really probably the right way to look at it.

You mentioned that you could see some retailers and distributors possibly offer a bit of more softer prices to try to finally get some of the farmers to have a little more urgency and pick up there shipments for the spring. What would you think is sort of the floor to that softness over the next little while? I know it is a very leading question, but I can try.

There is a part of me that would love to say a $1 or $2, but once again I don't want to be Pollyannaish. I think it is very realistic that can we see $10, $15 if not as much as $20 in softness. But I think those are going to be localized markets. We are seeing firmness in a lot of the our markets, but the good news is the phone is ringing , we are seeing people that want to buy potash . We see this market as being firm in our regions and in our natural market . So I wouldn't be surprised to see a little softness , but once again I take people kind of on the world tour of the various products that potash is servicing from sugar to cotton we have seen a bit of fall off in coffee , but we look at corn, soybeans, wheat economics and I continue to ask people to really focus around the world when you look at palm oil economics. Agricultural economics right now are very firm. So while we may see a very short term moderate very small dip in the price , we are

Can I follow-up to that and maybe ask you to rank the markets that you serve, and in terms of where you see the I guess potential price strength down to price softness?

Joel, once again, I'm not going to really rank them, but I will take you on a tour. When you look at the pacific north west it is a great strong market right now. The California market is a very strong market . We are seeing our Texas and Oklahoma markets come with back with the rain they have had I don't think by any stretch the drought is broken. But we are seeing good solid firmness in those markets. Our oil and gas industrial market with the price of oil picking up and the amount of (Inaudible) plays going on .We are seeing our industrial markets pick up. We are seeing strength and solidity in our feed market. And as I mentioned earlier the compaction allows us to right size our products for each of those markets and some of those markets change on a quarterly basis, so that flexibility and optionality has served us quite well. And as I stress over and over it is reflected in our net realized pricing. So it is not a matter of ranking those markets, but it is the opportunity to have access to all of those markets. And have access to them on a iterative dynamic, real time basis, so we can supply our customers on an as needed

Okay. Thank you.

(Operator Instructions). The next question comes from Farooq Hamed of Barclays Capital. Please go ahead.

Hey, thanks guys. My question really is just around the development of the HB mine after you get your permitting you are going to start construction. I am just wondering do you have all the equipment in place and ready to go to start the construction process or are there any long lead time items that you are still waiting for?

Hi, Farooq, this is Dave. We are certainly doing everything we can to make sure we are prepared for that. Clearly we are out reaching, making agreements and talking to venders about availability we are trying to get contracts led at this point , so we have got drilling contractors lined up. We have pipe manufactures and labor lined up. In terms of having contracts in place around the (Inaudible) and construction all those things are in the queue and in progress right now. Our sense is we are going to get started right away as soon as we as what we hope to be a favorable Record of Decision. At the end of the day it is going to depend on what the Record of Decision says. We are optimistic about that, andplaning

This is Bob. I can't stress how ready we are to start on that project.

Okay. That is good to hear. I think that is the biggest concern would there be anything that would delay you that you are in control of ifyou get that Record of Decision on time. Next question is on the CapEx estimate.

Let me just answer that in fanatically no.

Okay. That is good. In terms of your CapEx estimate for construction when do you think or what is the time line for revisiting and re-addressing CapEx estimates?

Farooq, we will do that throughout the year . I think you have seen us keep that number as current as we can in our historically practices. Really the most probably the most realistic update will be at the end of the second quarter, and we will know on HB and we should known on North at that point in time. Those are the probably the two biggest unknowns in terms of exact

Okay. Great. And maybe if I could just switch gears a little bit and just talk about langbeinite for a minute. I guess a little bit surprising commentary this quarter around the strength and demand for the standard product. I think that is a little bit different from what we have heard in past quarters that really the strength and demand has been for the granular product and not so much for the standard product. I am just wondering two things, one, do you see the strength in demand for the standard langbeinite product being sustainable , and two how does that impact your thoughts on increasing granulation capacity for your langbeinite

Farooq. That is great question , but here is the really cool part is that our pelletizer will allow us we produce a natural granular and what we don't produce is a natural granular product our pelletizer will allow us to compact a 100% of the product. So once again Intrepid will be able to use its newly built plants and designed in a way to create maximum marketing flexibilities, so we can right size the product for the market. I will say the strength and the growth and the standard areas of the market have been a function of us going out and growing the market and showing the benefit of that product. So a lot of that product is going to people that are just seeing the benefits of it they are liking the product and wanting the product. The way the plant is designed is we will be able to produce the right amount of standard for the demand , so we are not going to have that disparity. We shouldn't see any kind of significant delta in pricing because we can right size our product for

Okay. Great. Thanks I will pass it along.

The next question is a follow-up from Ben Isaacson of Scotia Bank.

Hi, Shawn again. Regarding your Moab drilling , I was just wondering if you could give an update on the timing of when that drilling is expected to start ? I think we were originally looking at late 2011 , and if you could give us some color on when we can expect the project benefits to be realized is that still something we can expect to see in

Shawn, this Dave. We just dug that first well here right at the beginning of the year, and it will take us the better part of year to get that program drilling done. So I wouldn't really look for too much coming in 2012. We have incorporated really as a Company as you can see from our outlook numbers what our expectations are around production, so hopefully that gives you a good sense for it. Again it is not if you are going to see this 20% jump coming out of Moab straight away here. It is going to take us some time, and then there is always the -- you have to consider the overall mix for the Company as well.

Okay. Great thank you.

There are no more questions at this time. I will turn the conference call back over to Mr. David Honeyfield.

Thanks, Joe. We appreciate all the questions and the interest. And at this time we would just like to thank everyone for joining today's call and for making the effort and taking the time to learn more about Intrepid. Have a great day.