Precision Drilling Corp (PDS) 2004 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Precision Drilling Corporation first-quarter results conference call. (OPERATOR INSTRUCTIONS). I would now like to turn the conference over to Mr. Hank Swartout, Chairman, President and Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen. As usual, we will start with Mr. Dale Tremblay, our CFO, and his rendition of his numbers.

Thank you, Hank. This conference call and webcast contains forward-looking statements based upon current expectations that involve a number of of business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, national and regional political and economic conditions, oil and gas prices, weather or the other unforeseen conditions which could impact on the use of our services supplied by our Corporation.

As we have already released a detailed news release outlining our financial results for the quarter, I will give an overview of our financial highlights for Q1 2004 and provide the regular operational data points our organization focuses on. The record-setting quarter was the result of the anticipated strong Canadian market that benefits the cost reductions in the United States operations and the much improved operating earnings of our TS statement.

The Corporation generated diluted earnings per share from continuing operations of $1.91, a 43 percent increase compared to $1.34 for the first quarter of 2003. Diluted net earnings per share were negatively impacted by discontinued operations in the amount of 12 cents per share. This loss was related to the sale of Polar and to the lesser extent to some additional charges relating to the Fleet sale. At year-end, the Company was in negotiations to sell Polar for an amount which would have resulted in no write-off being incurred, and for this reason, there was no adjustment booked at year-end.

During the first quarter of 2004, these negotiations terminated, and the Company began discussions with a new purchaser to acquire Polar. Management determined that it was in the best interests of the Corporation to accept a lesser amount for these assets in order for the TS management to focus on our wireline separation service and directional drilling businesses. The diluted net earnings per share of $1.79 for the first quarter of 2004, an 18.5 percent improvement over Q1 2003.

I will now go through each of our segments, starting with Contract Drilling. In Canada we achieved 14,768 rig operating days or a 72 percent utilization rate for the quarter compared to 14,641 days in Q1 2003. Therefore, virtually no volume difference for the quarter. The industry man power shortages were still an issue. Alleviating some of this situation was the crew standby compensation and greater contractual continuation with operators. During Q1 2004, 222 of the total fleet had activity. Average available rig fleet for the quarter was 225.5 rigs. The average drilling rate increase of approximately $1700 per day resulted in Q1 '04 day rates of $16,800 a day compared to 15,100 a year ago.

Well servicing. Our fleet of 239 service rigs, down one from last year, obtained 150,600 operating hours compared to 138,900 hours last year or 69 percent utilization compared to 64 percent last year. Revenue for 2004 increased marginally to $534 an hour or an increase of 7 percent over last year's number. The improvement in service hours over the prior year Q1 '03 relates directly to the additional completions performed this year as a result of the drilling activity in Q4 '03, which was stronger than the previous year.

International operations saw operating days increase a total 490 days over Q1 2003. By region, South America improved 140 days to 322, attributable to the effect of the national strike in Venezuela last year. Mexico increased to 826 days, an increase of 258 due to additional rigs moved into the country. The increase of 91 days in the Middle East was a direct reflection of the new rig moved into the region.

Revenue for Q1 '04 was abnormally high due to the inclusion of revenues for claims of approximately $3 million to compensate us for out of scope drilling days from the project beginning through December 31st, 2003 relating to Mexico.

Just some points. Canadian drilling was 249 million for the quarter, well servicing 80 million, international 38, and other 20 million.

Moving to our TS operations, which showed the greatest improvement from an operating earnings perspective at 120 percent increase over Q1 '03 result on a revenue increase of 12 percent of 12 percent. Benefiting from the strength of the Canadian market revenue by region is Canada at 126 million; the U.S. was 38 million; Mexico was 34 million, and all our international regions totaled 29 million. Revenue by productline -- wireline, 92 million; directional drilling, 78 million; separation services, 30 billion, and other, 27 million. Canadian open hole wireline jobs totaled 6,515 for the current year compared to 7194, down 9 percent. Although activity levels were lower than last year, both revenue and operating earnings were higher. Directional service average drops per day followed overall rig count and increase significantly over prior year. Q1 '04, 61 jobs average per day compared to 51 jobs average per day last year. Separation services was up 13 percent to 20,959 man days compared to 18,498 in Q1 '03.

Moving to the U.S., open hole and case hole wireline jobs in the U.S. for 2004, 3059 compared to 2426 last year, an overall increase of 26 percent. Latin America's revenues more than doubled year-over-year. Mexico remained relatively flat. Europe, Africa and the Asia-Pacific regions were both down significantly, while our Middle East operations continues to improve year-over-year.

Moving to R&E has increased relating to expenses existing relating to the (inaudible) equipment. It is relating to the latest -- bringing everything up to the latest engineering designs on the Rotary's durable tool, which focuses resources on completing the technology in various full-sizes.

Rental and Production. This segment remained constant year-over-year with an improvement in operating earnings. Rental revenue was driven by the strong oil field activity levels. The rental rate fleet averaged 253,000 utilization days or 46 percent compared to 232,000 last year or 43 percent. Surface equipment operated at 66 percent; accommodations, 75 percent, and tubulars, 22 percent for 2004. This compares to surface equipment last year of 59 percent, accommodations of 65 percent, and tubulars at 24 percent for 2003.

CEDA operations were off slightly at the revenue level as a coca shutdown that was anticipated in Ford McMurray did not occur. U.S. catalyst group had another strong quarter, while Canada was just slightly higher. Canadian industrial group was slower than last year with steady results in the U.S.. The mechanical group was very similar year-over-year.

Quickly moving to the balance sheet. It continues to improve with the working capital increasing 173 million since year-end to be at 422 million, while our total borrowings declined by 80 million. Capital additions for the quarter was somewhat lower than anticipated. The reduction in capital expenditures should not impair the Company achieving its revenue goals that it has set for itself.

Just quickly, Contract Drilling. We spent 17 million on capital, the TS group 26 million, Rental and Production 6 million, and the corporate group 4 million for a total of 53 million.

Just giving some guidance on our tax rate for the year. We expect it to run on an average rate of around 33 percent with the split between current and future taxes at 85 percent and 15 percent respectively. The consensus earnings estimate for the fiscal year 2004 is approximately $4.00, and the Company is comfortable at this level at this time. Thank you.

Thank you very much. John King will give us a review of TS.

As everybody can see, we are obviously very comfortable with our results in Q1. I think it is important to stress that we see these as a result of the improvements that we made in '03 and the continual focus on cutting costs, rationalizing our businesses and continue to focus in the markets where we saw the best return. We did that through '03, and we are seeing the fruits of our labor in Q1 '04.

In almost all cases, the increase that we see has outpaced the overall industry activity. So although Canada has been significantly stronger than Q1 '03 as well as the U.S., our improvement mostly at a profitable level, at the operating earnings level, has been significantly better than the overall activity.

We have continued to focus in Q1 on where we can improve our business efficiencies. We have continued to focus on the markets that we chose to focus on and prioritize in terms of adding our resources and applying our resources to those areas. This time last year when I first joined the Company I found that we had many brushfires, so to speak, we were fighting in all different areas in the world in order to struggle. Now I see a very strong platform, a platform where we can basically deploy our technology, and we have the efficiencies, the operational procedures in place in order to grow this business. It was important to stabilize the business so we could grow it, and I think we are comfortable we have done so. Our people know exactly why we are doing what we are doing, when we are doing it, and why these decisions are made in terms of the focus on these markets in these different product lines.

As Dale pointed out, we have divested of two product lines now. We are finished. We are just in the throes of closing the Polar deal, so we are back to three core product lines -- the directional services business; separation services, which includes our (inaudible) testing, and wireline services. And those are the three product lines that we are going to continue to focus on and continue to grow. We see that as a much clearer way to strategically decide in terms of where this Company is going.

Talking about the technology a little bit, I continue to remain cautiously optimistic on all fronts with our technology development strategy. In some areas, we are slightly ahead; in some areas, we are slightly behind. But there are no material surprises with any one of our initiatives. We maintained the same view that I basically consistently have given over the last couple of quarters, and that is the first full year of contribution in technology will come in 2005, and material contributions will not start to be seen until the third quarter of 2004.

As we look out here in the future of Q2 and Q3, the challenges that exist are both positive and in some cases negative. The competition we are obviously gaining more respect and I guess getting more attention from the competition in various markets, and that in some places has resulted in some aggressive pricing tactics in many of these markets. It is up to us to be very smart in terms of where we focus our attention and resources to ensure that we give ourselves the greatest opportunity for success.

We want to work with our customers where they want us. We cannot muscle into these markets. So we have many customers in many different regions of the world, and they want to see us in there and we are working with them.

So with that, I will pass it back over to Hank, and if there are any specific questions later, I will be happy to answer them.

Thank you, John. We are all very pleased with the job that John and his group at TSG have done over the last year. It is amazing when you focus on the bottom line, and I think it worked.

When we look at the Canadian drilling scene, we obviously have the best quarter that we have had in the history the Company, and as we go forward through the rest of this year, we expect it to be record year as we go forward.

The international side has certainly come in nicely. Mexico is fine. There could be some more additions in Mexico over the next year. That is possible. We are also looking to utilize our new asset purchase that will be closed here on approximately May 21st, and we are looking forward to the exciting things that will happen with all the GlobalSantaFe land drilling people and the equipment.

Obviously we are seeing some interest in some of the rigs that haven't been activated for the last while, so we are excited there. Rents in CEDA are doing very well. As we proceed this year, we are just very pleased with everything that we focused on that seems to be coming in the right direction.

So with that, we will open it up for questions so that you can ask us some interesting questions.

(OPERATOR INSTRUCTIONS). James Stone, UBS.

Congratulations on a nice quarter. A couple of questions I have. The first in terms of the outlook for the technology service margins over the next couple of quarters, can you give us a sense -- your margins were clearly better in the first quarter than we were looking for and I think probably you were even looking at back in January, December. Do you expect to see that running at these higher levels, and what would influence that going forward?

The first point I guess I have to make there in terms of these margins I think it is important to realize that in many areas of the world we have gone from brackets, i.e. losses, to where actually they are flat or making a little bit.

So in terms of our improvements in our strong markets like Canada and so on, last year we basically there were negatively impacted by some fairly significant losses in different areas around the world. So we have stabilized it. Our margins in our contributing regions, i.e. Canada and so on and so forth, they have increased obviously from last year. We think that pricing is one issue. Utilization is another one. Our rationalization of cost is another one.

As we go through Q2 and Q3, I think we can continue to see some pricing increases in some areas, Canada probably not. In the U.S. and other areas of the world, there are some opportunities there. There is still an overcapacity in those areas. All of that should help us maintain the margins that you see. We do obviously have a Q2 coming in Canada, which is our perennial breakup period. So Canada being the biggest piece of TS is at the mercy of the weatherman. That can either work positively or negatively for us. But I see margins continuing to be strong in this Company as we go forward, as long as we keep our eye on the ball and make sure we manage our costs.

My second question is, if you could just update us on the status of the RSST tool and where you are employed right now? Lastly, Hank, if you could just update as on what the financing plan is for the GlobalSantaFe fleet?

The rotary steerable tool we have continued to qualify and run field trials in many different areas of the world with the 4.75 inch tool. We have had many successes where we have had challenges. They have not been fundamental challenges. So I am quite comfortable with the development with the tool. The challenges we have had have been small issues, sort of $50 problem so to speak with $1 million worth of technology. So you are always going to get to those situations. You have to iron them out and you have to be comfortable with them before you can actually get into sort of a certain full swing of commerciality.

We introduced our 6.75 inch tool in February. We have tested it in our R&D facility, and we have also tested it in the ground on several field trials, and we are exceedingly happy with that. So basically now we are in a situation where we have got two whole sizes with the ability to do 6 inch holes with the 4.75 inch tool, and obviously we have got the ability to do larger hold sizes with the 6.75.

So with the rotary steerable tool, we feel very comfortable where we are at. We have got customers working with us on trials in different areas of the world. We have run the tool on a stand-alone basis. In other words, we are running it without coupling it with our piggybackers as our MWD system, which is a new market for us. So we are very positive.

We are very excited about what is going on. The market is there. The market is strong. It is not if; it is just when we start seeing a material contribution from this tool. Does that answer your question?

And that should be third quarter?

We should start seeing some good enough volume by Q3 where we can actually talk about it and say here is the results we are seeing from rotary steerable tool. As a full year, by the time we get enough mass in terms of the number of tools we have and have them deployed around the world, '05 is the first full year I can start saying, look here is a meaningful contribution from our rotary steerable technology in TS.

Relating to our financing plan, we currently have in place a bridge financing to close the transaction, and we are currently in discussions on various options to take out this bridge. We will probably know exactly what we are doing in about a week's time.

Okay. That is great. Thank you very much.

Kurt Hallead, RBC.

The question I had for you, Hank, is, can you give us your general assessment of the Canadian market beyond breakup? What kind of indications of demand you are getting at this point in time? And then what you think are the prospects for potential price increases as we get out into the third quarter for the land drilling business?

Well, at this time, we are very pleased with the demand for the equipment. Obviously shallow is totally booked at this point in time. Intermediate, we are doing some retrofits. We have three rigs under construction on long-term contracts that we have received. We are also looking at three to five retrofits, plus some more to be built into long-term contracts.

So as we go through the rest of 2004, we are very bullish obviously going forward. The demand is going to be as strong as we have seen in the past, and it seems to continue on. We are just exceedingly pleased with the demand.

As far as pricing, we have to be fair with our customers as well. Obviously we are going to breakup now. We are certainly not raising our prices. We can be very honest about that, and as we go into the future, there won't be any price increases possibly until the fall, which is traditionally due in October.

So you don't see anything potentially before the fall even on a case-by-case basis?

Oh, no, that will be some price increases in the fall. Obviously on the Spot market when somebody is in a bind it is amazing what one can get, I guess. But we try to be very fair with our long-term customers. We look at that as a very serious condition of our working together with them. And we have to be cognizant of what we're doing, so we had a great year and we will continue on. But we certainly are not going to gouge our customers.

Let's assume that commodity prices stay at or about the levels that they are currently. As we head out into 2005 is there any potential for the Canadian market to get any better than it is right now?

I don't think you are going to see much activity. What we are all held to in the Canadian market is weather and people basically. When we look at 21 to 25,000 wells, it sounds like 4,000 wells can be 3 wells a day with shallow drilling. So it doesn't take a lot of iron to augment that space that we are talking about. So it's going to be a very good year for all of us, and the rest of the services will follow. As long as the price of gasoline is where it is at today, we are in great shape for ongoing ongoing.

Keep in mind that we're still declining in Canada, as well as the United States is, on a quarter by quarter basis, or it is certainly annualized. And as long as we are declining, we're going to the drilling more.

And then finally, Hank, if I may, Bowie's had a long-term strategy to diversify your operation beyond the Canadian border. Clearly with the acquisition of the GlobalSantaFe rigs that you can kind of do that in one fell swoop. Can you give us some early assessment as to how those rigs may be deployed vis-a-vis were they are right now?

Well, we are very pleased with GlobalSantaFe. We have also received a tremendous amount of people with the acquisition. The equipment is some of the best equipment in the world. Santa Fe is well-known for years as having some of best equipment in the world. And when you talk 2 and 3,000 horsepower rigs, obviously with the 31 rigs we bought, their size and the dynamics of them are far greater than anything we had internationally. And we're known as a 1,000 horsepower or less drilling contractor. And obviously when we added 22 or 23 2 to 3,000 horsepower it gives us a new level of activity.

But as you see the Middle East get deeper in gas, obviously we are very comfortable that the deeper rigs will be certainly utilized. We are seeing Venezuela come back nicely. Egypt is fully utilized. Oman, we are busy there. Saudi, our rigs are busy. We don't have a lot of flexibility in the Middle East. There is only a few (indiscernible) that we can. And obviously there is a country to the North that is only half an hour away that makes us a potential player at some point in time down the field.

The challenge we have are the eight rigs that are in Venezuela that certainly didn't operate last year at all for Santa Fe. And one has to keep in mind that last year we also had a slow down for a few months in the revenue because of the war in the Middle East. But these rigs are probably some of the best (indiscernible) we could get our hands on. We have 6 2003 2000 -- 2 3,000 horsepower rigs. They were set -- $100 plus million when those rigs being retrofitted. So we are in great shape to move those rigs, possibly some into Mexico. Obviously we have an interest now of 4 rig wells to be drilled in Venezuela for (indiscernible) operators. So Venezuela is going to get back to work as well. And obviously we might move some rigs to the Middle East. So we are very pleased at having the group together, and we are very comfortable that our timing was excellent to make the purchase.

Matt MacKenzie, Dundee Securities.

Just to follow up on that a bit, maybe a question for John or Hank. Can you speak to the strategy for the T&D (ph) in some of these new regions that you're entering with the GlobalSantaFe acquisition? Are you looking at just directional drilling initially? Are are you going to market the whole package?

Well, as we take over our operations in different parts of the world then I will be traveling to the Middle East very shortly. We will certainly be chatting with everyone one of the national oil companies that we certainly have more to offer than just the rigs. And obviously we don't do anything in Kuwait at this point in time. We have a lot of services. John will be visiting there as well in a short bit of time.

So we're going to make all our products available to these players in different parts of the world. And obviously we have a tremendous platform now because we actually have the facility. We have an operating entity. We have a base camp, or in some cases almost a big city to work with. So we're very pleased with the ability to bring some of our unique technology forward.

So John and his group, with all due respect, are already make some tremendous inroads in the Middle East. And give them about six to eight months and they will be well known in the Middle East and people will be wanting more their (indiscernible) than they want ours possibly.

Absolutely. It sounds good. Actually, John, you hinted that you were profitable in a lot of regions. Is it still Latin American and Asia-Pacific that you weren't profitable this quarter or breakeven?

I think the thing to keep in mind here is, as Dale pointed out, that we actually had a reduction in revenue in Asia-Pacific and some other areas. That reduction in revenue that we had in Q1, '03 versus Q1 '04, we're able to sort of manage our cost structure to the extent that in most places we're able to breakeven, or make a little bit of money.

So in those areas we believe we have stabilized it. We believe we won a number of contracts in the quarter, the last two or three months that should be kicking out here into Q2, into Q3. And we are very comfortable with the amount of business that we have in those areas from a business point of view in terms of looking whether they are profitable or not.

Now it comes down to a different challenge, and that's actually execution, being able to get into the field, deliver, provide a reliable service to the customer. So it's not so much a struggle on a day-to-day basis in terms of staying alive, now it is basically trying to make sure that we execute properly because the business is there.

Okay, just further to that last quarter, John, you mentioned that the reliability saw a huge step change. Has that been maintained through the quarter, throughout Q1 and the first month here of the second quarter?

That is correct, Matt, we have. Our directional services business we continue to see good MTDF (ph) even despite the fact obviously we've had incredibly high utilization and stretched fairly thin in some areas because of the activity that comes in Canada in Q1. So we are happy, we are comfortable with that.

We always have challenges. We have challenges from month-to-month, week-to-week, but we've got the appropriate products (indiscernible) group in place that is able to address that now. And we don't take our sight off the ball in terms of delivering service reliability to our customer, just because we have a problem once a month or something like that.

Sorry, I might have missed this. Do you have any plans for the 8.5 inch rotary steerable for this year? Is that still in --?

Yes, we should be delivering that. We should have an 8.5 inch rotary steerable ready by the end of Q3.

Okay. Last question. If the weather cooperate here over the next couple of weeks, do you think the rigs will be back up and running? Any sense for when road bans are coming off guys?

It looks nice at this point in time as it did last year -- 29th of April we are about the same as we were last year for our activity. Of course, last year there was some major snow. Obviously we hope that won't happen, and we can go back to work. We have a lot of customers that are ready to go May 1, getting things organized and getting some leases built at this point in time waiting for road bands. And it will be a flurry without any question. Now we have certainly taken advantage in the month of April where we are either full major retrofits and tuning up a lot of equipment so the we can get them back on the road as soon as possible. But we do go through tremendous period in breakup where we are fixing a lot of things, all the little things that you want to get back your hands back on before they are gone again for the rest of the year.

I think you mentioned last quarter 80 to 90 rigs is what you are thinking could be running through --?

Right now we are running at about 45, which is just like last year. We were as high as 90 at the start of April. It has come down now, and we should have the shuttle going back to work next week. So we will probably average if we get back in June which we can, then we will get back up to 140 we can average that. So we will see as we go through May and June.

But as far as the numbers, we are a little bit behind where we had forecasted our budget for 2004, but it is not monstrous. We always take a very cautious approach in the spring time simply because we never know what what it is going to do to us.

Last question just for Dale. Dale, you were mentioning some abnormally high revenue in Contract Drilling, something over $3 million in Mexico. Can you add little bit of detail or just explain that for me?

I will explain that. What happens is when we go through the project and we have a management group that has a risk plot involved in Mexico and when sometimes, for example, we are trying to go to location to location and we get held up at a farmer's gate, we keep that in the pot until we get through the extension period. Then we sit down and reallocate that back to the drilling group, some of the funds because they are the ones that have more at risk due to weather and road locations and farmer problems, etc.. So that is where the money comes from.

John Tasdemir, Raymond James.

I think most of the stuff has been asked and answered, but I guess I did have a question for John. Kind of an open-ended question. I am not exactly sure how to ask it. But listening to some of your bigger competitors on their conference calls, they talked about with the directional drilling versus the rotary steerable markets are pretty competitive right now, you just mentioned it yourself. So I guess when I hear that, my concern is that you are trying to grow and develop a business in a very competitive market right now. So can you address that?

Are you specifically asking about the competitiveness of the rotary steerable market?

Well, rotary steerable market and directional drilling as well.

Okay. Yes, I would say overall if you look at the directional business on a worldwide basis, yes, it is very competitive in lots of areas. There are certain markets out there that if you focus on them, that is an overcapacity of equipment and services where you can actually make a decent dollar. Part of that, the largest what you might call LWD market in the world, which would be the Gulf of Mexico, we still not have seen appreciable uptick there. We are still looking at that rig count being sideways from where it was in Q1 '03, so there is a lot of capacity that comes from that market that is spread around in different markets around the world.

As I said in my dissertation at the beginning, we just have to be smart and make sure that the areas where we are actually looking and trying to make an impact that we are working with our customer. And these are places where it is not call out day-to-day type work like it would be in the U.S. and Canada. These are were contracts are in place. So where those contracts are in place and the customer wants us there and they want more than two players, they want to go to three or four or whatever it is, then there is a good opportunity, you can get in, make some decent money, and basically get your foot and build a bridgehead in a market. So we focus in that way.

From a rotary steerable point of view, I would say in the larger sizes, where we are actually not at right now, I do know it's somewhat commoditized in certain markets. But remember when we are looking at 6 inch hole and we are operating with a 4.75 inch tool, there is only one other player in the world that has that. So we are very careful to make sure that we maintain pricing in that area as does our competitor, and we are comfortable the market is there.

Each one of the us, them and ourselves, we don't have 100 percent reliability with these tools, and we never will. It's just the nature of this business. But we are both right now working towards getting a reliable service, and the market exists there, and the pricing is strong. We can basically pull through our other services with that. So I hope that answers your question.

Absolutely. Let me also ask this then. I guess trying to go through and look at obviously second quarter is always hard one to figure with the weather. But as far as what you are expecting in TSG in terms of operating income in the second quarter, last year a pretty big loss, but you spend a lot. You have trimmed a lot of costs. Pricing is better this year. I would imagine there would still be an operating income loss in the quarter. Would you agree with that, or you want to comment on that?

I would prefer not to comment on it. But I think I am going to step in here. If you look at quarter-over-quarter, year-over-year, you are going to see a marked improvement, and that is all I can say to the first quarter. You will see that in the second quarter, and we are not sure where it is all going to come from, but we stem the losses so dynamically that we are very pleased.

I hear you. All right guys. Appreciate it.

(OPERATOR INSTRUCTIONS). Gentleman, there are no further questions at this time. Please continue.

Thank you very much. Well, thank you very much, ladies and gentlemen. We appreciate the time that you have taken to listen to us. Obviously we are very bullish. We are very proud of what we have been able to accomplish with the turnaround at TSG. With our new acquisition on the drilling front, we are looking forward to the rest of the world becoming something that we can enjoy and get some good return from.

We are very pleased with the acquisition of GlobalSantaFe from an equipment point of view, which is as I alluded to earlier 2000 and 3000 horsepower equipment, which is an awful lot around the world. And they are in the right places where there is actually some demand and will be for many years to come. If we can take the rest of our services to those parts of the world, it will certainly be accretive to the whole Company.

So we are very excited about what we can do. We are excited about Venezuela getting a little more active because it needs more oil. Overall Mexico is going to do well. Obviously Canada is going to do well, and the international market is very buoyant. So we are looking forward to 2004 to be a record year across the board. If we can, we will be very fortunate. And as to 2005, I am sure everybody has an opinion what that will be because I am already seeing some numbers forecast.

We thank you very much, and we look forward to you talking to you when we have our second quarter. Thank you very much.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating, and please disconnect your lines.