Precision Drilling Corp (PDS) 2005 Q3 法說會逐字稿

Good afternoon, ladies and gentlemen, thank you for standing by. Welcome to the Precision Drilling Corporation third-quarter conference call. [OPERATOR INSTRUCTIONS] We'll now turn the conference over to Mr. Hank Swartout, President, Chairman, Chief Executive Officer. Please go ahead, sir.

Thank you. We'll start with Doug Strong giving his review of the quarterly numbers.

The quarter ended September 30, 2005 was an extremely active quarter for Precision Drilling Corporation, on several fronts. I would like to begin with the statement of. Third-quarter results from our continued drilling and rental operations in Canada were quite simply spectacular.

For the third quarter of 2005, we generated revenue of $300 million, an increase of $82 million, and 38% over the comparable period in 2004. Operating earnings for the quarter were $112 million, an increase of $50 million and 81% over last year. As a percentage of revenue, operating earnings are 37%, an improvement of 9% points over the comparable period last year.

This margin improvement is particularly -- is primarily attributable to pricing improvement associated with sustaining high demand for our service for our drilling and oil servicing businesses throughout the quarter and the year. Major repair costs were relatively light in the quarter, as many projects were complete previously in the weather-impaired second quarter and some delayed to the fourth. Our ability to control costs through efficient operational execution and infrastructure support is also a key element in dealing with the pace of cost escalates.

Year- over-year for the quarter these operating earnings were achieved with an underlying asset base that was little changed in terms of the size of the equipment fleet. While we currently have customer commitments for 19 new drilling rigs, the delivery of these rigs is expected to occur over the next 18 months. In terms of general and administrative expenses, we expect to see further cost reduction as we size our infrastructure for continuing operations.

Continuing contract drilling and rental operations are comprised of drilling rigs, service rigs, and other complimentary oil field service businesses in the area of rentals, camping catering, oil field supply, and equipment manufacturing and repair. Supplemental divisional information for the third quarter of 2005 as compared to the third quarter in 2004 is as follows. We achieved 12,539 drilling rig operating days for 60% utilization, an increase of 3,060 days and 32% over last year. Average revenue for operating day was $16,259 compared to $15,029, an increase of 8% over last year. Average operating expense was $8,439 compared $8,584, a decrease of 2%.

In well servicing we achieved 122, 622 service rig operating hours for 56% utilization, an increase of 9,985 hours and 9% over last year. Average revenue for operating hour was $551 compared to $479. An increase of 15% over last year. Average operating expense for operating hour was $335 compared to $344. Once again a decrease of 2%. Working our way down the statement of earnings, earnings from continuing operations before income tax axis is $19 million. A reduction of $93 million from operating earnings. There are two notable amounts to consider.

First, we booked a $65.5 million premium on early retention of our bonds. Second, we recorded a $20.2 million unrealized loss in market value on short-term investments. This relates to the $26 million held by Precision and considered on the divestiture of energy services and international drilling with closing on August 31, 2005. Income tax. Income taxes at $16.6 million in expense may appear a little high in proportion to earnings. From continuing operations before income tax is the unrealized market value loss on the weatherford shares is not tax deductible.

Therefore earnings from continuing operations are reported at $2.4 million, and $ 0.02 per diluted share. Closeout discussion on the income statement, discontinued earnings net of tax of $1.38 billion. Included, are the operating results for July and August, 2005, and the gain realized on the sale of our energy services segment international drilling division and our production business, Seda International. Boosted by discontinued operations in -- Seda international. Boosted by discontinued operations in the gain of this units, net earning for the third quarter 2005, is 1.382 billion and $11 per fully diluted share Based on a denominator of 125,686 million diluted shares outstanding.

Turning to the balance sheet, the timely closing of our diversity tours as previously announced in a strong third quarter has solidifies our asset base heading into our proposed plan of arrangement and special meeting of security holds on October 31, 2005. The business diversity tours previously mentioned generated proceeds of approximately $1.3 billion. Our cash balance at September 30, 2005, stood at $1.85 billion was reduced in October from the entire repayment of long-term debt in the amount of $767 million. This leaves us in a good cash position to fund the special cash payment of up to $850 million, pursuant to the proposed plan of arrangement.

Included in current assets and valued at market in the amount of 2.072 billion at September 30, 2005, are the 26,000 weatherford shares. This equates to a carrying value in Canadian dollars of $79.69 per share. This value will fluctuate with changes why the US-Canadian exchange rate and weatherford share price and as a result will have an impact on Q4 results.

Moving to our equipment and capital expenditures. The purchase of properness plans, and equipment amounted to 77.1 million. Of which 40 million was for continuing operations. Through the first nine months of the year, purchase for continuing operations amounted to $110 million. Included in this amount is $65 million for upgrade or maintenance with the remaining $45 million on account of expansion. 80% of which is associated with growth in drilling.

In terms of liabilities, you will notice an increase of approximately $148 million in current taxes payable. This is due to an acceleration of previously deferred income taxes as a result of corporate reorganizations. Hank, that concludes my comments.

Thank you very much, Doug. Ladies and gentlemen, we had a great third quarter. We've had lots of challenges as we go forward to become a trust which we are very confident we will achieve as we go forward. Some of the comments I want to make is that today's numbers are running 197 rigs drilling and moving which puts us at about 87.5 %utilization. The weather a head of us looks very good. The next five days looks very good. The long-range forecast, it could be 10 or 15 days before we have any cold weather possible.

This will put us in a tremendous fourth-quarter position. Certainly a higher utilization than we anticipated back a year ago. And we look at the numbers. We went up for customers, raised rates for the winter. Obviously, a lot of our rates took into act November 1. So this month we actually -- I guess we'd have to go back. We had probably half of them renegotiate to October, to 2/3. So I'm very comfortable that you'll see that the fourth-quarter numbers will be substantially higher than the third-quarter numbers on a per-date basis.

And as we go forward to 2006, we're very excited about the future and that the new construction we have forecast is coming along nicely. We're very comfortable that the procurement. Of equipment is done very -- procurement of equipment is done very well. We have secured everything with firm delivery dates and firm pricing. So we're -- we're very fortunate that we've done that. But it's our size that allows us to do it. And Doug alluded to the fact that our costs through 2005 has come down in drilling and oil servicing on a per-day basis. We've really done a good job. It's something we were concerned about going forward but I think we can handle that quite nicely with the great team we have here.

The other comment I'm going to throw out is that obviously we're very [cog] of the fact in this company that Gene Stall happens to be my son-in-law. I'm very proud of what he's accomplished over the years, and let's keep in mind that when we looked at how we were going to proceed going forward with the exit of my self over time, I chatted with most of our field operations and a lot of our people that were in the -- the sales groups, etc. And one comment came forward if we wanted somebody to lead this group we wanted somebody inside. And everybody looked toward Gene for leadership.

We have to keep in mind that being my son-in-law is not always a great thing to happen, but it just happens to happen. And let's be also [cog ] of the fact that I own a small part of the company. I've never been a large shareholder yet I've committed my life to it. I love the company. I would do nothing that would put it at risk. I'm also going to tell you very clearly that I'm going to take all my options, the two million options that I have and 100 -- 1.8 million of options that were diversified stow's not a question of early divestment and they would diversity in September. So mine were diversified. I'm going to take those and buy all units as we go forward as far as the trust.

What I'm comfortable with as we look at numbers and budget going forward in 2006 is that the guidance we gave you at $0.24 a share, distribution on a monthly basis, when we did this that we also looked at some other things inside the company,ie possibly $400 million a debt. Those things are behind us and we're virtually going to have zero debt. We have a few things we have to look at as we come out. But I'm comfortable saying that $0.24 is probably on the low side going forward. I think there's a case that we could go as high as $0.30 distribution on a monthly basis. We won't be able to qualify that until the second quarter 2006, but you want us to be honest going forward. I'm comfortable that distributions will be there.

We're going to see what happens in the first quarter, and we understand clearly that as the quarter builds and this is dependent on weather. One has to keep in mind that if we look at the weather and we can last until March 15 rather than February 15 up north, that gives us higher utilization. June is a month we got rained out this year. We have property Utilization. We can get to 60% drilling on the utilization basis. The growing forecast in the 50%. So there's lots of upside. And we feel comfortable with the demand we see today. We certainly cannot deliver the services that we need. So I'm excited about that.

But the end of the day, we are a service company which means that we have customers that need the best -- we need the best people, we need the best equipment, and we need the best leadership to lead them. I am very comfortable that the team that we've chosen, Doug, Ron, and Gene to lead this going forward are the best that we could bring forward at this point in time. And I'm sure other people have opinions. And probably some of those people that aren't part of the group have opinions, as well. But I'm pleased with it, and I'm willing to support it. And that's what I'm going to continue to do going forward. So we're going to open it up to questions and answers now.

I have Bob Gibson with me, as well, who's the Chairman of our Corporate Governance, just in case somebody has some questions for Bob that we'll let the rest of the people understand that I -- this company's not a dictatorship by any means. We have a great board. They're very thorough. I'm proud of the job they did on the independent committee going through things. And Bob is here to help in any questions. So please feel free to ask anything you'd like. And we'll try to answer to the best of our ability.

[OPERATOR INSTRUCTIONS] Your first question comes from Alan Laws from Merrill Lynch. Please go ahead with your question.

Good afternoon. Hey, just wondering, have you had any thoughts on the post-conversion growth strategy of the company? To, -- is -- does precision become more passive in -- in the Canadian market, or does it become more aggressive? And really in talking about, you know, you have 19 new builds that are on order, are you looking at more?

Alan, at this point in time the 19 rigs are going to generate somewhere in the range of about $2 political EBITDA per year going forward. These are all long-term signed contracts. Obviously by the time you do 20 that's another $40 million EBITDA we bring to the bottom line for district. We will have to shad debt to the company, but we are going to look at consolidation in some of the other areas where we think we can be leaders in. And there are areas where we don't have anywhere near the combined restriction act.

And hopefully of our trusted value and we have independent players who want to become part of our trust model, we're going to aggressively look at the industry and see what we could bring forward to add value to this group. Let's be realistic. I'm not one to sit back and say that it's over and walking away. We're going to look at some acquisitions in the -- hopefully we'll wait until we have to become a trust obviously. Once we have trust paper and everything going forward, we will play the game as strong as anybody.

So you look outside of the drilling business, is that what you're saying?

Well, outside of the drilling, obviously we have our rental division and some of the rental division that's exist in Albert a are very lucrative going forward. And some of these people that have critical mass that we'd like to chat with them and see -- to chat with them and see if they want to become part of the trust team. Respecting the people that work with them and growing together as we can add acquisitions to unit holder distribution.

Are you going to stick in energy, though, you're not going to buy a sardine canning plant or anything, are you?

No, no, we're sticking to oil and gas. What we do best is drilling, well servicing, and rentals. We have a tremendous regime, we have tremendous position in this province. And in British Canada, Saskatchewan. And there are good-sized operators, as well, that might want out in some time. We'll help facilitate with units or cash. We're not against adding value to this company by any means.

Sounds good. The last question I have is on the day rates. You talked a little about -- you talked a little about looking forward to the winter. Talking about the lift would you provide any color on what you think the rate increase might be this winter.

Traditionally we don't do that, but I can -- I'm comfortable that we've certainly broken through the $ 8,000 a day contribution level and climbing. Borders will be added to that. You'll see in the first quarter, in the first part of 2006 that our rates are very, very good. Certainly higher than they were in the summer of 2005 as we go into the fourth quarter of 2005. We don't like to throw -- what numbers are. Everybody in the industry's seen them. Everybody's signed up with them. We didn't have a lot of fuss. We probably left some money on the table. But they're very attractive.

Appreciate that. I'll turn it back then, thank you.

Thank you.

Your next question comes from James Stone from UBS. Please go ahead with your question, sir.

Yes, Hank, a couple questions. First of all, can just talk about -- you say you've ordered a lot of equipment for the rigs. That you're building. Can you talk about what you think your CaPEx number's going to be in 2006. And then secondly, just -- I'm a little curious about how things went -- work. Once you trust or assuming that you trust, if you have income or cash flow above and beyond the level of the distribution, how does that work from a tax standpoint?

Well, let's talk about the first question. Our maximum extension capital next year would be $100 million. Spending $100 million a year is something that, you know, we might get $100 to $110 million. Upgrading capital, you look at that, probably $115 million. Worst case. And that's including the cost escalate that we're expecting to see some from -- from some of the providers. Ie, we have long-term relationships with drill pipe. There's always a few things that can come at us that we're not expecting.

Obviously, our top drives are [pop's], and equipment we've ordered are all set price. We're very comfortable there. And probably going forward, James, you have to keep in mind that we too have to pick up some debt. Obviously, we're pristine at this point -- in time. Though one look at our expansion capital being our debt going forward, that's something we can look at which could be $100 million. Obviously, our CapEx, our maintenance CapEx of $100 million would be the only thing you take off for EBITDA going forward. And we are anticipating sitting on a lot of cash to a transition year end.

So what will happen at the first quarter, we should have identified where we're at as far as numbers. Obviously, January, February, March are always the most influential for us on an annualize basis. Except for this year we're probably making more money on a daily basis than we did in the first quarter this year. That's never happened before. It's one of those great times. We will look at distributions. That's when your distributions will probably come up at that point in time, after your first quarter. The board's seen where we're at. We have our capital to go to. It also depends on how we do with acquisitions.

We'll look at somebody wants cash or somebody wants units, it could be a combination of both. And our idea still though is to get distribution up to a fair level so our unit holders can get a bounce and certainly the value of the unit. And that's how we're intensifieing the new management. We're very confident that the board has done a great job on the compensation scheme going forward. And tease gentlemen are going to be challenged to grow. And they understand it. And with the growth that they have comes some very great hurdles. And but -- if they hit the hurdles, they'll be well looked after.

Okay. Just as a follow, I know you don't know the answer to this specifically. But do you have some thoughts on the -- the statements recently by some of your government ministers about beginning to tax the trusts and how that might change your strategy at all once you -- you've done the reorganization?

Jimmy, we don't know what the government's going to do. Obviously were in western Canada not Eastern Canada.

Some of your western Canadian guys are talking about it, too.

Well I'm not sure but with 15% withholding tax, that's still an active free trade. We have a lot of challenges to do anything to change it. We don't see it going up. Both governments agree. I can't see it being one sided. Again, I'm just a plain old drilling contractor, and I'm not one of those fancy boys in the east.

If you assumed it happened, would it change the way you run the business much?

No. Our model that we have set up is to maximize our distribution to our unit holders, and that's what we're going to do. We're also going to run it -- we have the most efficient drilling operation in the world. There's nobody that can challenge us on a rig-per-rig basis even on size. We could take anybody, maybe somebody that has two or three rigs and they're doing everything themselves. But if you look at what we're capable of doing and the way this company's been set up, it is a great team. And this team going forward, there is a large number of people that are going to pull together as a team. This is no longer Hank Swartout and a bunch of guys where some some people thought this new group is very much a team going forward. And they win together and they lose together. This is a team we're going forward.

Great. That's very helpful. Thanks, Hank.

Your next question comes from Gary Lapidus with Garsh Capital Management Please go ahead with your question.

Hey, Hank, hi, Doug. Question on first on capital spend. Could you just review those numbers you throughout, specifically what of the year-to-date maintenance capital?

Well I'll throw that out. When we look at it to date we've probably spent on -- just upgrades about $100 million. And expansion $77 million. Doug's numbers and mine -- I don't know if Doug alluded to that, but that's what I have. And we're right in that range. So we thought we'd do 100 and 100. We're a little bit less. And that's timing and weather and people. But we've got everything organized. We had some new equipment coming out that we're very proud of. And as we go forward we'll expect to keep the same numbers except that we should have a cost increase in 2006 just due to inflation of the product.

So what's your expectation then for the full year, total spend versus -- versus maintenance?

Well, this year our total spend upgrade is 103 and 77 expansion.

Okay. Okay. And then -- and you r you saying you'd expect '06 to be similar numbers other than some inflation?

We could spend $100 million in expansion capital we'll do that, and maintenance could be 100, 115 million. Just throwing out numbers that we're very comfortable with. We haven't gone through our budget yet, but I think those are very close be aren't they, Doug?

That's correct. And Gary to answer your question on the year-to-date numbers, looking at cash flow, we've -- purchases on equipment through the first nine months of the year is 238 million. And of that 110 as I mentioned previously relates to the continuing operations.

Okay. That number is a little different than sort of the 60, 0, 80 million types of maintenance capital numbers that I've heard on an ongoing basis.

That's correct. We mentioned in the conference call last time this a normalized type of year would be 60 to 80 million. These are not normal conditions. We have customers coming at us, and there's a number of demand.

Gary be let me qualify that a little bit. In a normal case we would not take a triple rig, for example, replace the pumps as been requested. So a let of these are capital upgrades that are paid for and guaranteed by our customers.

Uh-huh.

They've approached us and want the fastest, most high-priced equipment we can get. We gladly facilitate it. During the course of the summer, we added another, you know, $20 million to $30 million. Or by our customers on small parts, portions of enhancement of rigs. And it doesn't take long when you have 225 rigs that we're capable of running this winner, you know, it just adds up quickly.

Yes. One of the things that -- it looks -- it looks like your utilization is -- I think from what you were describing fourth quarter, utilization rates are running very -- you're being very productive I guess is the way to put it. As -- as we look out to '06, I mean obviously we can all make our estimates of day rates. And I know you don't want to throw out a number. That's fine. We -- we know incrementally how many rigs you'll have. I mean, how should we think about what you -- you might be -- I mean be keep weather out it because I know that's a wild card. But -- in terms of utilization is it possible to move utilization above where it will be full year '05, or -- or is what you're going to accomplish this year sort of a practical limit on utilization?

Well, Gary be one has to keep in mind that when you look at the index, a voluntary index given by people. We should record days drilling and not moving. Obviously when you have 200 rigs running like we do, we know we're between 10% and 12% of our rigs that are moving on a daily basis because our average well is, even in Canada, is somewhere between 4.5 to six to eight. Depending on the contractor, I think it's six days when you look at some of the bigger stuff. Obviously, we get paid whether we're drilling or not drilling.

And what's unique this time of year is that because there's such a demand for drilling rigs and some of the major operators got a little bit behind in booking them up, we were able to start earlier when we had a couple of majors come to town and say they'd chat with us and say, "Precision, we need five big rigs." We said, "Gentlemen, we don't have five big rigs." They said, "Well, you go out -- if somebody else is willing to step up and add it, add a price I'll pick it up. It's caused a flurry of activity. And obviously it got things moving in October. Which is very unique. We're in great shape. Still short of big rigs.

The thing we try to do for customers and we're cognizant of this is if they're in a land expiree situation etc., everybody's been there before. Not just the little guy, some of the big guys. The big guys will get a window and move the complete rig over there and all of the ancillary rentals get the well drill and have the smaller company move it back for them.

Just one last question. I -- I know this is sort of the season where your pricing gets adjusted for the -- for the coming season. And it looks like this quarter you guys did a good job on cost control, and obviously that would include crew costs. And I'm curious -- is this also a season when you would see an increase in per unit crew cost or have you already seen that given how active you already were this past quarter? How should I think about that?

Gary, I can tell you that the crew costs went up virtually October 1. 7% approximately depending whether you look at drilling oil service across the board. We're also reviewing our costs internally to the new group starting in November. We're trying to get to grips and make sure the demand we have for people is looked after so that our people within Precision Drilling are treated very fairly going forward.

And it's nice to say that because I'm going to be somewhat redundant. So I'll sit here and watch these gentlemen make sure that the employees that are going to look after them, they look after them, as well. So that's it, 7%. I'm very comfortable saying that the rate increases were very pleasing to see. First part of the quarter 2005 and the spot market is absolutely crazy.

Yes. Okay. Thank you. Congratulations.

Thank you.

Your next question comes from Jeffrey Grossman from Gerber Capital. Please go ahead with your question.

Mr. Grossman: Good afternoon, everybody. I apologize in advance, I have a cold. If I start coughing that's what it's about. Is there any update or ratio you could give on the amount of weatherford shares or cash that would be --

I think we've gone out with whatever shares you hold at Precision Drilling you'll get .2 of weatherford. I believe that's the number within my dimensions.

.2 --

.2 of every weatherford share you own.

It won't be carried out any more decimal places?

I can't hear you, Jeffrey. I'm sorry.

.2000 fixed?

That's close enough.

And the cash valued at $6, $6.50.

$6.80 Canadian.

$6.80. Now the -- the materials indicate that the amount of cash is up to $850 million. Aside from increase in the weatherford price, what could cause that number to go down?

I'm sorry, Jeffrey. I didn't quite spend that.

The cash amount that's going to be distributed is described as up to $850 million.

That's correct.

What could cause that number to go below $850 million?

I don't think it will happen. The only thing that could have gone is weatherford could have gone over $68. By the time they go to district. Tax consequence, that's gone. We're very comfortable at it, okay.

Okay. The registration statement for the weatherford shares, has that been declared effective yet?

No. We're working on it with weatherford at this point in time.

And the press release indicated closing would be around 11-7. Are the new units expected to list right at closing, after closing?

The new units will be issued according to the computer share distributions. I'm the sure the dates you'll get them. But there will be a distribution in December for people holding the units from November 7 to November 31.

But they'll be trading on the exchanges as units?

Oh, yes. They'll be trading -- there will just be a -- they'll be trading the next day without any question. Yes.

Okay, thank you.

Thank you.

Your next question comes from Todd German from Peters and Company. Please go ahead with your question.

Just to clarify, was all of the debt repaid after quarter end?

Yes.

Okay. Just the second question, can you clarify how the distribution of the weatherford shares will be handled, is it going to be a dividend?

No. I think we came in with a press release describing that there will be -- actually, I'm going to let Bob Gibson discuss that, please, Bob.

If -- really what it is is for Canadian, proceeds and disposition and the exchange of your share, you'll receive various components, you know, the trustee and weatherford share consideration and the cast component as proceeds to disposition.

But it's not going to be any tax. It's taxed -- for Canadians it's capital gains. We've sent a letter out. We're not sure where we will be with the United States. But we're comfortable at over 50% will be considered a dividend.

Okay, thanks a lot.

Your next question comes from Andrew Bradford from CIBC World Markets. Please go ahead with your question.

Thanks. Two quick ones. First question, is when you talk about an inquisitive stance with respect to 2006 and looking forward, presumably vendors would take some combination of units, cash. Where are you comfortable taking your debt levels? If things start coming your way?

Well, unfortunately I've never said no, and I know a board that has seen me come with a $100 million budget and finish with a $1 billion. Never say never. We'll look at anything that's accretive to the company going forward. If we had a choice we'd take over the whole drilling industry. Some of that will never happen. We have to be careful where we go. And keep in mind that we can only get to a certain size and we have some customers that want to make sure that they can deal with us on a pro-form a basis where we can be disciplined.

Okay, but if I were to sort of imagine, for instance, that you could take debt levels to, say, up to 30%, would that be -- would that be something that you think the board would be comfortable with?

I think we could go to 40%. In that range. You know, really we're looking at, we're just a lid over 1.2 billion in revenue this year. Income year we're circumstantial going to increase that. So -- we're certainly going to increase that. Stow depends on how we want to handle it. Keep in mind that even as a trust we have the ability to raise depth in a private market business. So there's different things we can do in the future. We're so pristine now and have no reporting capability to any agency whether it be -- any reporting requirement. It's awful nice to be back to being just a drilling company again.

Certainly is. Okay, so the second question, when you talk about taking the monthly up to $0.30, the second quarter. Just -- I know this is an early view. But are you -- when you talk about a 30-cent level, are you talking about that -- is that still within the confines of a 70% payout ratio?

I --

Are you pushing it up toward the upper end a little bit?

It is in a sense. But we have trustees that have to go through this evaluation. And I said we will not raise it in my mind until we get to the first quarter and see how dynamic it is. And if it is, as we predict at this point in time, and the weather allows us to do it, we're going to be in a tremendous situation that we'll have to see what we're going to do.

But maybe we could use it for acquisitions and increase the cash flow that way. But there's many ways to increase the dividend on -- or the cash flow in a per-unit basis. But I'm also -- if due the models, you'll see that if we do pick up some debt which we have to, the ability to get -- you'll see the 24 currents s very, very achievable.

Okay. I'm going to take just one more question here. When -- I think this was touched on a bit earlier. But -- stretching yourself as a trust now, Hank, is that going -- is that opening you up to -- to perhaps investing in other asset classes, or other areas of the oil field that -- that Precision had not been in before?

I don't think so. We're going to do -- we have a mine set and the capability that is rather unique in its rentals, drilling, well services. Obviously there's things to do. It will be field oriented and related. We're not going to get into something we don't know. We're not going to be that foolish.

Thank you very much.

Mr. Swartout, there are no further questions at this time. Please continue.

Thank you very much. It was a pleasure -- ladies and gentlemen, it was a pleasure. We're excited about going forward. And let's keep in mind that the guidance that you had $0.24 to $ 0.30 is something that will take place during the 2006 year. I'm very comfortable that when you do the model, you'll see that what we're trading at today for distribution is rather behind the scale. But be it as it may, we're going to forge forward. And I think our ability to keep our costs in line is better than any other drilling contractor. As we have huge inventories, great locations. And we also have great motivation for our new team going forward.

I'm very proud of the concept that the board came forward on the compensation for the new people. And it is -- basically performance oriented. So if these gentlemen can bring something to the bottom line going forward, they'll be rewarded. And that's what I like about it. And if we just stayed the course, then it's -- a normalized job. I don't think anybody here wants that. These gentlemen are, to put it as one gentleman said, feed them some red meat, let them go at it. But we're going to do it carefully.

We're also at the board going to watch the acquisitions, and I will be part that team going forward. And Mr. Gibson and the other board members are going to certainly have a say in the matter. But I'm excited for the gentlemen that are going to be here. They're excited. It's their time under the sun. And we thank you for your time today. Thank you.

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