Primoris Services Corp (PRIM) 2013 Q4 法說會逐字稿

Greetings and welcome to the Primoris Services Corporation forth-quarter and full-year financial results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce Ms. Kate Tholking. Thank you. You may begin.

Thank you, Danielle. Good morning, everyone, and thank you for joining us today. Our speakers will be Brian Pratt, Chairman, President, and Chief Executive Officer of Primoris Services Corporation; and Pete Moerbeek, Executive Vice President and Chief Financial Officer.

Before we start, I'd like to remind everyone that statements made during today's call may contain certain forward-looking statements, including with regard to the Company's future performance, words such estimated, believe, expects, projects, may, or future, or similar expressions are intended to identify forward-looking statements.

Forward-looking statements inherently involve risks and uncertainties, including without limitation, those discussed in this morning's press release and detailed in the Risk Factors section and other portions of our Annual Report on Form 10-K for the period ended December 31, 2013, which we plan to file next Monday, and other filings with the SEC. Primoris does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities law.

I'd now like to turn the call over to our CEO, Brian Pratt.

Thanks, Kate. Good morning and thank you all for joining us today. We're pleased to share with you our fourth-quarter and full-year results. Starting with the numbers, revenues in quarter four were $538 million, which is a 12% increase over 2012's results. This was reasonable top-line growth, nearly all organic, and we are pleased with this number.

However, a more important number is our earnings. Our Q4 profits were $23 million, a record for us. Even with a few unusual items in the mix, which Pete will laboriously explain later, we earned an impressive $0.44 per share in the quarter and $1.35 per share for the full year. We did this while maintaining, what I believe, one of the strongest balance sheets in the industry.

Our year-end cash balance, including short-term investments, was a record $215 million and our tangible net worth was a record $235 million. 5.5 years ago, when we became public, our tangible net worth was right at about $45 million. While you might not fully appreciate the importance of this metric, when tough times come around in our industry, and sooner or later they will, tangible net worth is one of the most important metrics our clients, our banks, and our bonding companies look to. I'm very proud of our balance sheet, as pound for pound, we can punch with the best in our industry.

To share a little more detail I will start in the east. Cardinal Mechanical, Sprint, Saxon, Force, and James Industrial were part of the East segment through the fourth quarter. Going forward, they will form a new segment, Primoris Energy Services, headed by Jim Henry. Cardinal Contractors had a solid fourth quarter, with revenues up $2.5 million and improved margins. Government agencies in Florida have initiated spending plans at a level not seen since 2007, resulting in a bid calendar for Bill's team that is quite encouraging.

After a tough first half, revenue at Sprint returned to more normal levels in the fourth quarter, with a higher concentration of maintenance work and that drove margins higher. This type of ongoing cost-plus negotiated work accounts for roughly 30% to 50% of Sprint's revenues, and while it doesn't have the visibility of the larger pipeline projects, it is more consistent work and it softens the down cycles.

The rest of Sprint's revenues come from large capital projects. In the fourth quarter, they struggled a bit in this market due to the delayed permitting on a large project we have under contract. The majority of these permits were recently obtained and the project should result in significant revenue increase for Sprint in the first half of 2014.

Both Saxon and Force were a drag on 2012 financial results due to a poor project's execution. We made changes. Both groups are now structured and managed more effectively to work with James Industrial for meaningful opportunities ahead. A lot of the recent projects' awards have been reimbursable and we are confident we're turning the corner with both of these business units.

We were too long in turning these groups around. We only have ourselves to blame. We were not aggressive enough in the nature and timing of the changes that were needed. We will not lack in Management aggressiveness here again. Danny Hester's heavy civil guys performed well in a tough year of transition for them. I am very proud of their hard-fought contribution.

We finally received all of the notice to proceeds on the I-35 Belton work, so Pat's crews in Texas are very busy, and we continue to see a crescendo in our revenue here throughout the year. Rodney's Louisiana market continues to be slow and the LDOT work accounted for less than 2% of fourth quarter's revenues, but our guys there picked up some sizeable design build awards in Mississippi. These projects are similar in scope and execution to our very profitable and award-winning LA1 project.

Another of Danny's groups, James I&M, is continuing to run smoothly under the leadership of Jonas Beatty, who transitioned into his current role a couple of years ago. They are growing revenue, maintaining margins, and working in concert with other groups to win larger pieces of petrochem projects available in our market. Conrad Bourg and the James Industrial Group continue to pursue and execute work well along the Gulf Coast.

I am pleased with the size and complexity of the projects available to us. Conrad's group is very good at what they do and the clients recognize it. Our James Industrial Group skills will continue to be much in demand over the next several years in their marketplace. By planting the skill sets and resources of Force and Saxon on to James, we are creating a powerful team within the industry to help our clients achieve their desired results.

Randy Kessler, in the Engineering segment had a solid quarter; while the revenue was down slightly compared to 2012, they ended the year with over $62 million in backlog. This is a four-fold increase over where they stood a year ago. The largest contributor to this increase is a contract to construct a mini-LNG facility located near San Antonio, Texas.

On this project, OnQuest is partnering with James Industrial to provide our client a complete EPC package. I can also tell you the Jose Calma at OnQuest and his estimator group is in hot pursuit of numerous other mini- and micro-LNG projects located across the United States, along with a growing number of good prospects in our more traditional fired heater market.

Roger Newnham's Calgary group continues to do well in the foreign markets he serves. We will be able to count on continued generous contribution from Roger's group. As you heard me say previously, the smaller LNG plant market has the potential to be really transformative for our engineering business over next several years.

In the West segment, our California-based ARB Structures had another slow year, as the Southern California market continues to stumble along in the doldrums. We are watching the market carefully and if we can't see better climate in the near future for our Structure services, we will make further adjustments in our cost structure. Recently, we have been encouraged by an increase in bidding activity for clients that buy value instead of price; we will wait to see if this is improving trend or just an aberration.

ARB Industrial had a stellar year, highlighted by outstanding completion of our El Segundo project. Our VP of Pre-Construction, [Wade Trucon], and his team, have been busy proposing on multiple power projects with numerous sites and technologies for each potential project. Many of these proposals are EPC contracts. This means that the timeline from proposal through award and construction commencement is lengthier than just pure construction services packages; however, the benefits are larger awards and hopefully an opportunity to work closer with our clients to achieve better project execution.

While we wait for these projects to come to fruition, Tim's workforce has been busy on a range of other industrial projects in California, most notably several large solar projects, where we had over 700 craftpersons working on site. With nearly $55 million in new awards in the fourth quarter, I continue to have no doubt, Tim, in 2014, will continue the legacy of strong contribution.

Scott Summers' ARB Underground Group also turned in a stellar year, although fourth-quarter revenue came up a bit lighter than we expected. The year-over-year quarterly decline was mainly on the gas distribution side, where we completed a significant multi-year gas distribution replacement program for a major client early in 2013. This client is gearing up for another long-term replacement program; we anticipate that we will get our fair share of this larger program. Gas transmission work for our California clients, which includes their integrity spend, continued to be strong throughout the year and we anticipate it will be no different in 2014.

Rockford, another one of Scott's groups, had its busiest fourth quarter and full year in their history, with $110 million of revenues for the quarter and a full-year revenue of $365 million. That is 2.5 times what they billed in 2012 and is $31 million more than their 2011 revenue where we built the Lord Baltimore project. I'm extremely proud of Frank Welch, Rockford's President, and his guys, for their hard work. Obviously these guys have a busy fourth quarter, which has challenges, namely weather, and the fourth quarter was no exception. Rockford performed well, and as the midstream client market continues to improve, we expect Rockford's margins will follow suit.

Last but certainly not least, is another underground group, Jay Osborn's Q3C team, which performed in outstanding fashion; their 2014 revenues were $168 million, far in excess of what we expected. Of course, now the bar has been raised. While the winter has basically shutdown most of Mike [Russell's] work in the Upper Midwest, Jay Osborn's crews in Denver have been busy. To help Q3 grow, we made a sizeable investment in new equipment in 2013; with these kinds of results, we are ready to do it again.

At the end of the year, we made two small investments. One was the purchase of Blaus Wasser, a small development company we've been working with for several years to build projects to alleviate effects of the prolonged drought in the southeast. In the purchase, we retained the company's founder and [rainmaker] Norm Bangle. Norm and [Pat O'Reilly], the President of the renamed BW Primoris Organization, will be focused on water opportunities and associated construction projects in Texas and other parts of the drought-stricken southeast. With the acquisition, we continue to [pursue] projects ranging in size from less than $10 million to potentially hundreds of millions of dollars.

We also purchased some pipeline and gas distribution construction assets from a small company in the Mid-Atlantic region. We retained a very seasoned cohesive group of Management. They will run a newly-formed business unit for us we named Primoris Pipeline. This new unit and geographic expansion will allow us to better serve our utility and midstream customers as we seek to capitalize on a substantial and sustained market opportunities in this region.

2013, in summary, was quite a year for Primoris. Record earnings and continued strengthening of the balance sheet, a significant increase in our already sizeable construction fleet, and paramount, strengthening of our most important asset, our people. All of these will allow us to continue to deliver these kinds of impressive results and I strongly believe we are headed for an excellent 2014 and 2015.

The East Industrial Group is entering boom times. The Western Gulf Industrial Group could experience a short-term 1 year, 1.5 year hiatus in gas-fired power market, but will be busy with different types of work, performing several large solar projects, among other types of industrial projects. This will be followed by a cycle with more than abundant traditional power work.

The pipeline and underground business, concurrently more than half our revenues, will continue with prolific market conditions. Our heavy civil guys, unequaled in their industry, will find their stride in Texas this year, and grab second gear in Louisiana. And rounding it out, engineering is set to shine. Now I'd like to hand it over to Pete for the [green visor] part of the call.

Thank you, Brian. We will not file our Form 10-K until Monday, which means I will have to clearly enunciate all of the numbers that follow. Primoris' fourth-quarter revenues were $538 million and net income attributable to Primoris was $22.5 million or $0.44 per share. Our net income increased by 32% compared to the 2012 fourth quarter, and for the full year, we saw a 23% increase in net income. The $0.44 was a quarterly record and was a sequential increase of $0.02.

We achieved these results even with several one-time items that cumulatively reduced our earnings in the quarter. Unusual expenses include charges of $1.7 million related to the Management change at FSSI for our collectibility reserve for a prepayment associated with a five-year employment contract and the write-down of an intangible asset. We also recorded a $1.4 million charge for a combination of the increased probability that Q3C will obtain its 2014 earn-out target, and an adjustment to the fair market carrying value of an investment Q3C made in a small company.

Finally, we recorded an impairment charge of $4.9 million for our WesPac Energy investment, which has now reduced the carrying value of the investment to $0 at the end of the year. The sum of these expenses is $8 million, of which $2.3 million was in SG&A expense and $5.7 million a charge to other income. Partially offsetting the impact of these expenses was the benefit of $6.5 million, as we determined that Sprint, Saxon, and FSSI did not and would not meet their earn-out targets, and the contingent consideration balances were credited to other income.

To help understand our revenues, our two largest customers in the fourth quarter were both Rockford Gas utility customers, together accounting for 17% of total fourth-quarter revenue. Our third largest customer was TxDOT, at $36 million for the quarter, an increase of $8 million from the prior-year fourth quarter. Unfortunately, our Louisiana market remains challenged, as our Louisiana DOT revenues decreased by $28 million from Q4 last year to this year.

Our traditional large Northern California public utility continued as one of our larger customers, with total 2013 revenues of $154 million; however, that is a $70 million reduction from last year, with $43 million of that reduction occurring in the fourth quarter. As Brian mentioned, the client is between distribution system replacement programs and we do not expect that the reduced revenues are a new normal. It is encouraging that with our end-market diversity, we can attain revenue and profitability gains even when we generate less revenue from some of our traditional customers.

Our full-year end-market breakdown is as follows. Underground capital projects accounted for 23% of our 2013 revenues, compared to 14% of our 2012 revenues. Underground utility work was 29% of 2013 revenues, compared to 28% in 2012. Industrial work was 22% of revenues in both years, while heavy civil's percentage of revenues declined from 23% in 2012 to 16% in 2013.

Our margins in the fourth quarter and for the full year were outstanding. Fourth-quarter gross margin was 13.9%, an increase of 250 basis points over 2012. The large California power plant that is now substantially completed contributed significantly to this margin expansion and we expect that margins in 2014 will return to more normalized levels, but we anticipate higher levels than those we achieved in 2012. As we've tried to make very clear, the nature of our industry dictates that our margins do not progress in a smooth and orderly manner; as some projects begin and others end, we will have lumpiness, but the overall trend we are seeing in our end markets supports our view of improving overall margins.

SG&A expenses in the fourth quarter were $34 million, a $7.4 million increase over 2012's fourth quarter. As a percentage of revenues, SG&A expenses for the quarter increased from 5.6% to 5.9% after adjusting for the one-time charges.

2013 was a year of significant investment in equipment for Primoris, and in the fourth quarter, we spent an additional $18 million on CapEx, bringing the full-year total to $90 million. In 2014, we anticipate returning to more a normalized level of CapEx expending of $55 million to $65 million, which is closer to our expected depreciation and amortization expenses of just over $50 million. Our balance sheet has never been stronger and at year-end, we had working capital of $230 million and stockholders' equity of $398 million.

Since they're inevitable, let me mention debt and taxes. Our year-end total debt and capital leases was $225 million for a debt to equity ratio of 56.5%. Our 2013 weighted average interest rate was 3.3%, which we expect to drop to around 2.85% for 2014. With our cash and available credit line capacity, we can strike quickly for the right acquisition opportunity. Our full-year tax rate was 39.19%, and we expect that rate to remain similar for 2014.

As we look to continue our growth, total backlog at December 31, 2013 was a record $1.94 billion. This includes $1.48 billion of backlog using our historic calculation, or what we are now calling fixed backlog, plus an additional $460 million of four quarter estimated MSA revenue or MSA backlog. The MSA backlog estimate declined by $15 million from the previous quarter, reflecting the potential lower spending level by our large utility customers. Let me remind you that this is an estimate; MSAs are not a guarantee of revenue; even with a slight decline in MSA backlog, total backlog increased sequentially by $20 million.

We expect that during 2014, we will recognize as revenue approximately 50% of the East Construction Services segment backlog, approximately 98% of the West Construction Services segment backlog, and approximately 93% of the Engineering Segment backlog. Please remember that some cost-reimbursable contracts are not included in our backlog or in these burn-off estimates, and as always, please remember that our revenues are very seasonal. With that, I'll now turn the call back over to the operator so Brian can start answering your questions. Thank you.

(Operator Instructions)

Our first question comes from Lee Jagoda of CJS Securities. Please proceed with your question.

Hi, good morning and congratulations.

Hello, good morning, Lee, thanks.

Brian, can you go into a little more detail and describe some of the issues that may have caused Sprint, Saxon, and Force to not achieve their earn outs in 2013? And if you can quantify the shortfall versus your internal expectations?

And then as a follow-up, whether the issues have been resolved as we move forward into 2014?

Okay, that will take the rest of the call so Tahira won't get her answer in, but basically, these two companies were not doing particularly well when we bought them and we acquired a lot of smaller assets last year. We just never turned them around aggressively and we thought we would give the current management a try, based on our obligation on the earn out and without trying to change them too much, so we can allow them to achieve part of their purchase price.

But we were just slow in making the changes we needed to make and we needed to make senior level changes to really turn the companies around, which we've changed both senior level execs. We've also -- ultimately, our goal was to always meld all these companies together. 2014 won't make a lot of difference to the market, but we're going to try and meld our operations together -- you won't be able to see that -- to try and lever some of the attributes and advantages that we have, plus reduce our overheads.

But also we're going to rebrand and put everything more under the Primoris umbrella. But we'd always intended to mush these groups together down in Houston, and -- but you have to be careful when you do that with earn outs and your purchase contracts. That's one of the things I don't like about earn outs; you can't really jumble these companies up the way you should to achieve optimum efficiency.

We've now done that. They are now cross-selling, they are now using common estimating software. We've always used common contracting and insurances and everything else, but we think we've put most of them all in one building down there so Jim Henry can get his hands around everybody's neck on any given day. So we've made substantial changes in the way we've bid work.

They got caught in a pretty tough environment. We're seeing a transition from hard dollar work to reimbursable work and that's needed in the industry because the amount of work that's available and the poor productivity that you're going to get and the lesser level of employee you're going to get to do this work with the labor shortage down there. They had some hard dollar work they were trying to finish while the market went to reimbursable.

On one of the jobs, we had the one piece of hard dollar work for one of the industrial gas guys. They gave the rest of the job reimbursable to two other contractors and they just hired all our people and they were paying more and we had the cheaper price, and guess what, all the good people left and went to the other jobs, so that's anecdotally what happened to both companies.

But we're confident we've got our hands around it and Jim is really focused on it, and we're going to have a lot better cohesiveness and a lot better efficiently-run group.

Lee, neither of them contributed positively to our earnings in 2013.

Yes, they both had losses for the year.

Okay, that's very helpful.

And then Pete, can you just quantify the close-out amount related to NRG in Q4?

I'm not sure that we really want to release that, Lee. We had -- obviously, you can tell by the margins that we had a very positive Q4, although NRG is not the only thing that impacted that. There were a couple other things that we finished or we had settlements on, but it probably doesn't make sense to get that specific.

Okay, and then one more bookkeeping-type question.

No, [Arnie] said you're only allowed to ask one question when you chime in (laughter). So what do you got?

Will you be providing any segment restatement prior to Q1, so we can get a better feel for the seasonality and the margin mix within the segment?

Since we're already two-thirds of the way through Q1, I'm not sure. We will do our best to either hopefully do it on an 8-K or clearly show you, when we do file the Q and have the next call, to show you the migration.

It's not -- it probably sounds more from a financial standpoint than it should be, because really what we're doing is pulling apart the East segment into a couple different pieces.

Thanks very much, guys. I'll hop back in the queue.

Thanks, Lee.

Our next question comes from Tahira Afzal with KeyBanc.

Thank you very much and congratulations, guys, on another great quarter.

Thanks, Tahira.

So the first question is, you've had a fabulous 2013, you're entering 2014 with backlog being up 10%-plus year on year. Is that and the profitability returning to some of your more challenged businesses going to be really sufficient to really drive your margins up this year?

What I'm trying to see is, as we look at 2014, and we look at growth and all these end markets that are working really well, how we should be looking at our numbers?

We're still not going to give guidance (laughter).

Every year we have a project and you guys -- and it's your job to really get into the weeds with us -- and I like that. It really helps us -- believe it or not I like getting good hard questions from you guys, not on the calls, but as much -- all the time, when our presentations and we're in town there.

But every year we get this question: what are you going to do without El Segundo or what are you going to do without PG&E or what are you going to do without Ruby or what are you going to do without LA1 or what are you going to do without the Long Beach parking structure? And every year, we seem to find another place to make a lot of money and to find growth.

That's why people should invest in our stock. I've learned a lot; I'm sitting here watching the prices go up and down this morning after earnings release and I've learned that, beating your earnings by 10% isn't as good as having your stuff in bold print and then leading with your safety statistics. I'm looking at our peer groups that are doing well today, obviously.

So we just led with basically good news and it was all organic -- the one-time -- the one call was well, geez, you've been too dependent on acquisitions, what are you going to do if you can't find an acquisition? We did all that.

I'm not big on buying troubled companies. We've been approached, as you know, Tahira, by several of the larger public companies that need help and my philosophy has always been, I can make enough of my own problems, why do I want to fix somebody else's? I don't like necessarily having to do turnarounds.

We bought two of these companies this year because they are in a market -- Saxon, for a long-term power and some of the industrial gas stuff that they do, and Force, to be more involved in the refinery turnaround business, and they were both turnarounds, and it's not my favorite thing. I'll do them; I've had to turn this thing around once or twice in the 40 years I've been here, but we're always going to be able to find the right market.

We are dependent on weather; we're dependent on all kinds of stuff that everybody else is and those issues are exacerbated in the first quarter. If you're going to get a project delay, chances are it's going to be first quarter, because everybody is still sleepy from Christmas. But every year we found some unique project or some unique client, whether it be PG&E or somebody else, that has taken care of our earnings needs and our growth needs and I don't have much doubt that we're going to be able to continue to do that.

We're going to continue to find small little niches, like this guy up in North Carolina, or this -- we've got a couple in the pipeline to get us into some new wrinkles in the markets and the geographies that we want to be in, to continue that growth and to continue to improve those margins. There's still margin improvement to be done. I don't think your West is going to improve much, based on a couple of very good jobs.

But the East really was a drag for us this year. They did okay. They're capable and they will do much better in the next couple of years. They've got the ability to be rock stars out there. Danny and Conrad and Jim Henry and those guys, Bill McDevitt, they can be absolute rock stars and I have no doubt -- not every song you turn out is a hit -- so some years they have hits and some years they have busts but I have no doubt these guys are going to give me some hit songs over the next couple of years.

That's actually helpful and I've had my own bumps this earnings quarter, so I totally understand (laughter).

The second question I had is, Brian, around a year and three months ago, exactly, when I look at my notes, you were one of the first people to talk about 2015 and 2016 being very good years, potentially for the pipeline industry, and we've seen all your peers follow suit and grasp on to that timeline.

Can you talk about what you're seeing out there on the pipeline side for those years now and how important would Keystone be in terms of the timing of that tightening occurring?

Right now, you've got clients that have their favorite contractors and our clients have a lot of wind at their back. You've got regions that have different contractors, like we've talked about. If you're going to work on most projects, small or intermediate projects, below the Mason-Dixon line, you are not able to go down their union. You're going to have to do it open shop.

There's some areas, like California, you're really going struggle if you try and do them open shop, so everybody is pocketed either with a client or with a region. Keystone is a little bit outside of that realm. Then you have clients, of course that are just absolute whores, they will buy their services from whoever will hand them to them and then they're hard to work for, too, because their bottom-dollar buyers.

We just had some Senior Management guys here in the last couple of weeks and we're having a big meeting in Dallas next week. Everybody is pretty optimistic. The work has gotten smaller, although there's some big projects coming outside of Keystone. There's going to be projects built to get oil out of the Bakken, whether it be Keystone or somebody else.

The rail guys that struggle, they've had what, five accidents, five significant accidents in the last couple of years. You're talking about, in some locales, double-digit deltas between what it costs to ship it rail or pipeline, and obviously it would appear that the rail guys are no safer, are they? So pipelines are going to get built, with the exception of maybe California -- it makes sense to have a new crude line out there, they've already got plenty of gas capability, although they are talking about further expansion in their gas system, because as they build more of the gas-fired power plants, they are going to need more gas.

But the next couple of years are going to be pretty good. You're going to see a lot of open shop work, and as the price of gas has gone up, you're going to see more collection lines laid, more gathering lines, more gas processing done. Everybody asked me, what's the price of gas going to do to you? Well, it doesn't matter when you're related to a coal plant.

They are not going to build them; the current guys we've got aren't going to allow it. It doesn't matter when it relates to areas that are committed to gas consumption and we just simply shift gears and go from the consumers out to the producers. It won't matter with the utilities; every couple of years, they get to bake those new gas prices into their rates, so we're like those clients. We'll take money from anybody, and I hate to refer to ourselves as prostitutes, but we are.

So the next couple years are going to be good. You've got to be nimble and you have got to have your right client. Ours seem to have good money and want to spend it with us, so we're pretty pleased with what our prospects were. I don't view Keystone as anything that but a long shot. I'm not sure it's going to get built, but if it does, it's just not a huge impact, one way or the other, because with the guys that we work for -- our clients that we really like working for -- the guys that, again, are committed to build on Keystone aren't typically guys that would compete with our clients.

Got it, okay. And I'll follow the Arnie law and get back in queue.

(Laughter) Thanks, Tahira.

Our next question is from Jason Wangler of Wunderlich Securities. Please proceed.

Good morning. Just curious -- you talked about the small water business, and obviously, you guys have talked a lot about the issues that were coming through Texas and other areas. Can you just talk about what you're seeing there from -- whether it's [bidding] or even the prospect of -- is it coming from the states or the municipalities or are you seeing it from the companies or is it a conglomeration -- just some color on what you're seeing on the water side?

Well, Norm Bangle, he was a -- I met him years ago when he was a cell tower guy, he was a cell tower developer, and he lives down in -- he lives in New Braunfels down outside of San Antonio, and he's been [kicking clods] out in West Texas for about three or four years. The users range from the oil drillers, the production guys, the E&P guys, to the municipals.

The state has actually raised money here to assist in development. They've been very helpful with us. They are actually sponsoring one of our larger projects and they've been very helpful, both Dewhurst and Perry, there's a little power thing going on there because this is Perry's last term and Dewhurst is a good guy too. Both of them have been real helpful.

We don't really want any state money. We've got an agreement with the bank that is pretty favorable. We've got the first project, which is $8 million, $9 million, that basically takes water from the city of Seminole, which has got too much arsenic in it under the new EPA standards, and too much fluoride, and we're basically taking their water, cleaning it up, and selling it back to them. There's numerous of those kinds of projects.

Then you've got the other projects, where they just don't have enough water and there's a little bit of sweet water out there but most of it has got a lot of dissolve solids and nasty stuff in it, so some of their projects will involve hundreds of miles of large diameter pipeline for conveyance with large membrane plants to treat the dissolved solids. You can't drink anything above 100 to 150, it's distasteful, in terms of total dissolved solids parts per million in water. Some of this stuff coming out of the ground is 6,000, 7,000 and at that level you can't blend it too effectively, you really have to treat it.

Most of these municipals are -- they are not really set up to build these mega projects, so you have to aggregate, you got to find ways to help them finance it and you got to really lead them through the process of getting something built. They are not strong on administration and engineering staffs and everything else because they are small, so that's a big opportunity.

The oil guys, they need frac water desperately, and they've got a lot of produced water so there's an opportunity there to take their produced water, clean it up, and give it back to them for frac water. So you've got the produced water plus, they need new water. One of the producers out there is talking about 30,000 new wells. Each well is 1 million barrels of water; there just isn't the water available to them out there.

The good news is they can use the more brackish water; they are not as sensitive on the quality of their water. Norm has been working hard with the municipals, with the producers, we've got some water rights we own part of with our bank. There are some other water rights we're pursuing out there, and having the rights, if you've got those, it doesn't matter who has the pipeline, they are going to take your water from you.

So we're pretty optimistic on it. It's something -- we hired Pat O'Reilly, he worked for SouthWest Water, worked actually with Pete for a number of years when Pete was COO over there and Pat is just a first-class guy and we [blanched] him up with Norm and we think we've got a great rainmaker and a great guy that can facilitate, so we're pretty excited about it.

I appreciate the color, thank you.

You bet.

Our next question comes from Adam Thalhimer with BB&T Capital Markets. Please proceed.

Hello, good morning, guys.

Hello, Adam.

Pete, you said -- I think I heard you correctly -- you said you think margins in 2014 will be better than 2012, is that a consolidated margin or are you -- segment by segment?

No, it's consolidated.

And then on the East segment, when do you think you might start to release some of the I-35 work in the profit?

We take profit on it every month, but not a lot (laughter). Where we're pretty conservative, as the things unfold, is various benchmarks and risk levels. We always -- everybody likes good surprises at the end, not bad ones, so we're pretty conservative about how we release contingency and how the permits are issued. You've got -- I just went through this with our auditor; it's not as simple as saying we're 10% done, let's take 10% of the profit.

Every month, we do a cursory review and every quarter, we really drill down hard, and we say, okay, what's it really going to cost to complete this stuff? It changes every quarter and I don't like backing profit out. That's why we don't have some of the big ugly surprises some of our peers do; we don't like taking a job that's 90% complete, and go, oops. We're too aggressive on knocking down the contingency.

We're taking it every month, but the last job -- the award is a 4-year job so it's going to be 3.5 more years before we see the closeout on that. But these jobs are continuing -- as the contingency requirement goes down, we should, unless there's a problem on the job, or an unforeseen issue, we should be able to continue to release bigger and bigger chunks of the contingency.

As we hit our stride -- Danny told me his peak revenue on the I-35 work is third quarter, well, it's not peak, it gets to that level and then it runs hard for a couple years -- but when we get to running a full bore, as we get into that, we'll start seeing improved margins because the contingency will go down.

Okay, and then somebody already asked this question, but in terms of trying to quantify El Segundo in Q4, you gave a directional, you said most of the gross profit increase in West was El Segundo. Is it $20 million out of the $22 million or--?

(Laughter) correct.

I assume you're going to put it in the K, so it's not a huge secret.

No we aren't going to give the specific details in the K.

Okay, and then Brian, what are your thoughts on that -- because you say that -- I would totally agree with you that there have been other projects like Ruby where you do get big profits at the end. But El Segundo seems to be pretty large relative to those. Then what are your thoughts on -- maybe it's some of these pipeline jobs that have started up late, but where could some of that extra profit come from in 2014?

Well, when we bought Q3C in the end of 2012, they were at a $93 million run rate, we spent $22 million or $23 million on additional equipment for them. There's a request for them on my desk for $17 million for this year, so if they went from $93 million to $168 million. And their -- Jay is very profitable, he runs a great organization, they're very lean, it's recurring work.

We've got several of the clients that have actually terminated some of the other contractors and asked us to become a lot bigger players in some of our better markets. So you add another -- a comparable amount of revenues there with the kind of gross margin Jay makes, that makes up a good portion of El Segundo.

We've got a lot of good solar work. We stayed out of the solar business out in California for a number of years because of the crappy terms that the clients were offering up and guess what? The idiots that took -- I'm sorry I shouldn't say this -- some of our peer groups that took that work didn't do very well, so we're now in finishing all of the work that they're doing and we're getting to name our terms. So some of that will replace El Segundo.

I'll tell you a story, and I'm sorry I wax on, on these things, but I'd like you to have a little color. Most of you guys don't know this, but my dad ran ARB before I got out of school, and he left, he had some illness and some other stuff and he sold the business to another guy. I bought it back from the other guy eight, nine years later.

I never worked for my dad, but I was having dinner with him one night, and he said what kind of year did you have, and I said, ah, it was a good year. He said, ah, that's great. I said, dad, if it wasn't for that couple of jobs we had -- and he started giggling, and I said what are you giggling about? And he says, son, I said that every year of my life, I said that, if it wasn't for that one or two jobs that we had -- but every year we had them.

So don't buy us, if you don't like El Segundo, don't buy our shares for that. If you think we're capable of adding a Long Beach, a Ruby, a PG&E -- two years ago, I'm sorry, it was all about PG&E. Well now, PG&E drops off $50 million and you guys are quiet about it. So and I'm more than -- like I say, I enjoy the detailed questions, but you know what -- I'll find another El Segundo, I'll find another PG&E.

That's what you guys pay me to do. I'm good at it, and I'll tell you what, my guys are better at it. Tim Healy, we didn't do any power work until about 10 years ago, 11 years ago, we didn't do any power work, and we built a great Company. And if there's no power work going forward, guess what, we'll be doing refinery work or solar work or hydrogen work or something else, but I'm just not going to get too worried about weather in first quarter or the price of gas or El Segundo.

We've got a great Company. We're going to make a lot of money across-the-board this next year. You look at the amount of work that's coming up in the southeast and the ship channel and up through Louisiana, Lake Charles. That work, a couple years ago, if you could get a 6% gross margin, you were cutting, you were [cropping in call cat].

Today, the margins are double that, and they should be because the risk is more and the clients are tougher and the work is tougher and there's no help to do it and the projects are bigger and there's no capacity out there on our Business. So you look at those volumes and you say, okay, if you're doing 6% and you're going to be in the double-digits, what does that do to you?

Well, not only are we going to see improved margin there, we're going to see a lot more revenues there over the next couple of years. I have sat down and said, geez, where am I going to get every dollar of revenue and what kind of margin that's going to roll into, but I have no doubt, you guys will be proud of us when we're sitting on this call next year.

And what are your -- I understand you're positive and I would totally agree about the end markets. What are your thoughts -- the [streak] of the $1.60 this year? Is that -- you're roughly comfortable with that number?

I don't give guidance, but like I just said I'm very proud of where -- you'll be proud of us this time next year.

Okay, thanks Brian.

You bet.

Our next question comes from Dan Mannes of Avondale. Please proceed with your question.

Hello, good morning, everyone. I'm not sure how I'm going to follow that up (laughter). Pretty fired up today, Brian.

Well I'm sitting here looking at our price and looking at these other guys and I was pretty proud of our numbers, but like I said, we should have led with our safety statistics.

I'm sure they are all looking up at you, though, from your performance over the last 12 months (laughter) so you have got to take everything -- you have to look at it on a period of time, but--

Dan, you know me pretty well. I'm pretty thick skinned.

I know. So highlighting maybe some other potential growth opportunities that we haven't talked about. Some of your peers have talked a lot about the market to the south in Mexico on the pipeline side.

Obviously, you have a lot of capabilities on pipeline and as I look back at your history -- you've, through ARB, you've done some work there in the past. I would ask, is that a market you're excited about and how do you think about it given your experience in that market, and maybe even some stubbed toes there as well?

One of the guys that you cover that has been touting all of the opportunity down there came to us a couple weeks ago and asked to join our consortium, but -- we are active down there. The biggest problem you have in Mexico, as you do in most of Latin America -- people don't realize -- because we've been public about 5.5 years, but we've been doing the international work, since -- I was the first guy to drill a crossing under Taichung Harbor in Taiwan, that was 1991.

So we've been international for a long [year]. We've drill holes and put pipe in, in India for Gas Authority; we've rebuilt the Subic Bay to Clark Pipeline for Oscar Wyatt; we've been all over the world with what we do, except Europe, I'm not wild about going to Europe. Mexico is not a bad place to work. The problem you have there is there's really no legal system and the joke in Mexico is a good judge is a judge that stays bribed.

It's a tough place to work. So if we find the right client, in which case, this is a blend of a Mexican client and a US client, you get under the right laws, which are US laws, or international arbitration, which is my second favorite choice, you get into the right conditions with the right kinds of cash flow and those things, then it's okay to go down there. But if you get into litigation down there, and Mexican law with a Mexican adversary, you can be down there in litigation for 15 or 20 years. When I leave this thing and retire here in 20 years, I don't want to have one of those kinds of things hanging over somebody else's head.

So we're very cautious about what we do down there. We have a great deal of capacity to work down there. We've built 300-something [clicks] of 16-inch propane system down there years ago. We built 180 clicks of 30-inch gas line for Kinder down there -- oh, gosh, that was 12, 13 years ago. But I've got to tell you, there's good work down there, but the only reason you go down there is if you can't make a bunch of money up here, without all those problems.

Right now there's plenty of opportunity in the US. So we're looking at it, and given the right opportunity, if it's somebody like Sempra that is a good client -- our relationship with them is 60 years long -- we'll take a look at that work down there. But in general, if we've got the opportunity -- and the margins aren't any better.

It's tough to take gringos down there to work, because they don't want you to import them, they will put them in jail, unlike up here, we write them a ticket or just ignore them, but if they are working up here without a permit. Down there, they throw your guys in jail. So it's hard to take talent down in there; we've got a good amount of Mexican talent.

We've built a lot of stuff down there -- built a couple powerhouses for CFE, it's just the opportunities here, and you don't have to screw around with people that want to tempt you to violate the FCPA, which we won't do. Sorry for the long answer.

No that's great -- but when you combine that also with what's going on in Canada, it does sound like, maybe it is more of a North American market, so when you think about the capacity opportunity, particularly in the pipeline side, just it all rolls together pretty nicely over the next couple years.

When I looked at the numbers for 2012 and we import 3.6 million barrels of oil a day -- that's what we import -- of which about 1.25 million is from Canada. That's for 2012, and I would guess that our domestic production is up 400,000 or 500,000 barrels a day at this point. If they would get off our backs and let us build the system and drill the wells, there's no doubt -- Keystone, how much would be replaced by Keystone?

If the peak of the well that blew out in the Gulf of Mexico -- the peak leaking -- the peak amount of leak, it was 600,000, 700,000 barrels a day. People are just silly if they think we can't be energy independent within a couple years if they will just take the handcuffs off and let us go out and do it. That's without replacing crude, with LNG in the trucks and everything else that's available to us.

The opportunity is here. All the Europeans are trying to get into the US because they see the opportunity. The action is here, it's not in -- it's in Canada, the [tar sands] -- it's a wonderful resource and we're up there, where we've had an office in Calgary for 10 years. It's just that our guys are so busy here that there's just no reason to go up there.

Obviously, we're chasing the work from Fort McMurray over to Kitimat. Hell, everybody is. It's going to take everybody. God didn't intend for people to put a pipeline across the Canadian Rockies in a union environment. It's going to be incredibly expensive to build a pipeline across there, but it will get built, because they need to do it, because gas in Japan is $17, $18 and gas here is $6. It needs to go there.

Can you indulge me with one more quick one?

Yes, sure. Use our hour up, man.

I'm almost done. So real quick -- you did talk a little bit -- and it wouldn't be a call if weather didn't come up. You did talk a little bit about maybe some challenges in the fourth quarter. I'm wondering, as you look at the first quarter, and this relates primarily to pipeline, but your other businesses as well, how should we think about it, especially in the context that in prior years you've generally been -- given a cautionary tone about the first quarter broadly. Just wanted to hear your thoughts there as we think about it?

Well contractors, by nature, if you're good at it, you're a curmudgeon in the winter and you're euphoric in the summer and I'm always a curmudgeon. In fact, I'm sitting here in California watching it rain, which is good news out here because we're in a pretty serious drought. It's rain, it's customers that are wiping the sleep out of their eye from holidays, it's permits that drag because the agencies aren't particularly motivated, it's utilities that are trying to fix their annual budgets trying to reengineer themselves along with their work. It's a lot of things that hit you first quarter.

We were hoping we would have a force of people like that, would help us do more refinery work over the next couple of years to obviate the downside in first quarter. But I'm not -- we got hurt fourth quarter and recognize that on our financials with the rain, and we've had some rain, but in general, the Seaway job has not had a lot of problems and we've got some sunshine and we've working hard there. The BridgeTex job really hasn't been too weather impacted, because we really didn't start anything until later, they didn't have permits, after they promised us they did.

And that's been -- having to work around poorly-planned permitting more than anything else, and you can't start here, you can't start there, so you end up jumping around and pipelines, as you know, you're supposed go from A to B, not skip all around. So that's had a different set of issues and we're dealing with a client on that. And I'm sure, at the end of the day, everybody is going to take their responsibility,

PG&E has actually stayed pretty strong, stronger than normal. They usually fall off a cliff in about the second week of January but they are staying pretty strong. We think that's going to grow; they've got some bigger capital jobs they have got to put out. The industrial work we're doing in Louisiana, when it gets wet down there, it's pretty tough to put dirt down and pour concrete, well pipe. That's had a little bit of an impact, but we just don't know yet where we're going to be and if we did we wouldn't say.

(Laughter) all right, thanks, Brian.

All right, Dan. Thank you.

Our next question comes from Rick D'Auteuil with Columbia Management. Please proceed with your question.

Good morning.

Good morning.

Good job. Dan beat me to the punch on the Mexico question, so Part B of the question is, if some of the competitors are pursuing work down there, and you don't see it as desirable, I would think that does nothing but tighten the market and improve the margin picture in that business. Is that consistent with your thoughts?

Well, these -- you've got to go out and give them the one project we're in the throws on. You have got to go out and give them a budget estimate on $1 billion project, they give you about two weeks. Then they short list it out and they go through this heebie-jeebie dance thing and you end up with two or three contractors and they're all of enough size and enough scale that they are all going to be joint ventures of 2 to 4 contractors, the bigger jobs you look at down there.

It just takes a long time and sometimes you get good prices but sometimes you don't. It's not as -- as bad as the US legal system is, it's heads above anything in Latin America, and that goes from if you have a litigation or you have to resolve a legal issue, but that also goes to permitting and rights of ways and things like that. Here, when a pipeline owner goes out and pursues a project, there's a pretty firm set of laws state to state on how he procures his right-of-way, and typically they are all common carriers, so they have the right of condemnation, so -- but they try not to do that and piss all of the owners off, but there's always that threat there.

In Mexico condemnation can take five, six, seven times longer than it can here. It just isn't a well-oiled legal machine with a lot of hard-fought rules, with precedent, so it's just a whole different can of worms. You're dealing with Mexican labor and the social security department down there is extremely egregious in the way they prosecute things. You come in after the job, you've done everything right, and they say, oh, by the way, you didn't pay enough of your fringe benefits, which is $20 million.

It's got more risks so you should get more reward, but in the end of the day, after doing work in Latin America, we had offices in Equador, in Colombia, Santiago, Argentina, Mexico -- I'm missing one -- for 15 years, and at the end of the day, I looked at it and said, well, I've made the same amount of money, I've burned up my people on airplanes, I've taken all kinds -- and it isn't a currency risk because in the big jobs down there it's kind of a dollar thing. In fact you typically make money on currency, because you're getting paid in dollars, and your costs are in pesos.

But it's just -- you just burn your people up for no more profit than here and you fly them around on airplanes that are air-worthy. Once you get down there you can't fly on a US airline in between countries. It's just not something you do out of choice.

Okay.

And you have all of the Europeans that come in and compete with you and they get some of those guys that could corrupt nuns -- they will, we just -- we'd never -- we wouldn't be inclined to do it if we could, but you just can't compete with that in some venues.

Okay, thank you.

You bet, Rick.

Our next question comes from Cezary Nadecki of Schroders. Please proceed with your question.

Good morning, everybody.

Hello, Cezary.

I dialed in a little late -- a lot going on, so first of all I want to make sure I'm still on Primoris quarterly call.

No, you're on [MasTec].

(Laughter) I have a question -- I'll stick pretty close to it [a netting] -- on the engineering side, you guys had a nice backlog move. Is there and I want to combine it with your comments on good outlook for petrochemical infrastructure. Would you have some visibility there?

Can you talk a little bit more what's going on with those guys and how that would translate later for the Business if it does?

We -- James, their history has been the bottom end of the plant, so when they build a big plant, first thing I've got to do -- these plants are all in Louisiana and the wet parts of Texas, so the first thing you have to do, is you've got stabilize the site and build a pad to build a plant on. James, both Conrad and the I&M group that works with Danny, are very good at that.

One of the projects we're looking at is 8 million yards of dirt. I'm an old dirt guy so I'm looking at the thing, well, this is $6 or $8 a yard, well no you've got to bring it in from miles away, so it's more like $25, $30 a yard, so the numbers are big and they start early. What we do is that -- James is very good at the dirt and the concrete that go into these plants, where Force and Saxon and parts of James, they are very good at the piping, along with Cardinal.

We're going to see a lot of these guys just do the pipe side and they will be late getting into the party; we'll be at the front end of the party, which has two good attributes. First off, you get in before everybody else so you start seeing revenues earlier. And secondly, you're getting paid before the client's figured out he's run out of money, so typically you get paid, some of the guys later, they're fighting the client's budget. We will participate in that other work, but there's a huge amount of petrochem stuff; they were talking $50 billion $60 billion just in the Lake Charles area.

My question was more specific, Brian -- sorry, maybe I missed it -- but I was thinking the OnQuest guys, the backlog you have there, what's showing up there?

I'm sorry. That's fired heaters -- Roger has got fire heaters, the guy out of Calgary, he does a great job, he sells mostly international, which has good margins. OnQuest margins, Adam asked earlier about margins, they do exceptionally well, they get great margins, and that's where some of this make-up is going to be for El Segundo, but most of their -- the good margin they have is these small, mini-, and micro-LNGs, and they're fabulous.

We've got a deal with Stabilis we announced earlier and that's up to five plants, and if that works out, they are going to build more. The big one that snuck up on us that we're working really hard right now is all the ships now when they come into the national waters of the US have to meet the EPA standards for air pollution. Well they're all either fuel, oil, or diesel driven; they won't meet the new standards.

So they are -- and the only reasonable thing they can do is LNG. They can't put compressed gas in there. They are not going to run it on diesel, because it's dirty. So they do a blend; they run about up to about 70% LNG and 30% diesel; the engines won't work as well if you don't get at least a 30%. But they can meet the new standards with that, so we're seeing a huge influx of proposals just to meet the needs in the ports and there's no big LNG places to get these so they are going to make the LNG in the ports and then distribute it to the various places with barges. We think that's going to be a great market, but at $40 million or $50 million a piece, how many of those do you need?

But that's what's driving the backlog? It's already there? [Engineering]?

Yes. You got to remember, a lot of the stuff, there's a couple of different manufacturers of the equipment for this stuff, and we have alliances with both, and [Chart] is just a great company and so we've got to get in the queue with them to get the parts. Some of the clients are actually going directly to them and ordering the parts ahead of us just to get in line to get this stuff built, because this isn't something they're doing for fun. This is something that's a regulatory mandate and so -- and they're all design-built.

And we're very good at this. Our guys are just very -- they're the best at this. They flip a switch and make LNG, everybody else's process takes awhile. You have got to cook the thing up and when you have that and you can make LNG on a moment's notice instead of having to roll the plant up, you need less storage and storage is very expensive and your plan is more responsive to when you need it.

So our guys are great and we think it's going to be a huge market for us. In fact, we're looking desperately for more capacity because we think we've got enough that we really need to grow our end, our ability to perform the work faster than what we can do internally.

Okay.

And [note] (technical difficulty) we have a lot of projects themselves in backlog.

No, right now -- and what we've got, is we've got 1.5 projects spoken for. We've got up to five with Stabilis, which one of those is in there, the other four aren't. And then we've got several projects where, basically, what we do is we do the feed on it and we do some preliminary engineering, we put hard dollars on it and then they convert the project to an EPC after they are comfortable with the number.

We're very confident --because these guys know our numbers, we've built enough of them, we can give them a pretty good number to start with, they aren't wasting engineering money and then not build it if we come in with that number.

All right, thank you for the time, and for a great quarter.

Thanks, Cezary.

Our next question comes from Lee Jagoda of CJS Securities.

Hi, it's actually Lee's associate, Arnie Ursener. I had six or eight questions I was going to ask (laughter) --

You can get back in the queue by [five and ask them]

But I just had--

Sorry, we are out of time.

But I just had one I thought I would ask you. A lot of companies we deal with announce share buybacks. How did your Board come up with the $23 million level?

We thought we would approve $23.238540 million but we thought it was silly. We think there's plenty of shares on the street and so we've been issuing a few shares here and there. We've got a great Management bonus plan where the guys get shares at a little bit of discount but then they're locked up for a couple years, they can't leave without forfeiting them.

So we just think that we'll use some of it to facilitate that, because we don't really want to issue much. And then, we just think, based on what we see in the acquisition market, that we just think that we're a pretty good price right now, our shares are at a good price and if somebody thinks they are worth less then we'll buy them.

Congratulations on good results, thanks.

Thanks, Arnie.

Thank you. Our last question comes from John Rogers of Davidson. Please proceed with your question.

Hi, good morning. Brian, I know you've touched on this a little bit but especially on the bottom work that you referred to with James, what are you seeing in terms of proposal activity or aligning with the larger EPCM companies out into 2015, 2016, 2017? Is that -- is the market slipping at all, in your mind?

Well when you look at the wad of work coming through the pipeline--

Yes, sorry I don't mean to interrupt you, but there was a lot of excitement, not so much from you, but others, about the wave of work and talk about 60,000 craft labor people needed in the Gulf Coast. More recently, it seems those numbers have come down and everybody is talking about an extended cycle.

I'm trying to get your sense, what you're seeing there, and is that better for Primoris and how do you participate in that?

Where I was going with this wad of work that is working its way down to the guy -- the bigger [fool], ourselves, to build it, has to get through the engineering side first. If there's a -- it's more like a -- they originally estimated a 200,000 craftsperson shortage, which I think it will be that acute, whether it's an extended cycle or not, because a lot of people left the industry. They just don't -- being a construction guy isn't as glamorous as it was 30, 40 years ago.

But it's having to work its way through the engineering groups and the permitting groups and you've got rather unfriendly federal regulators, most of the state regulators are pretty friendly. But with -- you're going to get poor engineering and it's going to take longer. Then the permitting process is going to take longer, not probably as much because of regulatory -- not because they're trying to be difficult to permit but they are inundated with permit requests so it's going to slip. They always do.

We've had several very large projects get delayed and I'm under confidentiality so I can't tell you which ones. They are not cancelled, they are delayed. Somebody says, well, it's the price of gas and yes, I doubt it. Most of these guys don't build $1 billion plants because the price of gas blips up for a quarter. I think we're going to have cheap gas for a long time.

But I do see the same thing. But that's pretty good, actually, because there's enough to go around for every contractor out there. If it's an extended cycle, it will be -- usually these cycles, it takes you a 1 year, 1.5 years to get where you're actually making the money you should make, because you're cleaning up the old work, you had to clean up, you're cleaning up your people, you're getting rid of some of the crap you've got to get rid of to start getting your head up and looking out ahead.

Then you're trying to adjust your prices to reflect the marketplace. It takes a while to do that and your costs go up -- if you think the contractors are only going to make money in this thing, the guys that you work for, you are going to make money, your insurance broker is going to make money, the guys selling welding rod are going to make more money and so your costs go up and you've got to make sure you capture those.

It takes 1 year, 1.5 years, so if the cycle lasts 4 or 5 years -- and originally I was talking about peeking in 2015 and it's going to be more like a 2016, 2017 peak, with a slower star. So what you're hearing is probably right, John.

Okay, thank you, and congratulations.

You bet, thank you.

Thank you. I'd now like to turn the conference back over to Brian Pratt for closing comments.

Closing today's call, I'd like to thank all our stakeholders that believe in us. The men and women driving the nails, welding the pipe, to the investors that have believed in our ability to create value for them. Pete and I truly am gratified to be able to work for you. Thank you for the privilege, goodbye.

Thank you, ladies and gentlemen. This concludes today's conference. You may disconnect your lines at this time. Thank you all for your participation.