山脈資源 (RRC) 2002 Q3 法說會逐字稿

My name is Weiss and I will be your conference facilitator today. At this time, I would like to welcome everyone to Range Resources third quarter 2002 earnings conference call. This call is being recorded. All lines have been placed on mute to prevent any background noise. Statements contained in this conference call that are not historical facts are forward-looking statements. Such statements are subject to risks and uncertainties, which could cause actual results to differ materially from such statements. After the speaker's remarks, there will be a question-and-answer period. At this time, I would like to turn the call over to Mr. John Pinkerton, President of Range Resources. Please go ahead sir.

Thank you. Good morning ladies and gentleman. With me today are Tom Edelman, our Chairman; Terry Carter, our EVP of Exploration and Production; Eddie LeBlanc, our CFO; and Rodney Waller, Senior Vice President. After reviewing the quarterly results, I'll turn the call over to Terry to provide an update on our E&P effort and then over to Tom for his assessment of the quarter and on industry conditions. After Tom's comments, we will turn the call over to questions.

This morning we filed our third quarter 10-Q with the SEC. You can access the 10-Q via our website or on EDGAR Online. Eddie LeBlanc, our CFO and I have executed the [Surbanes-Oxley] certification and it has been filed via 8-K. The impact of the re-audit has been fully incorporated in the third quarter 10-Q, as well as all the financial information contained in our new release and all amounts discussed in this conference call. In that regard, we're obviously very pleased to have the re-audit behind us. We are now back to the oil and gas business and fully focusing on growing our production reserves. With that, I will turn over to third quarter results.

Starting with revenues, they totaled $50.3m for the quarter, 3% lower than the prior year period. Oil and gas sales fell 3.2% due to a 2% drop in oil and gas prices, and a 1% decline in production. In total revenues from transportation and processing, IPF, ineffective hedging and interest and other decreased in total by $200,000. Turning to realized prices including the impact of hedging, they averaged $3.46 per Mcfe as natural gas prices rose 2% to $3.48 while oil prices dropped 13% to $22.05 per barrel. Hedging increased our average price by 25 cents per Mcfe, as the average gas price was increased 49 cents and the average oil price was decreased $3.38. On the production side, as I mentioned, production dropped 1% versus last year and averaged 151.2m cubic feet a day. Gas production dropped 2% to 113.6m a day while oil and NGL's production increased 1% to 6,282 barrels per day. On an equivalent basis, 75% of our production was natural gas, which was essentially the same as last year. As compared to the second quarter of '02, third quarter production rose slightly by about a half a million a day.

Our second quarter production was negatively impacted by the tropical storm Isador, other down time in the Gulf, and drilling project delays. These current items cost us roughly $3m a day on average for the quarter. Turning to expenses, they totaled $41.8m, less than 1% higher than the previous year period. Again, the interest expenses were reduced 29% due to the reduction of the outstanding debt in fixed income securities, as well as declining interest rates. Direct operating expenses, which includes production taxes, increased 4% [equivalent] to 76 cents per Mcfe. The increase was due primarily to higher-level field costs.

DD&A expense increased 5% due to higher depletion rate. Exploration expenses increased $575,000 due to higher dry hole costs and seismic expenditures, and this really does -- is an indication of our higher level drilling and technical staff. In terms for our G&A expenses, they rose $1.2m. This was due to an increase in personnel cost of roughly $300,000, higher insurance premiums and information systems cost of roughly $250,000 and an additional $250,000 relating to the re-audit. We anticipate G&A expenses to decline slightly in the fourth quarter.

With regard to income taxes, the deferred taxes for the third quarter were fully offset by deferred tax benefits from 2001. We expect about a $1.9m deferred tax benefit to be utilized in the fourth quarter of '02. Looking forward to 2003, we anticipate recording deferred taxes at a full 35% rate. That being said, we don't expect to be a material cash taxpayer anytime in the foreseeable future.

In terms of our EBITDEX, which is earnings before interest, taxes, depreciation, depletion, amortization, exploration, and other non-cash charges, it totaled $35.3m for the quarter, a 9% decrease versus last year. For the latest 12 months, our EBITDEX has totaled a $139m. Turning to cash flow, it totaled $29.7m for the quarter, 5% lower than the prior year period. Cash flow per share was 54 cents. For the latest 12 months, cash flow totaled $2.17 cents per share. In our earnings release we included a table that sets forth the computation of cash flow for the quarter and for the 9 months. We also on our website we've included some supplemental schedules that provide additional information on EBITDEX and cash flow, and you can go to the website and get those.

Going to the bottom line, net income was $9.2m, a 12% increase over the prior year period. Earnings included a $687,000 extraordinary gain on debt retirement. Earnings per share was 16 cents before the gain on debt retirement and 17 cents per share after the gain. Turning to the balance sheet, again the key point here is we continued to reduce debt. Total debt was reduced by $8.6m during the quarter. Fixed rate debt was reduced by $7m, and non-recourse debt was reduced by $4.9m. Offsetting that parent bank debt increased $3.3m, which was due to $5.8m of borrowings we used to help finance the purchase of that higher cost debt which I just spoke about. As I mentioned, $687,000 gain was recognized on the debt retirement.

During the quarter, no debt securities were exchanged for common stock. Since quarter-end, we purchased an additional $305,000 worth of fixed rate debt. Since beginning of the year, that caused our debt in fixed income securities to have been reduced by nearly $28m. As I have discussed in some of our previous calls earlier this year, we put on together a new bank credit facility. In addition to reducing the size of the bank group, our borrowing base was increased. The term of the loan as a facility was extended 3 years and the interest rate spread was decreased slightly. Importantly, the restricted payment basket provision has also improved enhancing our ability and flexibility to repurchase fixed income debt. Under this facility, as we retire this fixed income debt, we have the option to increase the borrowing base based on a formula. Effective October 1st, the banks met and our borrowing base was increased to $147m. Currently, we have roughly $40m of availability under this facility. Turning to debt statistics, our debt to EBITDEX ratio improved 2.6 times; this was based on total debt including fixed income securities outstanding at the end of the quarter divided by the latest 12-month EBITDEX. In the third quarter, our EBITDEX to interest coverage rose to over 6 times. Turning to our hedging program, it's having the exact intended impact, it's reducing price volatility and making our cash flow much more predictable. In the quarter, hedging increased the average price per Mcfe by 25 cents. It also has increased the -- on the gas side, increased gas prices by 49 cents, but lowered average oil price by $3.38 per barrel. For the fourth quarter of '02, we have roughly 75% of our projected production hedged in [IMEX] prices of $4.08 on the gas side, and $23.60 on the oil side. We also have some significant hedges in place for '03 covering roughly two-third of our anticipated production. Again, a roughly $3.96 per MCF and $24.31 per barrel. We also brought some hedges going out in '04 and '05 at lesser percentages and they range from $3.80-3.92 on the gas side.

Obviously, counter party is a big item today and we select our counter parties very carefully, and we have used primarily large financial institutions. The counter parties with the most significant positions currently are Bank One, JP Morgan, and Credit Lyonnais.

Turning to IPF, it generated $505,000 worth of earnings during the quarter versus the loss in the prior year period. The IPF receivable portfolio continues its decline, mainly due to the decline in the underlying properties. IPF debt was reduced by $4.4m during the quarter subsequent to quarter-end that have been reduced by an additional $2.3m, and currently there is a $16.8m outstanding on the facility. We expect IPF debt to continue declining relation with decline in the portfolio. Going back to the production side, as I mentioned, third quarter production declined 1% versus the prior year. Decline was primarily due to downtime in the Gulf including the Isador, in addition we had several drilling projects that were delayed because of lease issues, partner issues in terms of getting their approval to move forward on a pace that we wanted to go, and then we had some rig delays little bit in the Gulf and some in East Texas as well.

Compared to the second quarter of '02, as I mentioned, production actually rose about 0.5m a day. In terms of looking at the third quarter production by business unit, production was 73.5m cubic feet a day with 49% from our Southwest unit, 44.2m a day with 29% from the Gulf Coast and 33.4m a day with 22% from Appalachian. On a 9-month year-over-year basis, Southwest production has grown by 11% and Appalachian by 6%. Offsetting these increases was a 19% decline in the Gulf Coast. While we are obviously pleased with the performance of Southwest and Appalachian so far this year, we continue to expect for those growth trends in those area to continue.

Lets focus on the Gulf, decline in the Gulf is the result of the high intrinsic decline rate coupled with the large amount of capital we spent in the Gulf over the past two years. With the recent increase in the Gulf drilling activity, we expect this decline to moderate. By yearend we expect to begin to accelerate total pumping production as a number of the significant wells that we are currently drilling will be brought onto production. And Terry will talk about this more in his section. Looking specifically to the fourth quarter, we currently anticipate production increasing over the third quarter, but being essentially flat to the fourth quarter of last year offsetting the impact of the new wells we drilled that we took in plus the new wells we're currently drilling will be the impact of Hurricane Lily. We currently estimate that Lily will reduce fourth quarter volumes by roughly 3m a day on average. Not only did we suffer from wells being shut during the hurricane, but there are four wells that we have yet to return to production. We anticipate these wells will be worked over. They either have been worked over or in the process being worked over. And we hopefully -- we are hopeful that we can place these wells back on production by the end of the year. But, you know, there are no guarantees.

In terms of our capital expenditures for 2002, we began the year at a budget of $100m. This is $10m more than our 2001 expenditures. As we discussed on previous calls that 2001 capital budget focused primarily on developing and bringing on to production our undeveloped reserves, by roughly only a third of our capital budget was focused on new projects or new reserves. That was '01, in '02 roughly two-third of our capital is attributed to new projects and new reserves. Therefore in '02 we're spending roughly twice the capital on new projects versus '01. Assuming we may continue to achieve the results that we have achieved so far this year, we anticipate replacing 125% of our production in '02. Terry will talk about that in more detail.

Through the first 9 months of the year, we spent $68m. This has funded 136 net wells, 23 net re-completions, slightly more than $4m of property -- producing property acquisitions and slightly more than $5m of leasehold purchases. Fourth quarter spending is currently estimated at a total $34m. This includes 63 net wells and 6 net re-completions. Based on current futures prices for oil and gas, we expect capital expenditures to be funded, which is roughly 80% of the internal cash flow, and if you include plugging cost on that, because we've had a fair amount of plugging cost in the Gulf this year, this number move up to roughly somewhere between 85-90%.

When you look at our E&P objectives for '02, they were pretty simple. First was to continue to expand on inventory drilling projects, second was to achieve a 110% reserve replacement, and third was to increase our production year-over-year by 5%. We are ahead of schedule with regards to expanding our drilling inventory and as Terry will discuss we have several significant prospects currently drilling. As I mentioned above, we currently believe we're on track to achieve reserve replacement of 125% for the year ahead of the 110% target. That's obviously the good news -- its not so good news, the bad news is that given that production problems in the Gulf including the storm and the hurricane as well as the poor start we got in the beginning of the year, we are simply not going to meet our 5% growth target for the year. We do, however, anticipate of seeing 5% production growth for 2003. With that I'll turn the call over to Terry, let him review some of the E&P activity we have going on currently.

Thanks John. I appreciate you all calling in and listening. Finally, we continue to make progress with our E&P efforts toward more consistent meaningful production and reserve growth, and although the pace has not been what I want, as John mentioned, some recent successes and our current level of activity that we have gives me confidence as we go forward. I will address that little bit more later on call.

As with the other operators in the Gulf of Mexico, John mentioned problems we have at tropical with storm Isador and the lingering effects of hurricane Lily and Isador, as he said that will reduce our fourth quarter expected volumes by roughly 2% from what we expected. The majority of that production loss is temporary and will be recovered and even with strong effect we should still see fourth quarter production exceed third quarter, but unfortunately it may be found to be somewhere flat with the fourth quarter of last year. But there are some good reasons, I believe we are heading in the right direction. Our ongoing exploitation and development programs are still meeting or exceeding our expectations for initial rate and about the cost that we expected them to be. Our exploration programs have begun to yield results with some of the recent discoveries, some of which has been announced in each of our key exploration areas Gulf of Mexico and Texas. Finally, we are beginning to make small acquisitions that will augment our organic growing efforts and in addition exploitation opportunity in the future.

As John said our strategy remained the same. We are focused on expanding our producing asset and opportunity base in Southwest and Appalachian, primary type gas areas, while maintaining exposure to high-rate impact opportunities in the Gulf Coast and Gulf of Mexico. Specifically, John mentioned our production mix and growth through 9 months, but if I look at it projecting out 2002, I would expect our production to grow 13% and 5% respectively in Southwest and Appalachia. Southwest for us includes Southwest Texas, West Texas, mid-Continent area and East Texas, but we will likely decline roughly 20% in the Gulf of Mexico. Our Gulf of Mexico [inaudible] post production now represents about 26% of the total compared to around 34% this time last year. Over the long run, I still see Southwest and Appalachia providing a lion's share of our growth with the Gulf Coast, as I said generating periodic higher impact but somewhat less predictable production such as West Cameron 45, which was announced recently.

I'd like to talk to you about several projects that cause me to believe that we're going to enter 2003 in a healthy pace. We've already discussed the West Cameron discovery, what our contraction limit and what we can disclose, [inaudible] the operator has indicated to expect first production before year-end. As you might recall, Range carried to the drilling phase and we're now paying our 25% share to completion cost. I currently estimate that it to be something less than $2m a net range. Secondly, I am encouraged by other recent exploration and exploitation success throughout the company and expansion of our leasehold in some of our core areas in the Gulf Coast in addition to the West Cameron where discovery of [inaudible] prospect. We mentioned that real briefly, I think at our last conference call, but it began producing in late August at 2.7 Mcf/day equivalent net and is still producing at near that rate. We are now looking at other similar prospects in the area and we'll be making decisions on those shortly.

We are also currently drilling an exploration prospect in ship shoal and this well is drilling at about 11,000 feet and should reach TD between 12,000 and 13,000 feet in December. Ranges and non-operating holds 26% working interest. The well was a result of reprocessing existing 3D data to enable us to use different size [inaudible] to identify overlooked opportunities in a similar fashion to what was done with West Cameron. Block was purchased as a result of these announcements back in the mark sale of 2001 and that's where we are actually currently drilling the well. We are encouraged with what we're seeing so far, but it will be a while before we know the results, probably sometime near the end of this year or early next year. We are analyzing and continue to analyze additional deeper explorations, exploitation opportunities in our existing producing fields, and I expect that we will drill wells in 2003 as a result of that analysis.

In the Texas Panhandle, we continue an aggressive exploration development program. In 2002, we significantly increased our resell position to around 56,000 acres, gross 44,000 net acres, and we've also added 32 square miles to our 3D seismic coverage. Recently, we had an old discovery that is completed and tested about a 1000 drills a day equivalent. The well began producing last week. It is now producing the top-level rate of around 350 barrels a day. We also drilled a dry hole a few miles away while testing a different feature identified with 3D. It appears that we drilled a little to far up deep and found our target zone truncated. That particular well doesn't condemn the area because we've used that data and we'll continue to use the data again on the drilling of that well to improve our interpretations. And I expect that we will probably drill additional wells there if our interpretation comes out. More importantly, we'll spread an offset to the recent discovery in November. I am not sure exactly how many wells that might lead to, but I believe there will be a number of wells that we'll drill between now and sometime next year, around that discovery.

In the West Texas we continue to explore our storing piped gas area and we began the redevelopment of the Furhman Mascho. The oil, as you know, Furhman Mascho is a shallow 4500 feet [sandrous] oil field in West Texas. Three wells that were drilled in the quarter in the third at Sterling have added about 2.7m a day initially to that production. We are currently drilling again at Sterling and I expect that we will drill wells throughout a portion or a significant portion of 2003 in Sterling, as well. At Furhman, in addition to our water flow redevelopment pilot, which we initiated in August, we've drilled 10 additional producing wells; nine of those are currently on production. Those were all drilled in the fourth quarter - but put on production in the first fourth quarter. And the remaining well will be put on production shortly.

Since the projects began in summer, we've built 18 producing wells and 4 new water injection wells and have increased production there from 460 barrels of water per day net to something in the neighborhood of 1100 barrels a day net. This production increase is entirely due to new producing wells, and doesn't really have anything to do with the ongoing water flow other than the fact that they will be incorporated into the water flow, as it's successful. We hope to see some indication of power flow response by mid-year of 2003. As stated before, this area can have multiple years of development containing -- depending on the amount of success we have with the pilot. In East Texas, we've just reached a measured TVD of 15,750 feet on our first range operated James Lime horizontal expiration test. We have a 100 % working interest and 75 % net revenue interest in this well. It is an apparent discovery, and we should have it on production by December. This is a -- it's a pretty good technical feat for us since we hadn't drilled horizontal wells significantly in the past and this one went very smoothly and everything went according to our plan. We own around 30,000 acres gross - 24,000 net acres in the play. Our expectation right now is to start at least one well -- one additional well in 2002. Our level of success in our first two operated wells will determine the level of drilling activity that we will have in 2003, but the acreage position that we have right now really affords us with ample room to run depending on the results.

Finally we closed a small $4.9m mid-continent acquisition in September. The properties are located in the [inaudible] of Western Oklahoma and Ranges has now taken over operations. The acquisition initially added $1.8m a day and 4.4 Bcf of developed producing reserves. Additionally, our expectations are to start two wells on this acquisition prior to year-end, and we believe that there are a number of additional drilling locations to be explored over the next 12-18 months, which would add more reserves, if successful. We continue to pursue small-to-moderate sized acquisitions in and around our core operations. I fully expect that we will make additional acquisitions of this nature that will augment our exploration and exploitation efforts next year.

In closing, although I am not satisfied certainly with the pace of production growth throughout this year - I am pleased, particularly recently, with our exploration and exploitation results. Our geoscientist engineers and land teams continue to identify and execute good projects. Based on the results I have seen so far, we do expect to replace 125% of production this year, primarily through the drill bit and with encouraging results on a number of these recently drilled wells. I am really pretty excited about the remainder of this year and as we get ready to head into 2003. I'd be glad to answer any questions at the appropriate time when we get ready, but with that I'll turn it over to Tom.

Thank you Terry and thank you all for joining us. I think the important thing that's happening here is what we've sought over a several year period is to return Range to a status of consistent growth and profitability. And while the static of some difficulties in the Gulf - and certainly the re-auditing and resultant restatement have interrupted that process in the course of 2002, as I indicated in the press release, I think we've made steady progress that should begin to pay substantial dividends to the company and to you - our shareholders in the course of the next 12 months.

In terms of income and hedging, we are solidly profitable. As John indicated, we are heavily hedged for the fourth quarter of this year at attractive prices roughly 75%, and we are already hedged two-thirds for 2003. So almost irrespective of what happens in Iraq and the commodity markets - obviously we will benefit from any improvement in the commodity markets. But almost irrespective with what happens to the company, will be solidly profitable in the course of the year -- next year. We are currently looking at returns on equity on the order of 20-25% pre-tax -- slightly confusing because we'll not go to a normal tax rate, even though it's deferred taxes almost all of it in 2003, but returns on our equity base have -- approaching 25%.

In terms of cash flow, we are expanding, as indicated by John and Terry, substantially. The amount of spending we are doing not only on drilling existing reserves, which have had attractive results turning around the performance at several of our old fields that historically have proved disappointing, Sterling and Furhman Mascho being the most dramatic examples that Terry alluded to, but we are investing substantially in projects that could and should contribute to production in 2003-2005. We are spending in the order of $12m a year on exploration projects in the company - some of which where we've been fortunate like in West Cameron and it looks like at Lelu, will contribute in short-term - but most of which are longer term projects that really fill our pipeline of projects looking out one, two and three years ahead. And we're doing that while limiting ourselves to between 80% and 90% of internal cash flow, so that the balance sheet continues to improve.

As John mentioned, we continue to reduce our debt at roughly a $10m a quarter rate with some of the small acquisitions beginning to go on. It may not continue at quite that pace, but we've knocked off -- approaching $30m of debt in the first nine months of 2002. Simultaneously, our equity -- or at least the way I look at our equity - meaning without looking at what, I believe is the slightly foolish kinds of other comprehensive income or OCI. As it's known at the same period, we were reducing debt by roughly $30m - we were increasing equity by roughly $30m. And that is confusing now because the better of the commodity prices are for a company that hedges such as we do - the lower your other comprehensive income. And as you'll note in our balance sheets between year-end and September 30, there was roughly a $50m swing in OCI that was looking at it from a very poor commodity climate at the beginning of 2002. And that made our hedges look very good to a far stronger climate now, which is obviously better for the company in long term. But the accounting probation, at least, to my opinion has got this backwards. They regard it as a negative when oil and gas prices get better. So, we're building equity while we're reducing debt.

As also mentioned in the call, we've entered into the first in a long time small acquisition up in Oklahoma. This should be a second acquisition concluded in the course of the fourth quarter. And while these are still very modest contributors to the company's earnings and growth, we have again at least started this pipeline of aggressively looking at transactions. We have taken a senior Vice-President Chad Stephens, who is now fully dedicated to that area and we believe it will be an increasing contributor as we enter 2003 and beyond.

So overall we are pleased - not delighted, which we would be if we had succeeded in achieving production growth already, but hopefully we are right on the cusp of doing so as we move to year-end based on some of these successes particularly in the Gulf of Mexico. We intend to continue to improve the balance sheet to optimize our existing assets such as in Sterling and Furhman Mascho, as I mentioned to expand our reserve base which would certainly seem, while we haven't done the work that we would have succeeded in quite dramatically compared to the last few years, when we do wrap up the year end engineering this year - and begin to show an increase in production at the same time that the overall industry is showing a fairly consistent decline in production. So we are not celebrating yet. There is still a long way to go before we at Ranges - the company that all of us aspire for it to be, but I think we're solidly on track despite some setbacks along the way. And we very much look forward in the next quarter or two to say that the last piece of the puzzle - consistent production growth - is on the scoreboard as well. At this point operator, let's open the call up for questions, if we could.

Thank you Mr. Edelman. The question and answer session will be conducted electronically. If you would like to ask a question, please indicate by pressing the "" or the asterisk key followed by the number "1" on your telephone keypad. We will take as many questions as time permits. If you are on a speakerphone, please pick up your handset before asking your question. If you would like withdraw your question, you may do so by pressing the "#" key. Once again, please press "" "1" to ask your question and we will pause for a moment to allow everyone a chance to respond. Your first question comes from Rehan Rashid with Friedman Billings Ramsey.

Afternoon, gentlemen. Quick question on the production rates. Any thoughts on what you would like or what you think the exit rate would be for the year-end '02. And any additional thoughts as to West Cameron 45. What's the time-line in terms of production being attempted to be brought online by year-end?

Rehan, Waller and I -- this is John -- Waller and I answer the first question and then I will turn the second one over to Terry. In terms of the production, just to give you a viewpoint, we were beat up pretty bad in October because of the hurricane Lily and now we are coming back -- production is coming back on. But rationally I am trying to work over some of the wells that had some damage, what not. Our production is up in 150-153 range as we speak from a fairly significant dip in October. And in terms of the end of the year, I'm going really have to beg-off. I think it will be higher, obviously, than where it is today. But we -- you know, between West Cam, some of these other wells that we are drilling, you know, whether they come on in the end of December or 1st of December or January, will have enormous impact, but I think it will be higher. But I just -- I have to beg-off right now because it could swing pretty dramatically, the impact of some of these wells.

Okay.

Terry, you want to take the West Cam.

Yes. West Cameron, I think your question was, really, what does it mean beyond what we got right now?

Right.

And I am really not going to hedge here today, but I will tell you my character is, I really count things when they start selling gas down the pipeline.

Okay.

But what we -- we've learned a lot of information on drilling this well. Obviously, we are very pleased with the fact that we had a discovery here. We do expect it to be a high-rate discovery. We'll take all the information we've got from this well, and we will re-look at our seismic model, make sure we understand what we're doing, and will probably sometime in the first half of next year, before we really fully know exactly what we have here and where this might go in the future?

Okay, fair enough.

Just a chime in. I think it's probably fair to quote our operator here. They, apparently indicated in their call, yesterday. But they thought this well would be on early in December. Being professional cynics, we find that hard to believe but would obviously be in favor of the movement. So, we are accounting on the year-end target.

Okay. Fair enough. Just any quick stabs as to the CAPEX for next year?

Rehan, John again. I think, you know, our budget this year is 100 depending on the small acquisition that Tom talked about. It should be somewhere between $95m and $102m for the year for 2002. I would think that we would, given the projects we have got and given, you know, 2 or 3, again, small $3-$6m or $7m acquisitions. I would think the budget would be somewhere, you know, maybe $10m higher than it is this year. Again, that's all subject to our Board. We are going to have [inaudible] in December to get approval for the budgets and so we'll know more then, but I think, again I think the drilling level will be roughly the same as this year. But we may expend, you know, let's say $10m more on some acquisitions, some smaller acquisitions that we're currently looking at and few others that Chad has identified.

Gotcha. On Appalachian, one little last quick question here. Any incremental focus on drilling deeper wells, [Teracrin], Black River in South next year more than so than this year? And any thoughts on that front?

Well, in the third quarter, we drilled six naturals run wells and two [Riskney] wells and we drilled no trend Black River wells. And the reason why that is that in the trend wells, they're much more expensive and much deeper. So instead of taking a 100% like we do in the Rose run and [Riskney] just because of much lower risk, we are not taking full interest in these wells. And so because of the nature of Appalachia, where we had very split up acreage, it takes much longer to get all the partners aligned. We work in a going to grow three trend Black River wells in the fourth quarter of this year and they have all been [inaudible] in the first and second quarter of next year, strictly because of partner and lease issue. So, down this year, but we hopefully have two to three drills in the first half of next year. The good news there is that we had had -- [audio gap] offsetting some of our acreage by other operators. So, we will see how those wells do as well and then that gets us a little bit more excited. But, again, we have done lot of work with that, lot of [inaudible] patience that we are working on and we are cautiously optimistic but no results to-date.

Okay. Thank you guys.

Your next question comes from Donald Cussin with RBC Dain Rauscher.

Yeah, hi. My question is on IPF, seems to be a bit of kind of run off of the portfolio at this point and I know it was talked about on previous conference calls with your strategic vision and that is going forward, you know, given the way the portfolio seems to be going can you give us some color on where are you going to take that now?

I think it is taking itself as we've indicated. Previously, we were open to and we've had some very preliminary discussions in the course of the last six-nine months with several parties about selling that or folding it into some other mezzanine type financing vehicle. All the time and energy of the staff and to some degree senior staff at the parent company, particularly Rodney Waller, have been directed to resolving issues in that portfolio. Somewhat surprisingly given the attractive oil and gas prices, a disproportionate number of those small operators continue to struggle in a variety of ways. So, I think at the moment, while we we're certainly open and interested into a strategic transaction to divest or reposition that, for the moment at least the portfolio is simply amortizing off the receivables just as you indicated and that if anything is making accelerating progress.

Yeah. Thank you.

This is John. To gave you an idea -- the debt associate that will drop roughly somewhere between 40 and 50% this year. So it's declining, you know, the debt is declining just like the -- at some degree the underlying assets.

I think it's fair to say it will become insignificant to the overall company and the current track, unless we start making new loans in the course of '03.

Right. Okay. Thanks.

Your next question comes from John White of BMO Nesbitt Ferns.

Congratulations on the steady progress you guys keep reporting. Realizing that you don't have a finalized CAPEX budget for 2003, could you talk a little bit about how you plan to spend the money in terms of regions?

This is Terry. We probably end up spinning it in a fairly similar fashion to what we have this year. Our strategy is really going to remain much the same where the majority of our expenditures are going to go into our Southwest, Appalachia, although we will have some incremental expenditures as we talked about before in the Gulf of Mexico, but I would say the split of our expenditures remaining much the same as it has been in 2002. You know, roughly 10-12% or so as Tom eluded to relative to exploration and the rest are going to exportation and acquisition.

Yes. John the -- this year, [inaudible] that almost comes out exactly 50% in the Southwest, 25% in the Appalachia, and 25% in the Gulf. So, again like Terry has said they may be [inaudible] a bit, but we wouldn't seem any move around dramatically.

I think the only thing gentlemen that might maturely move this is obviously to the extent that West Cameron, for example, proves as fruitful as -- at least for the moment it appears to be if there is follow on expenditures there or in our size [make] partnership that was touched on the Gulf Coast could see a resurgence, but it's too early to say we are going to be dedicating capital to those projects. If they come before vision, they could be very impact, as Terry mentioned, and we would obviously follow them up with expenditures if we got comfortable with the potential.

Right. Thanks. And was there any capitalized interest in the quarter?

None. Zero-zip.

Thanks very much.

Same with G&A. No capitalization.

Thank you.

Your next question comes from Brad Diego with Credit Leonnais

Good morning, guys.

Good morning.

I guess, Terry, I wanted to get a little more color on the James line play. What kind of acreage do you have in running room? How many wells would you like to drill and would you -- do you have any comments on what you'd expect your first well to come on at?

Okay that's a number of questions, Brad.

Limited.

We own roughly 30,000 net -- 30,000 gross, 24,000 net acres in the play. We currently have three wells producing, but they are small interest non-operate wells that we got into when we originally got into the play in late 2000 to 2001. We certainly have enough room to run, given, depending on the level of success we have. It obviously is a competitive area, so I am not going to talk a whole lot about what my expectations are, going forward, but I would hope that we have enough success here that we could drill a number of wells. But it does depend on the success of the first few Range operated wells we drill with a relative high interest. As I said, we have got one well that appears to be a discovery. We'll know a lot more about that as we get into later this year and early next year. We're actually [inaudible] well today. We are taking a little bit different approach than a lot of people in the industry. And that we believe that the James line really needs to be enhanced with a stimulation treatments as well as the horizontal section and this will be our first real test of that as Range operated well. I would love to be able to drill 10 or 15 wells next year, but I don't know that we will get there, because I just don't know what the results are going to be yet. As I said before, I tend to be somebody that really likes to see gas going down the pipeline before I decide how successful we have been.

What would you think the cost of the well, with the stimulation, if you get this program up and running, would be?

Less then $2m.

Between $1.5-2m.

Okay. Right. And just on a mechanical question more on the financial and then anything else. I guess, DD&A is up a bit, LOE is up a little bit. Any comments on the trends there? And G&A also? And what you are looking forward kind of fourth quarter or '03?

In terms of the DD&A, it was up roughly a nickel over the second quarter because of roughly three things. One is the little different mix in terms of the different accounting pools that you have your properties in. Second, we wrote off, in Appalachia, one of our projects that cost us about a penny and half. We would have wrote that off in the quarter which is a one-time. So, to make a long story short, I think you will see the rate come back down a little bit probably a nickel or so back into the fourth quarter. That being said, obviously the DD&A rate has everything to do with reserves. We will re-compute our reserves at yearend. And based on those re-computed reserves, we will re-compute our fourth quarter depletion-rate, which will then move us forward for the first three quarters of '03. That, obviously, we don't know because we don't know the reserves, we don't know what yearend prices are going to be etc. But, you know, I guess to summarize the 5-6 cents increase in the third quarter, we view as a kind of temporary and it will all go back down.

In terms of the LOEs -- a little bit -- we were, quiet frankly, had been a little bit fortunate in the first couple of quarters of the year in terms of low work hours and really getting our field level cost down. It popped back up a little bit in the third quarter, and again we would expect that to move down a little bit. We don't see those costs. Again, they are more kind of one time, but of course that's what everybody says, but we don't see -- we see them coming back down little bit in the fourth quarter. On the G&A, as I mentioned, I think I gave you a pretty good idea of the reasons for the increase. Again, I think, they'll move down a little bit in the fourth quarter, but quite frankly, I think -- from that, I think to level out the -- with the new -- all the new accounting standards, auditing standards, and all the other things, there is various fair amount of additional costs associated with that. And plus, you know, we got a higher -- bigger technical staff and the other things we are doing. So I think the G&A also fourth quarter rates will probably -- that will be a good, good view for 2003 going forward.

Okay. John, Terry. Thanks guys.

Certainly.

Our next question comes from Jack Aiden with MacDonald Investments.

Hi guys. Two questions. On West Cam 45, is there any second well scheduled? And two, do you have any acreage or any more additional leases in the area?

Well, we own parts of two blocks in the area and right now, as I said earlier, we have no additional wells scheduled but we will be working with our partners, looking at our data that we have gained through this drilling of this well and make a determination as to where this goes in the future.

Second, did you discuss the acquisition in Oklahoma? If you did, then don't go through it, but if you didn't could you give us some background on it?

Okay. Certainly. It's a small acquisition that really came to us just through identifying it from a small private operator there in an area where we are already active and have a lot of knowledge, and we were just able to negotiate a nice sale and already -- already had some opportunity to identify this because of the mapping and the geo-science that had been done by the time we closed the deal. It's in, as I said, in my notes earlier in the [inaudible] area in Western Oklahoma.

Did you give details reserves or price you paid or any of that?

Yes.

Okay. Don't go through it then.

Okay.

Sorry. Thank you.

Your next question comes from Howard Flinker with Flinker and Company.

Hi. I didn't hear the price and the reserves you paid for that small acquisition.

Okay.

Why don't we repeat it for simplicity?

I certainly will. The net price that the range closing was $4.9m and we bought about 4.4 bcf approved, developed produce and reserves. We already have plans to drill two wells between now and the end of the year, and hopefully we will drill a number of other wells as we go through the next 12 months or so.

Thanks. That's all I wanted to know.

Just as a side note. This is probably the best model of the type of acquisition we are seeking. It's in an area where it creates no incremental overhead cost, where we believe we have a substantial competitive advantage in terms of technical knowledge and operations, and where our knowledge of the transaction comes from being in the area as opposed to through one of the investment banking offerings or other competitive forms. So, it is not at $5m obviously any type of dramatic event. The other side of the coin is it's probably a very good marker for the type of transactions we are going to be most actively pursuing.

Your next question comes from Max Basher with Winfield Capital.

Yeah, good morning. And if you gave all these metrics, I got on the call a touch late. I apologize. Just tell me and I will call you offline. On the ITF Tom, did you make the - I heard your comment about, it becoming an insignificant part of the company if it remains on its current track, and I heard other comments that the properties you were lending against the running off. Did you make a statement about not committing any further capital to this earlier on?

No, we haven't said we wouldn't commit capital to it. It's just we have said that all over the time and energy both from [inaudible] who has been doing a terrific job would not be easiest portfolio frankly. But the thing is running down rapidly, the only investments we've been making are sequential investments in certain of the existing portfolio properties, meaning we will re-lend for certain projects. There had been no new loans taken on there in a considerable period of time, I can of the top of my head tell you the debt balance as John mentioned at one point in the call has dropped at sort of 40-50% annual rate.

That I got.

So, it's going to shrink very rapidly. This loan that IPF on a current course should sometime in the next 6-12 months be in the single digits and it will simply start to be insignificant to the overall company. If however, we get an attractive opportunity to grow that portfolio or to merge it or sell it with someone more fully engaged in that business terrific, and we recently very open to the idea. But in the meantime, on the current course it will be insignificant by the end of next year.

Now, I got that and I guess that fundamental decision is in terms of applying capital and applying particularly Rodney very expensive that Rodney doing this.

Rodney is very expensive.

Very.

In terms of expertise, we can barely afford it.

I finished ...

His wife of course says the same thing.

Can he afford her that's the question. The issue is application of capital both intellectual and financial, can probably be better used. I hear you saying without saying that it can be better used in other parts of the business.

It's not a core competence of ours and unless that changes or unless we get some form of transaction where we can gain a competitive advantage it will run off.

Okay. Fine. Thank you very much.

Your next question comes from Sam Kitson with Blackrock.

Hi! Sort of a minor accounting question here. I looked at the income statement, you have [inaudible] for ineffective hedging gains. If your hedge is added to realize prices in that quarter where does the addition go? Or why is there, you know, a debit there?

Is Eddie around?

Yeah.

How about it my friend?

I think the effect of our hedges -- you know in realized prices which were in the revenue line. The movement in [inaudible] prices, it differs from the movement in the sales, contract sales index price, is what's ineffective.

If the real cash impact flows through the revenue line, oil and gas revenues the non-cash [inaudible] of FAS 133 [inaudible] this ineffective hedging line and again it is a gain or loss based on the movement of oil and gas prices?

Said simply, I think in the interest of the accounting provision trying to make grater disclosure, they have made it impossible to understand what's happening. The hedging is principally done of [inaudible], if we are selling gas in Oklahoma while directionally attempts to move in the same direction, it maybe 15 cents less, it maybe 23 cents less, but [inaudible] and what they have done is a very complex tortured fashion one of the reasons our costs are going up. You have to split apart that little margin of difference and present valued and calculated in the ineffective portion. It's nightmarish to run and from my own perspective has zero significance to the business, but it is GAAP.

Okay. I agree with you -- that they make it more difficult, but -- and the other question is, do you guys have any sort of a pro forma reserve number at the end of the quarter?

No we don't make any reserve announcements in the course of the year. It's too complex with thousands of leases to try and do it. What we have said is we expect to achieve the -- what John -- 125% reserve replacement and then obviously the most dramatic impact, the way the reserves are calculated will be the year-end prices as John mentioned. So, we do not calculate reserves at the end of the third quarter even internally.

Okay, thank you.

Your next question comes from Chris Lanjolie with Morgan Stanley.

Good morning gentlemen.

Good morning Chris.

Good morning.

Actually this question, I guess for Terry on WC 45, I noticed in the Stone release, they said that they have drilled down to a depth of about 16,400 feet?

Right.

And I guess, is that shallower than originally it was anticipated when you guys first spoke about, how are you going to attack this well?

It is -- originally we had thought -- which has gone through a couple of permutations. I think originally we actually thought well it should be drilled shallower. But there was deeper prospective horizon identified, and Stone made a determination to go ahead and drill ahead to what we thought was going to be a deeper seismic reflector. The anticipation was that it would be somewhere in the neighborhood of 18,000 feet.

Right that is what I remember.

Okay. But due to just some abnormalities in the seismic signature, they actually encountered that prospective horizon shallower in the well. So, -- it was actually not productive, and so the productive horizon is the main productive sand that was being drilled for initially.

But to say it differently we drill to the deep objective, but the deep objective lay about 1500 feet shallower than originally thought.

Originally expected

Okay. That's' fine. I appreciate the clarification.

Your next question comes from Jim Dorsey, Shareholder.

Now let me clarify what you just said. You said that -- the original deep objective was not productive.

I'm sorry.

The deep objective Terry was not productive.

The deep is project -- the deep is objective and the well was not productive, but it was the secondary objective.

Okay. And so the primary is --?

We limited on saying a whole lot more just --

Yeah, but the primary objective is what we anticipate reproducing from the well and I missed the first 2 or 3 minutes. Are there -- we are running other pay zones besides the 59 feet?

Only one -- only what the operator announced.

Okay. All right. You had mentioned something about four wells still not back on production. Are we anticipating a possible permanent loss of production? And can you quantify the production? Its offline due to, I guess, it was due to Lily?

Yes. I don't anticipate a lot. I am going hedge you a little bit because you never know when you begin to do [inaudible] working in wells in Gulf of Mexico. Most of the wells went off production and are still off production. Relatively low volume wells that were near the tail ends of their life and in most cases the operators are attempting to re-establish that production. I don't anticipate that we are going to have any significant permanent losses at all in the few hundreds of Mcf today at most.

So, if I remember correctly, we said that Q4 production would be down would be impacted 3m?

Yeah, roughly 2% of what we expected. So, roughly 3m a day.

And much of that was concentrated already in October, meaning.

Yeah, correct.

The catch up had largely occurred, it just didn't occur day one in the quarter. So, the cumulative effect on the quarter would be an average of about 3m.

Were there any additional work-over expenses that you could quantify or they are immaterial too?

Other than what came out in the release the -- there are no initial -- no additional significant work-over expenses, and we had no extraordinary work-over expenses in the quarter.

Okay.

What do we expect any at this point in time to the rest of the year?

I think, he is referring to the hurricane damage.

Oh, oh, I'm sorry.

Yeah, that's what I was...

I am sorry. We had some as, I said there will be some wire line work and some other work that will be done, but I don't think it will be material to our results for the year.

From an expense standpoint.

We had no significant structural or permanent damage on any of our facilities.

Okay. Other question. I read through the 10-Q, if you believe it or not before the call, and I noticed the comment on SFAS 143, and I also understood during the call that we were talking about 5-10m of plugging costs that were expensed currently, I guess, during the current year in the Gulf of Mexico. Today, it raises all sorts of questions, I think if we don't accrue as we go for retirement cost and did we quantify the impact of 143?

We had entirely quantified the impact of 143, but we do -- but that's ongoing. We do though -- we do have our Gulf of Mexico abandonment cost fully accrued for in our financial statement.

I think the big issue is going to come on shore. Historically, the way the whole industry looks at this is when you go into plug hundreds or even thousands of wells ultimately, will you recover that cost in the equipment, and the tubing, etc. and to the extent you saw if you would or largely would there was no provision that this pronouncement is going to force a full gross up, meaning if on all your properties combined, and I'm just making up numbers here because we haven't done the work. If on all your properties combined, you're going to spend $10m, even though you are going to recover $10m, you have to gross up your balance sheet as I understand it under this pronouncement with the $10m liability and $10m asset as opposed to netting them, which is what was historically done. The challenging part for Range is not in the Gulf of Mexico, where we and the whole industry, as John indicated, because they are big net numbers, has historically accrued the thousands of on-shore wells. I don't believe anyone historically that I am aware of has done it, now you are going to have to try to methodically go through to project the timing, cost, and recovery on every well even if you're getting rid of it in 35 years. That's another nightmarish suggestion of our accounting friends.

Okay. So this $5-$10m we were talking about was actually charged against reserves that were accrued as we went?

I think all of that John was reserved in the Gulf of Mexico.

So not [inaudible] hit the current income statement?

No.

That's correct.

One thing about this comprehensive income, I mean I -- you know, when I went through and again reading through the 10-Q, we actually had a loss and I understand that was due to the hedging -- but, you know, that wouldn't have been there if when prices weakened earlier last year, we had covered some of our hedges - I know there seems to be some thought that, that doesn't make much sense - but if you are keeping track of, you know, I don't if it's ever going to occur again - but if you are looking at what finding costs are in the industry, and least operating expenses and everything else, there seems to from everything I have heard to been a pretty sizeable shift upwards and the cost of supply? And if for whatever reason if we ever get into a situation where prices fall below those costs, it would seem to make some sense to perhaps on vying some of these hedges?

Well, you loose both ways in terms of confusion. Because there is several accounting pronouncements here. One - if you're smart enough to hedge when the price goes down, you have to report a loss in other comprehensive income. You and I both know, it's a good thing to have hedged in that situation. When the prices go up like they did this year, you report losses because those theoretical gains would haven't come about yet.

[inaudible] went down your losses, you mean you'd report gains?

The worst the business gets, the more we will report a profit. Better the business gets, the more you report a loss.

Right.

Then switch to your thought. If we start [inaudible] hedges, its then speculative trading as opposed to hedging. And you will report gains or losses of that on a completely different basis than you would hedge in production. So, you loose in terms of your financial statements becoming far more volatile in this business - either way you go. The fundamental purpose of hedging the way we pursue it is to reduce volatility. What the accounting provision is doing is trying to have it maximize volatility.

I haven't read it recently, but I think if as long as your hedge, it gives production, you become forward against as a counter of equity account. But if you actually cover that, it would run through.

I think it goes, Rodney, to other income?

Well, yeah but you run through the income statement then. But I am not suggesting you do this all the time - I am just saying if you could - and I know in hindsight it all looks easy - but if you look at what the cost of everything is, I am just saying that it was something that I -- and I know it came up in conference calls in the spring and--

Well, I think it's fair to say all

But I mean, [inaudible] has been an economic gain [inaudible] fairly concerned about?

Absolutely, I think it is fair to say, which does not mean we would not consider unwinding or retaking on hedges, if the board made the decision that was attractive enough. We remain opportunistic. The other side of the coin is, I think, it is fair to say our policy [gets] on a rolling basis to hedge production over a 12 to 24-month period, so that 50-75% of our production looking forward is locked and if we can do that as attractive prices. That is the theory. We are more than happy to consider variations on the theme. If somehow we were convinced we knew future prices, but that has not come up often in my career.

Well, but again, I am not really talking about the future. It seems to me the industry has changed a lot, and there is a lot more discipline - and I am not sure we are ever going to see a situation like we saw in early 2001 - but based on what happened in 2001, my perception is that if prices become economic, people just aren't going to drill as much as they might have in the past for whatever reason. And so at that point, it might make sense to cover, but I don't want to labor - I think we - both numbers were coming from one end. On IPF, I notice that G&A expenses really haven't fallen that much - even though the amount of assets employee have fallen - and we are talking about cutting the amount of outstanding loans again. I am just wondering how we are going to wind that thing down?

Jim, I think if you take a look at the supplemental tables that are on the website, which give you some more detail on IPF.

I thought it would fall in the -- some like 430 to 390.

Yes. But if you take a look at the G&A and you take a look at the valuation allowance that is there those will come down overtime and, you know -- and we will look at the justification of those as we go forward.

I mean, as I would have edged the return on equity -- there IPF is falling fairly quickly, isn't it - I don't know what is right -- do you have any idea what's its been and--?

Not -- not really. I mean one of the significant reasons why the portfolio is decreasing is that in this very low interest rate environment many of our clients are being able to persuade other parties to give them financing, and they would much rather refinance at much lower rate. So, some of the runoff of that portfolio is the ability of these individuals to refinance. Now that's just the nature of the beast in the finance business and we just had to put that that capital back at work. But there is no conflict between IPF and the company as to capital, because their capital resources are all available separate and apart from the cash flow of the company.

Operator why don't we take a final question. I apologize, but I think the number of us have other commitments here behind -- and we've run about an hour and a quarter now.

Yes sir we will go to Ron Mills of Johnson Rice for our final question.

Good morning guys. Just two questions. One is - we touched on follow-up opportunities at West Cam 45. How about on some of your other projects specifically Lelu? And in also as it relates to your income statement on the non-cash mark-to-market G&A expense, what is that related to?

Well let's take that one first because its less fun and then we'll wind up if we could with E&P operations. This is the worst - although I don't know, I guess hedge accounting gives it a run for its money - the worst of the recent GAAP pronouncements in my view. We have a deferred compensation plan, most of which is assets or stock of the company. This is mark-to-market accounting on that stock - even though that stock beneficially under any conceivable circumstance will go to the beneficiaries and won't cost the company any more or less. But when the asset was contributed in, because it's in a [inaudible] trust, the accounting says you keep recalculating that cost. So to the extent the price of our stock goes up, countering suitably we will make a charge to the income statement to the extent the price of our stock declines - we will have a benefit on our income statement. Neither one - at least in the framework I use - is a cost or a benefit, either direction. It's part of the new accounting wonder to make it as confusing as possible.

Okay. And have you all now changed the way you show that on your balance sheet, is that -- in the past was that in the current asset line and now--?

It wasn't in the -- prior to the restatement it wasn't in the balance sheet either on asset or liability. We considered those assets of the trust and the beneficiaries. Its now fully consolidated - but also retroactively because of the restatement.

Okay.

Ron, if you look in the queue, you'll see that there is treasury stock now shown in the stockholders equity, which will show you the number of shares that are in the trust.

Okay.

And most of those are shown as non current assets and non current liabilities. So you'll be able to identify those. But when we calculate our earnings per share -- I am sorry, when we calculate our cash flow per share - we don't take the treasury share reduction. We still catch by the only old basis. Now the income statement will show a dilute -- a reduction for the treasury shares, but we don't follow that method for cash flow calculation.

Okay.

Terry, why don't you have at the E&P side and then we'll need to wrap up.

Okay. You are going to have to repeat your question, if you kind of remember all over there.

I will try. The follow up opportunities West, relating to West Cam Lelu or any of the other discoveries you alluded to?

Well, we've already talked about West Cameron.

Right.

But Lelu -- we are currently looking at other similar opportunities in the same area. That particular field will likely be a one well or may be two well field at most - but there are other similar anomalies with similar seismic attribution in the same area that we are actually considering right now. Relative to other discoveries -- I alluded to earlier what we expected to do at the James Lime - but certainly depending on the results there we have a lot of leasehold, and we have offset opportunities to identify, should we have a kind of success that we want. And I do expect to drill a number of offsets to the discovery that we have in the panhandle. We are actually spurting a well in November as a first nearby offset, and we'll probably have more as we go into 2003.

Okay, and how much acreage do you have around Lelu?

You know, I am going to beg off, I can't recall, but it is somewhat in the neighborhood of 200-300 -- no some 400-600 acres, but I can't recall exactly the number.

Okay, thank you.

Operator, let's wrap up if we could here and I apologize for truncating this, but as I think we indicated, while we're certainly not celebrating because of the fact that production continues to lag from the prior year period - we think that's a trend we will overcome, hoping to move to basically a flat profile increasing from the third quarter - but a flat profile to next year and then upward in terms of exit rate and looking into 2003. I think the most important aspect of what went on in this quarter and really over the last three quarters, is we have a sizable drilling program now operating - its not without its frustration, the ways we've even had several dry holes as are to be expected. But I think in an overall sense, this company is in a radically different position - both financially and technically and operationally - than it was a year or two years ago. We are in a position, where we're more than replacing reserves with the drill bit to the extent that going to be complimented by acquisition something we're in the financial position to take advantage of now at least on a small scale. We can begin to rebuild this growth curve that we've been off for several years. So we are not celebrating - but we are confident that we are making steady progress and with a cash flow solidly north of $2 a share and a stock price of about 2.5 times that - if we can continue to put these numbers on the board on a regular predictable basis, we think there is substantial value that could be added both with the drill bit and in the stock market for our shareholders. Thank you all very much and we look forward to hopefully having all these numbers on the board when we next speak to you over this yearend results. Thank you and good day.

Thank you for participating in today's conference. You may disconnect at this time.