SilverBow Resources Inc (SBOW) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Swift Energy Company first quarter earnings conference call. At this time all parties have been placed on a listen-only mode and we will open the floor for questions following the presentation. At this time it is my pleasure to turn the floor over to your host Scott Espenshade. Please go ahead sir.

Thank you. Good morning. I'm Director of Corporate Development Investor Relations and I would like to welcome everyone to Swift Energy's first quarter 2005 earnings conference call. Terry Swift, CEO will give an overview. Alton Heckaman, our Executive Vice President and CFO, will then review the financial results for the first quarter. Joe D'Amico, our Executive Vice President and COO, will cover our recent domestic activity and then Bruce Vincent, President, will update our new New Zealand operation. Terry Swift will then recap before we open it to questions. Before I turn it over to Terry, let remind everyone our presentation will contain forward-looking statements based on our current assumptions, estimates and projections about us and our industry. These statements involve risks and uncertainties detailed in our SEC reports. Our actual results could differ materially. We expect our presentation today to take approximately 20 to 25 minutes and allow additional time for questions. With that I'd like to turn it over Terry.

Thanks, Scott. And thank you again for joining this morning's conference call. I believe that several themes are developing in the 2005 commodity markets that obviously have a direct effect on the E&P sector. The first question is the sustainability of this strong commodity market. This strong pricing has certainly had an effect, a positive effect on the sector, and our Company's earnings for the first quarter, which we delivered first quarter record levels of income. Also, with the commodity price increases we were seeing pressure on oil field service costs. And again, this is affecting E&P companies as well including us. I'll touch briefly on each of these items.

But first let me cover some of the highlights of this morning's first quarter earnings release. For the twelfth straight quarter Swift has beat consensus earnings estimates. Management believes that earnings are a strong and primary metric for long-term shareholder value and we're proud of our track record on earnings. We had earnings this quarter of $0.89 per diluted share and cash flow of $2.39 per share. These results were delivered primarily because of these strong commodity markets and because corporate production continues to increase year over year. We brought in 15.5 Bcf equivalent this quarter. I'll have Alton, Joe and Bruce discuss in more detail our financial and operational results for this quarter.

Going back to the commodity price environment, I think it's important for us to realize that there's certain reasons that underlie the strength that we see in commodity prices. And I'd like to touch on these briefly. First of all, we do believe that the U.S. dollar is weak, relative to global currencies and will remain weak throughout the year. U.S. economic growth is also relatively strong given the downturn in some sectors but 3.1% GDP growth is certainly a good number to bring in. And we certainly think that this is going to be a good year for energy consumption. We also see on the international front, manufacturing and specifically economies that have infrastructure energy needs, continuing to put upward pressure on the demand side. Finally, one of the strong and important elements of the - - that give the fundamentals to this commodity market is the issue of additional capacity or additional supply that's available to global markets and of course with that additional capacity shrinking over time and that capacity being a lower quality crude oil, we believe that all of these things lead us to the higher price environment that we're in today. Principally being a $50 crude oil market.

On the natural gas side, we have to recognize that natural gas though it's linked to crude oil is fundamentally driven by U.S. domestic economic growth and is weather related in terms of demand. Conversely, downward pressure is currently being exerted on natural gas prices due to the higher storage inventories. Yet, even with this downward pressure, natural gas is still trading near the $7 mark on the 12 month strip. With these higher price decks it's not a time for us to be complacent. We have important strategic operational results to achieve. We also have cost pressures due to the commodity markets that we've got to manage.

In 2005 we increased our capital budget 10% due to the oil field inflation at - - that we saw at the beginning of the year but we've continued to see cost pressures from the service sector. Recently we've added an additional $20 million to our 2005 budget, both because we're forecasting higher cash flows and to help us account for these uncertainties in the costs side of our business. Particularly those resulting from day rate increases for drilling rigs. Because of the commodity price environment, we do expect these increases to be greatly offset with excellent returns. We continue to maintain a discretionary wedge in our capital budget, which we will only spend as we realize the positive impacts of this higher commodity price environment and as we realize our operational success.

With our planned activity levels we anticipate our 2005 capital expenditures to be in range of $220 to $240 million. Still well below the cash flows we expect for this year given a $6 per Mcf and a $45 per barrel price tag. We continue to deliver value through our operating results. For the first quarter production increased year over year 9%. This increase was despite a third party pipeline interruption that occurred in the first quarter that's since been fixed. Facility upgrades in Lake Washington are also important to our annual results this year and we expect these to be completed in the third quarter as planned. This focus on production has allowed the Company to capture value from the higher commodity prices but we also have a keen focus on reserves as well. And we believe Swift Energy Company can deliver 7% to 12% reserve and production growth this year.

Our 3D seismic data in South Louisiana, together with our Tarata Thrust prospects in New Zealand, have enhanced our drilling portfolio. This diversified drilling portfolio positions the Company for some higher impact exploratory drilling opportunities in 2005 as well as expanded exploitation results for the Company. Proper execution of our operational strategy in 2005 should bring us a very good year. Our South Louisiana plants call for more wells that will be impactful not only for production but also for reserves especially in Lake Washington. And we now have a new partner, Mighty River Power and together we will test meaningful exploration potential in New Zealand. Pairing this commodities pricing environment with our current outlook we believe we will deliver another year of excellent returns and increased long-term value to the shareholder. With that I'd like to turn it after to Alton to present the quarter's financial results.

Thank you, Terry and good morning, everyone. I'm pleased to reiterate that Swift had its best first quarter in the history of the Company. Revenues were almost 96 million, up 46%. Production for 1Q '05 rose 9% to 15.5 Bcf equivalent, as Terry said. Net income was 25.7 million up 76%. Diluted EPS came in at $0.89. While net cash flow provided by operating activities increased 63% and was $2.24 per diluted share. Swift's domestic production increase, along with commodity prices received, led the way for our stellar first quarter results. U.S. production rose 5% for the quarter when compared to '04. Thanks primarily to continued success in our core Lake Washington area which Joe will touch on. 65% of Swift's domestic production for 1Q '05 was crude oil, which in this current pricing environment is quite favorable.

With current weighting of crude oil in the equation, Swift's average composite realized price for 1Q '05 increased to 33% to $6.16 per Mcf equivalent. Domestic composite prices actually averaged $6.99 up $1.54 from 1Q '04 and New Zealand composite prices rose 41% to $4.13. Oil and gas seals revenues were therefore 45% above the 2004 comparable quarter. High prices are great but we remain keenly focused on our per unit costs as Terry mentioned. As to results for the first quarter results 2005: G&A came in at $0.31 per unit, in line with guidance, as we continued our Sarbanes-Oxley initiatives. DD&A per unit came in lower than guidance at $1.56. Primarily due to lower than expected capital incurred costs in 1Q '05. Production costs came in below guidance at $0.71 due to the efficiencies we are recognizing and less domestic workover activity experienced in 1Q '05. And production taxes increased in tandem with higher prices and the production mix.

And finally, interest expense came in at the low end of guidance at $0.41. Swift does realize net income of 25.7 million, which on a per share basis equates to $0.91 on a basic basis and $0.89 diluted. Beating consensus First Call estimates for the twelfth consecutive quarter, as Terry mentioned earlier. Cash flow before working capital changes for 1Q '05 came in at 65.1 million or $2.26 per diluted share, while EBITDA was 70.5 million for the quarter. Both well above the 2004 comparable amounts.

Swift's bank line remains untapped. We had no bank line borrowings at quarter end. Providing plenty of available capital for any value adding strategic opportunities that might avail themselves. With respect to Swift's hedging activity; we continue to layer in gas floor protection in this very strong commodity market. With three series of floors added in 1Q '05 and current contracts that extend out through December 2005 as we continue our diligent price risk strategy. You can see the details of our price risk positions is posted and updated on our Website. CapEx for 1Q '05 was 45 million, less than the quarter's cash flow. Allowing us to pay down our line and increase our cash balances. Our announced increase to 2005 CapEx budget, of 220 to 240 million, should remain well within our '05 cash flow projections. And as always, we've included additional financial and operational information in our press release including initial guidance for the second quarter and full year 2005.

2004 was a great year for Swift. We're even more excited about the 2005 financial prospects. And we're off to a great start. And with that I'll turn it over to Joe D'Amico for an overview of our domestic operations.

Thanks Alton. Good morning, everyone. I am pleased to report that, for the first quarter, total production was 15.5 Bcf equivalent. Which increased 9% from the 14.3 Bcf equivalent produced in the same quarter of 2004 but decreased 2% when compared to production in the immediately preceding quarter of 2004. First quarter 2005 domestic production increased 11 Bcf equivalent, an increase of 5% from the 10.4 Bcf equivalent produced in the same quarter 2004. Primarily due to increased production from the Lake Washington area. But 2% lower than production the fourth quarter of 2004, principally due to the previously mentioned third party pipeline interruption. In Lake Washington, Swift Energy's production was relatively level with production in the fourth quarter as expected; waiting on a new facility project. The facility upgrades in Lake Washington are on schedule to be completed in the middle of the third quarter as planned.

These expansions will take the facility rating capacity to approximately 30,000 barrels per day of oil capacity from the current level of 20,000 barrels per day. The main activities underway are the doubling of the current processing capacity of the CM3 production platform, which handles Swift's sour crude and will soon have a capacity of 10,000 barrels per day. The field is also having a high pressure gas backbone installed, which will aid the efficiency of our gas lift system. And we're also installing additional compressors. These items will significantly increase the capacity of the gas lift system. We believe this upgraded system will give a significant boost to production. Additionally, Swift Energy currently has seven wells waiting to be completed in the Lake Washington area. Swift Energy's Cote Blanche Island, acquired at year end 2004, had production restored in the second quarter. As you may recall, this field was shut in just prior to the acquisition due to a slight disruption of a natural gas line.

Production from Cote Blanche Island and Bay de Chene will be negligible from the first half. But the Company does expect to double daily production from the field by year end to approximately 1500 barrels per day. We expect Swift's activity in these fields to be similar to our early activity in the Lake Washington field. That is; improving the production facilities, searching for workover opportunities and beginning the drilling program. As far as our first quarter domestic drilling results, the Company completed 11 of 14 development wells for a success rate of 79% for the quarter. The Company successfully completed nine of 12 development wells and completed two and three exploration wells in Lake Washington. Additionally, the Company successfully completed two development wells in the AWP Olmos area. The Company currently has two rigs operating in Lake Washington. Which we now have under one year contracts and is planning to bring a barge rig into the Cote Blanche Island and Bay de Chene areas in the second half of 2005. And move a second rig into the AWP Olmos area this summer. Now I'll turn you over to Bruce to talk about our New Zealand operations.

Thanks, Joe and welcome, everybody. I'd like to cover several things in New Zealand this morning including our new mining permit and new exploration permit, our first quarter production, the current pricing environment, and our current and planned drilling activity. Swift Energy New Zealand was recently awarded offshore petroleum exploration permit. 38495 in the Taranaki Basin on the North Island of New Zealand. The permit is located offshore in the southern portion of the Basin to the south and west of Swift’s Rimu/Kauri, 38719, and encompasses approximately 600 square miles or about 240,000 acres. We believe that the permit is prospective for hydrocarbons. And we plan to review the current geologic and geophysical data to see if the permit merits further capital investment. We anticipate that we will likely conduct a 3D seismic shoot on the permit at a later date and hopefully drill an exploration well at some time.

This is in addition to the previously announced Kauri petroleum mining permit, 38155, covering 8,708 acres. Which now allows Swift energy to fully develop its Kauri early discoveries for a primary term of 30 years. In addition to the existing A and E pads, Swift energy New Zealand plans to place up to two additional multi-well drilling pads on the permit for full development of the Kauri sand, which is an intermediate depth gas condensator reservoir. Also, further wells are needed to exploit the Manutahi sand, which is a shallow oil reservoir. In terms of production results: First quarter 2005 New Zealand sales included production of 4.5 billion cubic feet equivalent, which was an increase of 18% from production in the same quarter in 2004 and a decrease of 1% from the levels in the previous quarter. Mainly due to an extra lifting of oil production in the fourth quarter of 2004. Within our core areas in New Zealand production in the Rimu/Kauri area averaged just over 27 million cubic feet equivalent per day, up 22% from the fourth quarter of '04 and up 136% over the first quarter of '04. Mainly from the success of our activity in the Kauri sand.

Expansion plans are underway to handle additional Kauri natural gas at the Rimu production station this quarter. Current plans include an approximate 10% increase, in this capacity, for processing natural gas in the short plan. And then further are plans are being reviewed for a possible 50% to 100% expansion of capacity in 2006. Up at the TAWN fields, production averaged over 23 million cubic feet equivalent per day in the first quarter. Which was down 14% from the fourth quarter of 2004 and down 26% from the first quarter of '04. These fields are expected to continue to decline through 2005. I should also note that Swift's Rimu production station underwent routine maintenance in the second quarter and as a result, Swift has reduced production levels for five days while this was going on. This happens every year and it generally happens about the same time every year.

In terms of the price environment, as we talked about at our analysts' meeting earlier year, Swift expects to continue to see a strengthening in our natural gas realizations due to the supply and demand fundamentals in New Zealand and worldwide. These are continuing to tighten in New Zealand. This has allowed Swift Energy to tranche into natural gas contracts at the increasing market levels. The fact that the TAWN production is declining, which is under an older contract, and the Kauri natural gas is increasing portion of the gas stream and under a newer contract, it allows Swift to continue to realize a higher price each quarter, all other things being equal. Additionally, currency rates did strengthen again throughout the first quarter. Which together brought an increase in the average natural gas price to $3.17 per Mcf for the first quarter, which is an 11% increase over the $2.86 per Mcf received in the fourth quarter and a 40% increase from the first quarter of last year. It should be noted that our annual guidance has been changed to better reflect current expectations of the gas market. Also, in New Zealand, the sales price of our McKee blend crude oil averaged $51.68, a 43% increase over prices in the same period last year.

Additionally, our contracts for natural gas liquids yielded an average price of 17.80 per barrel for the first quarter of '05. New Zealand natural gas and natural gas liquid price contracts are denominated in New Zealand dollars, which did strengthen compared to the same period in '04. In terms of our drilling plans, Swift is currently drilling the Kauri E10 well. The Kauri E9 well was drilled and completed early in the second quarter and is awaiting a fracture stimulation, which will occur late in the second quarter. We did plug and abandon the Kauri E8A well, which we believed faulted out the Kauri sand on the western edge as we've discussed before. As well as the previously mentioned Karaka A 1 well. Both of these were done in the first quarter.

We are particularly excited about an up-and-coming 2005 Tarata Thrust exploration program with our partner, Mighty River Power. This partnership allows Swift to spread our capital further since Mighty River Power will be providing the drilling capital on three wells in the program. After a two year hiatus of significant exploration activity in New Zealand Swift plans to drill a total of three to four additional exploration wells in the Taranaki Basin this year. The first well, the Goss Prospect, should spud in the second quarter and will be followed by the Tawa and Trapper Prospects throughout the year. I might mention that the Goss Prospect and Trapper Prospects are both located up in the TAWN area where access to infrastructure is readily available. This program could be very meaningful to us.

In summary, let me tell you that we continue to be excited about our position in New Zealand. We continue to see the impact of the tightening natural gas market there. And we believe that we are particularly well positioned to take advantage of it with a significant onshore position of exploration acreage. We have several exciting exploration prospects that we hope to drill in order to evaluate this potential over the next two years. We believe that our acreage position, our experience in having drilled more wells than any other operator in the last two years, along with our significant position in infrastructure assets; will allow us to exploit the opportunities of this market and this Basin. Thanks for your attention and I'll turn it back to Terry to sum up.

Thanks, Bruce. To conclude, before we open it up for questions, let me go over once more some of the highlights this morning. First of all, we are in an exceptional commodity price environment with strong fundamentals. And the best internally generated opportunity set for the Company is here for us to implement our operating strategies around. We've begun the year with impressive financial results and we intend to continue delivering on our 2005 operational plan. We have a high impact exploration program that has the opportunity to deliver significant results both in production and reserves for the Company and its shareholders. We are encouraged by our progress in our core areas, specifically in Lake Washington and New Zealand. And we have a financial flexibility that gives us a position that allows us to take advantage of future opportunities, whether they be organic growth through the drill bit or strategic growth through acquisitions.

Finally, I want to remind our shareholders that we have a keen focus on reserves as well. We at Swift Energy Company believe that we can deliver a 7% to 12% reserve and production growth for this year. At this time I would like to begin the question and answer portion of our presentation. Thank

Thank you. [OPERATOR INSTRUCTIONS] Thank you. Our first question is from Van Levy of Dahlman Rose.

Congratulations, good quarter. I'm hoping you can give me an update on the mid and deep drilling at Lake Washington? Give me a sense of the 3D program and how that's facilitating your exploitation efforts there.

Van, this is Terry. I'll take a shot at that. Clearly we focused last year on a lot of developmental activities that were - - required a lot of developmental drilling and didn't add a lot of reserves in that capacity in Lake Washington last year. We had actually slowed down our activity there in terms of drilling rigs and backed off of one of the rigs. And allowed ourselves the time to shoot a 3D seismic program in Lake Washington. We didn't get those results in until late last year in terms of beginning to work with them. But we clearly have identified not only 3D targets that are in what we call the shallow horizons but we've identified mid horizon targets that we would say are in the 6 to 12,000 foot range. We have several of those earmarked this year to drill. We also have some that are deeper than that, that we hope to get around to as well. It's a little early for us to say what those target sizes are. But I think it's important to note that they're consistent with analogies in the general area for those depths and they are larger, more impactful targets than we've historically have been drilling in the area. And they are more expensive. We do think that's going to be an important part to our complement this year. All of our mapping is ongoing as anyone know with work 3D volumes of this nature. We'll be using this 3D data set for three or four years I'm sure.

Okay. Second question I have is in New Zealand, could you give us a sense of the geology reserve size of your - - I guess next two exploration projects that you talked about, the Goss and the Tawa?

Van, this is Bruce. The way we've tried to discuss those is really look at the field distribution sizes in the eastern Taranaki Basin, both the large and the small one. Rather than try to discuss specific prospects and the specific potential of those prospects because there's certain risk factor obviously to that whether you want to look at P 10, P 50, P 90 reserves. On the south side of the eastern Taranaki Basin you have the Kupe field, which is offshore. That's somewhere in the 250 to 350 Bcf range. To the northern side also offshore is the Pohokura field, which is roughly 650, 750 billion cubic feet. On shore, the largest field is the Kapuni field, which is over a trillion feet of natural gas. And then you have several other fields like the TAWN, Tariki field and Ahuroa field, which are roughly 30 to 60 type Bcf fields. We believe that all three of these prospects essentially fit within the field distribution sizes for that area.

Okay. Last question. Bruce, could - - obviously the gas pricing outlook in New Zealand has dramatically changed from when you made the acquisition. Could you kind of sum up your New Zealand, what I'll call your New Zealand experience? Give us a sense of whether the acquisition has paid out yet including the additional drilling that you've done there and if not, when do you expect that to pay out?

Gosh, let's - - let me try to take that question. It's a lot of question. In terms of the acquisition, the TAWN assets, I'd have to check our numbers to see if it paid out but it probably has. We bought that - - we closed it in January of 2002. We used, I think our price deck we used I remember from natural gas was $1.10 U.S. and oil would have been around $20, so clearly the price impact that we've had subsequent to that has been pretty dramatic. I think it's - - in terms of reserves it's pretty much produced as we expected it to. And one of the significant things we did do though is increase or accelerate the tail end reserve so we got some quicker. So from a present value standpoint it was very attractive to us. The gas market is doing all of things that we've been saying it was going to do. I know New Zealand's a long way away from here and not as many people certainly as close to it as we are. But when you look at the fundamentals of the market and you look at the other sources of supply and you look at the drilling activity, what's happening today is not a surprise. Not a surprise at all.

It's - - in fact, from the standpoint of the locals in New Zealand it's very much a real concern for them because they need the gas to fuel their economy. The biggest source of natural gas for over 25 years, the Maui field, had excess capacity for much of that time. And so also was used kind of as a gas balancing mechanism as were the TAWN fields for some period of time. Neither of those fields, though, has any excess capacity anymore. They're both producing what they can produce. The Maui field, as I know several of you know, the reserves were redetermined about a year and a half ago and determined to be a lot less than what they had anticipated. In fact, the field was due to decline several years sooner than they had anticipated. And that's of course create add renewed market for new gas contracts. You're seeing that impacted in Swift's results particularly as the older contracted gas, like we have in the Tariki and Ahuroa fields up at TAWN declines. And then the newer contracted gas down in the Kauri area increases. That also is impacted, as we've also said, by the currency exchange, which the weakness of the dollar which is helping boost crude prices is also certainly helping reduce our results in New Zealand. Did that answer your question?

Yes. Thanks a lot, Bruce.

Thank you. Our next question is coming from Adam Leight of CSFB.

Good morning, guys. A couple of quick ones. Could you tell me what your well head prices were domestically unhedged?

Yes. I think they're all unhedged. The only - - we do have some floors but those aren't - - the prices you see are unhedged prices.

That's correct.

And with the revision in the capital budget, can you give us a breakdown on the type and region, where that's going to spent?

Most of that is going to be domestic. And most of it's going to be really in the South Louisiana drilling area of Lake Washington, Bay de Chene, Cote Blanche Island.

And is that all exploratory or was that - - how's that break out?

Pardon?

How does that break down between exploration and development?

It probably in the same percentages as we've allocated in the budget. Most of it development but some exploration.

Thank you.

Our next question is from John Sidringer of Loomis, Sayles.

I know it's very early days and you're evaluating the efficacy in the seismic program you undertook at Lake Washington. But it seems just looking at the numbers, that your exploration successful drilling rate obviously on a very small number of wells is pretty strong by recent standards. Is it a stretch to interpret that as a result of the seismic or is it just one of those quarters and it shouldn't be overinterpreted?

This is Terry. Yes, I wouldn't, you know, with small sample sizes it's hard to make broad generalizations. But I would say that we have kind of a combination of exploitation drilling and exploration drilling. And it's not uncommon in Lake Washington at all to have a development opportunity that we can drill deeper into exploratory target set. Sometimes those developmental opportunities are not booked reserves and therefore would be more classically called exploitation type reserves. So there's also a problem sometimes with the categorization between exploitation and exploration. We will be drilling some deeper wells this year that are pure exploration wells. Though Lake Washington is very forgiving dome, in that we often do have behind pipe serendipity type things that can compliment or add to your success rates. But I wouldn't draw too much conclusion on the exploratory success rates right now in the program.

Okay. Just for - - just a housekeeping type detail, are the drilling numbers you're reporting, are they net or gross?

The numbers of wells are gross. The net's going to be a little smaller than that, but not significantly because most of our - - these areas like Lake Washington, we have 100% working interest.

Right.

Okay. Just a - - just a cleanup question, that sort of clarifies everything for me.

Okay.

I've got nothing else. Thank you very much.

Thank you. Our next question comes from Eric Calamaris of Wachovia Securities.

I have a question regarding the realization New Zealand. What's the allocation of that, that was attributable to the change in currency? Or if you can just give me approximate.

Yes. I don't have that off the top of my head, and we'd have to be a little careful how we disclosed that, because our natural gas contracts, there are confidentiality provisions. And we have to be a little careful about revealing the prices for those. I'll see if I can run some numbers while we're still on the call and answer that later if possible.

Okay.

Otherwise, we can get back with you.

Okay. Thank you. And secondly, related to that, to the contract that you mentioned, what is the duration of that?

Which contract?

The one - - I guess the - - the new one. The one that was just signed in Kauri. And I guess the question is what's the duration and how is the pricing set?

The newer contract for the Kauri gas, actually it's two contracts. The newest one, though, was the fairly short term and I think it was three year contract.

Okay.

The price was actually fixed. We do - - as we continue to have success there, we anticipate ongoing negotiations with the gas purchaser there to lengthen the actual term of that contract. I think at the time, I think we entered into it would have been about a year and a half ago. Neither one of us wanted to take that contract out too long. Certainly from our perspective we could see the gas market continue to strengthen at the time the offshore Pohokura gas hadn't been contracted. We wanted to let that go through that process. It wouldn't surprise me to see us enter into a revised contract with the gas purchaser sometime later this year.

Thank you.

Thank you. [OPERATOR INSTRUCTIONS] Thank you.

While we've got a break, Van, if you're still on the call, we did confirm that we have paid out that TAWN acquisition some time ago.

And thank you. Our next question is coming from Rehan Rashid of FBR.

Good morning, guys. A question on New Zealand. A couple of days ago you guys had announced a receipt of a mining permit on - - what is that 38155. But the question is; you had disclosed about an $80 million development cost for the Kauri and Manutahi sands over the next several years. Is this going to be a pud conversion kind of CapEx or will it have associated reserves to it?

Yes, this is Terry. I ought to address that. It's real important to notice that we have filed the mining permit. It has been approved. The mining permit addresses all categories of reserves into the future as we best know them right now, both proven, probable and possible. It's the nature of how the Ministry works with companies to file these permits. That particular capital outlay is for - - is an estimation for all categories. And it wouldn't be appropriate to use it against the proved develop reserve base just yet.

Okay. Thanks.

Thank you. At this time we have no further questions and I'll turn the floor back over for closing comments.

Well, we appreciate everybody joining on the call. We're certainly proud of the results this quarter, and more importantly, we're looking forward to a very exciting 2005 and we hope you continue to be partners with us. Thanks.

Thank you. This call has concluded. Please disconnect your line and have a great day.