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Energen Corp. (NYSE:EGN)

Q3 FY08 Earnings Call

October 23, 2008, 11:00 AM ET

Executives

Julie S. Ryland - VP IR

James T. McManus, II - Chairman and CEO Energen and all Subsidiaries

Charles W. Porter, Jr. - VP, CFO and Treasurer Energen and all Subsidiaries

John S. Richardson - President and COO

Analysts

Carl Kirst - BMO Capital

Holly Stewart - Howard Weil Incorporated

Crystal Troy - Raymond James

Operator

Good morning. My name is Kevin and I'll be your conference operator today. At this time I would like to welcome everyone to the Energen quarterly earnings conference call. All lines have been placed on mute to prevent any background noise.

After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]

At this time I'd like to turn the call over to Julie Ryland; you may begin your conference.

Julie S. Ryland - Vice President Investor Relations

Thank you, Kevin and good morning to all of you joining Energen Corporation's third quarter earnings conference call. Whether you are joining us by phone or by internet, it's good to have you with us. Today's call is being held in conjunction with our announcement yesterday of the results of operations for the three months ended September 30, 2008.

Our prepared remarks will include statements expressing expectations of future plans, objectives and performance that constitute forward-looking statements made pursuant to the Safe Harbor Provision of the Private Security Litigation Reform Act of 1995.

Except as otherwise disclosed the company's forward-looking statements do not reflect the impact of possible or pending acquisitions, divestitures or restructurings. All statements based on future expectations rather than all historical facts are forward-looking statements. These are dependent on certain events, risks and uncertainties that may be outside the company's control and could cause actual results to differ materially from those anticipated.

A discussion of risks and uncertainties that could affect future results of Energen and its subsidiaries is included in the company's periodic reports that are filed with the Securities and Exchange Commission.

At this time I will turn the call over to Energen's Chairman and Chief Executive Officer, James McManus; James?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Thanks Julie, and good morning to everyone joining us today. Energen issued a fairly extensive news release yesterday and I hope you have had a chance to review it. This morning, Chuck and I will go over the key issues and then open the phone lines for your questions.

The third quarter of 2008 was a very good one. Earnings per diluted share increased 26% over last year to $1.01 per diluted share. This increase was due in large part to the impact of higher realized sales prices and increased production at Energen Resources, our oil and gas exploration and production company. In addition our utility, Alagasco generated improved results as it closed out its 2008 rate year.

Let's move to earnings guidance for a minute. With only a few months remaining in the year, we have narrowed our guidance range for 2008 to $4.35 to $4.55 per diluted share. This guidance remains within our prior guidance range of $4.30 to $4.70 per diluted share and we feel good about our prospects for achieving a seventh consecutive year of record earnings.

To better reflect the lower commodity price environment we are now in, we reduced our price assumptions for Energen Resources unhedged production for the remainder of 2008 to $7 per Mcf for gas, $70 per barrel for oil and $0.91 per gallon for NGLs. Our prior guidance included price assumptions of $10 for gas and $100 for oil and $1.30 per gallon for our natural gas liquids.

Approximately 73% of our estimated fourth quarter production of 26.5 Bs is currently hedged. So the impacts on 2008 of our assumed price changes are negligible.

As we look forward at 2009, 62% of our estimated production of 107.5 Bcf equivalent is already hedged. Our average NYMEX equivalent hedge prices are attractive; gas at $8.89 per Mcf and oil at $72.14 per barrel. And our average NGL hedge price is $1.15 per gallon. Nonetheless, after adjusting downward our assumed prices for unhedged production, we lowered our 2009 earnings guidance range to $3.70 to $4.10 per diluted share.

As with the remainder of 2008 our new 2009 commodity price assumptions for unhedged production are $7 per Mcf for gas $70 per barrel for oil and $0.91 per gallon for NGLs. Our prior 2009 guidance assumed prices for unhedged production of $10 per Mcf $100 per barrel and $1.30 per gallon.

These lower commodity price assumptions account for the bulk of the difference between our new guidance and our old guidance. The remaining difference is attributable to higher base LOE and increased DD&A expense. We are expecting base LOE per unit to increase in 2009 because of additional compression and environmental costs in the San Juan Basin, and expenses in the Permian Basin associated with increasing the efficiency of water injection in a number of our water floods.

We anticipate per unit DD&A to increase in 2009, primarily due to higher development costs. In yesterday's news release as is our practice, we estimated the impact that commodity price changes would likely have on our earnings.

For 2009 we estimate that every $0.10 change in the average NYMEX price of gas, some $7 represents an estimated net income impact of approximately $1.3 million or $1.08 per diluted share. Every $1 change in the average NYMEX price of oil from $70 per barrel represents an estimated net income impact of approximately $1.1 million or $1.05 per diluted share, and finally every $0.01 change in the average price of liquids from $0.91 per gallon represents an estimated net income impact of approximately $110,000 or $0.1 cent per diluted share.

Please note that our 2009 guidance does not include potential benefits from property acquisitions, Alabama shales exploration or stock repurchases. Nor does the guidance make any assumption related to potential impairment of capitalized unproved leasehold related to Alabama shales which is approximately $41 million Please note too that work is ongoing on our formal 2009 budget and it will be presented to Energen's Board of Directors in December.

As we have seen over the last few months, things can and do change quickly. We will of course be monitoring the economy, the financial markets, the energy industry, commodity price outlooks and should conditions change significantly we will adjust our budget and our guidance as warranted. As is our past practice we plan to announce details of our formal budget in mid December.

I spoke a moment ago about our hedges for 2008 and 2009 and want to note that we also have hedged a good portion of our 2010 production. Today we have hedges in place in 2010 for 36.6 Bcf of gas at an average NYMEX equivalent price of $9.43 per Mcf. Of that amount 25.8 Bcf are San Juan Basin specific hedges and to calculate the NYMEX equivalent price we used the basis differential of $1.34.

We also have hedged 2.2 million barrels of oil at an average NYMEX equivalent price of $96.74 per barrel Approximately 1.4 million barrels are sour oil hedges and for calculation purposes we used a basis differential of $4.53 We are very pleased with this excellent start to helping protect our cash flows in 2010.

Turning your attention now to our production estimates; based on a 3% increase in year-to-date production we have raised our 2008 production estimate to 102 Bcf equivalent. In the San Juan Basin Energen Resources' largest area of operation increased production is being driven by new drilling and continued development of the company's Fruitland Coal properties. Production also is up in North Louisiana and East Texas area largely due to new field development.

On top of our 3% organic production growth we expect in 2008 versus 2007 we estimate that production will increase another 5% in 2009 to 107.5 Bcf equivalent.

And now looking at 2009 capital spending; the capital spending outlook for Energen Resources has been increased from previous guidance to approximately $295 million but is still 26% below our estimated 2008 capital spending of $400 million. The additional $25 million in 2009 relative to our earlier estimates of $270 million, largely reflects a continuation of the increased development drilling costs we've been experiencing.

We have not yet experienced a decline in costs despite lower commodity prices and capital spending cuts by some energy companies that may result in increased rig availability and thus lower rig cost. And there are some drilling opportunities in the Permian Basin we could pursue in 2009, but we thought it prudent to not be too aggressive on that front until the credit markets loosen significantly, until we see the longer term direction prices may take or until we determine whether some of our other investment opportunities offer better returns.

Now a bit of an update on Alabama shales; there's not a lot we can say about our Alabama shales project yet. Once the initial data from our three-well test program has been analyzed, then Energen Resources and our partner, Chesapeake Energy will determine our next steps.

We will then disclose the results and our plans and we anticipate making that disclosure before the end of 2008.

Meanwhile work continues. A completion has been performed on the Marchant well in Bibb County as well as the Krout well in Bibb County and the completion of the Lamb well in Greene County is scheduled to begin later this week. At the end of September Energen Resources and Chesapeake had jointly released approximately 660,000 acres in Alabama shales with our net position being approximately 330,000 acres.

Importantly now let's look at cash flows. Energen's excess cash flows continue to look very solid. In 2008 after using after tax cash flows for identified capital spending and to fund a small portion of the holding company's annual cash dividend, Energen Resources had cash available to repay $84 million of long and short-term debt. In addition we estimate that Energen Resources will have a cash balance at the end of 2008 of approximately $65 million.

In 2009 we estimate that Energen Resources will have excess cash flows after identified capital spending and dividend contribution of $170 million to $200 million. That brings with the cash on hand we have at the end of 2008, our 2008 and 2009 available cash flows to $235 million to $265 million.

These cash flows are very important as they will be available to help fund Energen's strategic investment opportunities.

You've heard us detail these opportunities for months now, oil and gas property acquisitions, share repurchases and potential development of Alabama shales. In general Alagasco utilizes all of it's after tax cash flows to fund its capital expenditures and the majority of Energen's dividend.

In these uncertain times we are pleased that Energen's 2008 earnings have continued to grow. As I alluded earlier, based on our excellent year-to-date results, our prospects for increased production and our significant hedge position in the fourth quarter, we believe Energen is well on its way to achieving its seventh consecutive year of record earnings in 2008.

Looking ahead to 2009, Energen offers 5% organic production growth. Energen offers a strong hedge position and helps to insulate our 2009 earnings from commodity price volatility. Energen also offers as I mentioned solid after tax cash flows, a strong balance sheet and untapped lines of credit with which to pursue our strategic investment opportunities.

The US and global markets have changed but Energen's strategic objectives and financial capacity to meet them have not.

Before we open the phone lines for your questions, I want to ask Chuck Porter, our Chief Financial Officer to briefly review with you the results of the third quarter and year-to-date. Chuck?

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

Thanks James. For the three months ended December 30 2008, Energen generated net income of $73.1 million or $1.01 per diluted share as compared with $58 million or $0.80 per diluted share in the same period in 2007.

Energen Resources' third quarter 2008 net income totaled $79.6 million and compared with $69.3 million in the same period last year. This 15% increase in year-over-year net income largely reflects higher average realized sales prices for Energen Resources production along with a 3% rise in production to 26.1 Bcf equivalent and lower per unit general and administrative expenses.

Negative impacts on Energen Resources' net income in the third quarter of 2008 were increased LOE including production taxes; increased DD&A expense and a higher effective tax rate due to the reduced tax benefit under section 199 of the Internal Revenue Code. And natural gas and oil volumes which represent 90% of Energen Resources' production were up 5% and 3% respectively.

In the current year third quarter, a 4% increase in San Juan Basin production largely was due to new drilling and to continued development of our Fruitland Coal properties. Although volumes in North Louisiana and East Texas represent only about 10% of total production for the quarter, a new field development there led to a 32% year-over-year production increase.

In the Black Warrior Basin an 8% decrease in production mainly was associated with higher commodity prices that resulted in lower net volumes due to payout calculations.

Per unit G&A expense in the third quarter of 2008 declined 22% over the same period in 2007 largely due to lower benefits related to the company's performance-based compensation plans.

Per unit LOE in the third quarter increased 22% from the same period a year ago to $2.47 per Mcf equivalent. This increase was due to a 55% rise in per unit production taxes resulting from increased commodity prices as well as increased repairs and maintenance expenses, higher work-over expenses in the San Juan and Black Warrior basins and increased marketing and transportation costs in the San Juan and Permian basins.

DD&A expense per unit in the third quarter increased 14% over the same period last year to $1.30 per Mcf equivalent. This was due to continued higher development costs.

Moving to Alabama Gas; Alagasco reported a seasonal net loss of $5.8 million in the third quarter of 2008 as compared with a net loss of $10.5 million in the third quarter of 2007. This year-over-year improvement was due to three key factors. The utility drew down its enhanced stability reserve to help compensate for large industrial and commercial load loss. Alagasco kept its increase in O&M expense below the inflation-based cost control measurement feature of its rate setting mechanism, rate stabilization and equalization. As a result, it gets to keep one half of the difference and Alagasco earned on a higher level of equity.

Also included in the prior year third quarter net loss was a $2.3 million after tax reduction designed to keep the utility earning within its allowed range of return on average equity at the end of the 2007 rate year.

There is a detailed explanation of the ESR and the cost-control measurement feature of RSE in the news release and I encourage you to review that information.

For the nine months ended September 30, 2008, Energen's net income totaled $256.6 million or $3.56 per diluted share as compared with earnings of $229.8 million or $3.18 per diluted share in the prior nine months. The current year period included a one-time $6.4 million or $0.09 per diluted share gain from the sale of Permian Basin properties in the first quarter of 2008. Energen Resources' net income for the year-to-date 2008 totaled $222.6 million and compared with $199.4 million in the same period last year. This 12% increase largely reflected average … higher average realized sales prices, a 3% rise in production to 75.6 Bcf equivalent and a one-time gain from the sale of Permian Basin properties partially offset by higher LOE and DD&A expense as well as a higher effective tax rate due to a reduced tax benefit under section 199.

Alagasco reported net income of $34.8 million in the first nine months of 2008 as compared with net income of $31.2 million in the same period a year ago. Now this was due to the same reasons as outlined for the quarter.

For the rate year ended September 30, 2008, Alagasco earned a 13.1% return on average equity. With that I'll turn the program back over to James. James?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Thanks Chuck. In our news release of yesterday, there is a lot of detail related to 2008 and 2009 guidance and assumptions, hedge positions and also a review of financial results for the 12-month trailing period. I would urge you to review that data. In the interest of time, I'd now like to ask Kevin to open up the phone lines for your questions Kevin?

Question and Answer

Operator

Thank you, sir. [Operator Instructions] We'll pause for just a moment to compile the Q&A roster.

Your first question comes from the line of Carl Kirst from BMO Capital. Your line is open.

Carl Kirst - BMO Capital

Hi, good morning everybody and a very nice quarter.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Good morning, Carl.

Carl Kirst - BMO Capital

Couple of questions… kind of detailed questions and then sort of a broader question. But just… you know kind of from a modeling standpoint. Do you guys have what the realized prices were before hedges, we're just trying to debt-reckon our basis.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

I think Chuck, does have that information. While he's flipping to it Carl, he's got it.

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

Carl, I presume you're referring to the quarter?

Carl Kirst - BMO Capital

Yes.

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

Well, for gas the price was $8.42 with futures and it would have been $9.03 without futures. The oil price was $78.08 with our hedging activities and as you know through the first nine months, oil prices were very high so it would… price per barrel without futures would have been $116 per barrel. And natural gas liquids with the hedging were $1.03 per gallon and without would have been $1.37.

Carl Kirst - BMO Capital

Okay. And I'm sorry Chuck, just on the $116 on the oil. I'm sorry was for the nine months or was that for the third quarter?

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

Carl, all of that was for the quarter.

Carl Kirst - BMO Capital

Okay. Great, thank you. The second detail question was just more looking at the deferred taxes. It looks like there's quite a bump this year as much as it's almost… your booked tax rate I assume that's coming from the expensing of the IDCs [ph]. In as much as that's going to be… or at least according to the guidance kind of falling off for next year.

How should we be thinking about the expensing of the IDCs going forward? Should we be thinking about it just 40% of your booked tax rate's going to be deferred or should we be looking at something more like 65% of your drilling costs. I guess your CapEx would be used by the IDCs? How should I think about that?

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

It did go up a lot in 2008 versus 2007. In 2007, we thought 199 credits were going away so, we were managing for that. It doesn't look like the 199 benefit is going away at least for not… for people that aren't a major. So, we're now expensing both IDC and bonus depreciation in 2008 and we would anticipate continuing to do that in 2009.

Now, our CapEx of course is going from roughly $400 million to $295 million so, it will drop. For discussion purposes, when I talk about drilling a well, we usually think about 80% of that might be IDC 75% to 80% with a remainder being some type of tangible equipment.

The tangible is giving it a 50% bonus depreciation at least under current law for 2008. And the remainder of that of course is recovered through acres depreciation. But we would expect the same type of IDC and bonus depreciation, I guess next year absent any changes in the law, but of course the capital is going to be somewhat reduced from $400 million to $295 million.

Let me clarify, I think the bonus may only relate to 2008 so I guess that's not a major part of it. So, we'll probably just get regular makers… makers depreciation on the tangible piece in 2009.

Carl Kirst - BMO Capital

Okay. Very much appreciate the detail there. So, the broader question really… you know and… you know obviously we're in a very fluid market and who knows what the next few months are going to bring, but… you know to the best a question like this can be answered. You know James, as you guys kind of sit back and sort of look at your opportunities that are out there and recognizing we don't have all the data on the shale yet.

You know none of the stocks right now are reflecting of course any growth component to it. You know the implied dollar parameter of your stock price is probably a third of what your S&D is. How do you reconcile this with your budget going forward, as well recognizing that you've got S&P and perhaps the credit rating agencies being a little bit anxious as well? You know, I know there was a comment made… you know, the market can move very quickly and you guys will react accordingly.

Perhaps one way to ask it is… is that if the markets sort of stabilized as they are today, should we kind of expect this budget that you've laid out to be what is in effect put in place for 2009 or have even the changes of the last three to four weeks put that somewhat into question?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Carl, good question. We… no if things are stabilizing where they are right now. I think the budget that we've got on the table is the one that we would go with. My remarks when I alluded to the Permian basin in particular, we cut back what 2009 would be fairly significantly just waiting to see, which way this economy may go, which way oil prices may go.

Certainly, if things head deeply south from where they are right now today, we might look again at what kind of capital we would expend because obviously we view there is a premium on those companies that maintain liquidity that have cash and can execute. And so we actually… you know we did cut some capital out of '09 from what was originally proposed and we actually dropped, we've still got $107.5, which is within the range of what we were targeting. But we took a little bit of capital out. You know it could have been a little bit higher on that end, but we thought it was prudent to wait on that.

And what we've got to measure here Carl, you mentioned it about the reserves is we've got to look at, what our own reserves in the ground cost, weigh that against potential property acquisitions that may be coming as folks who need to raise cash are maybe forced to put those properties out there, which we will not have to do and then of course we've got to weigh that opportunity against what we might have in Alabama shales.

I mean you've hit the clear point capital allocation is the biggest decision that we've got to make as a company going forward and we don't have the total resolution yet, to tell you how that will play out, although obviously our stock looks extraordinarily cheap at this moment in time.

Carl Kirst - BMO Capital

Okay. Appreciate the comments guys. Thank you.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Let me… Carl, let me follow-up on the S&P thing, just for a second, I forgot you had mentioned that. We will be meeting with them obviously they placed us on a negative watch, this happened with Moody's a year or two ago. And it would be our hope, that if we do experience… we're two notches above investment grade there and if we experience any kind of ding that we would not drop below investment grade because of the financial health of the company, which frankly has improved, since all of those reviews have been done.

Now, we can't predict that, but that would be our hope through that process. So, we do want to as a company maintain investment grade and we'll be taking whatever necessary steps that we can take to ensure that that stays that way.

Okay? Next question?

Carl Kirst - BMO Capital

Thank you.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Thank you, Carl.

Operator

Your next question comes from the line of Holly Stewart from Howard Weil. Your line is open.

Holly Stewart - Howard Weil Incorporated

Good morning, everybody.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries1

Good morning, Holly.

Holly Stewart - Howard Weil Incorporated

Couple of quick ones, here. Nice jump in production in North Louisiana and East Texas. You mentioned some new field development; can you give us a little bit of color on what's going on there?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Let me do this, Holly. I've got Johnny Richardson with me here today also, who is the Chief Operating Officer of Energen Resources and he can speak to a little bit of our activities over in that area because we have had a good bit going on. Johnny, Holly.

John S. Richardson - President and Chief Operating Officer

Good morning, Holly. Yes, we operator three units in the Oak Hill field in East Texas Holly, which we have gone back in and done some additional reservoir work, which indicated we could down space those units into the 40 acre range. And we are now looking at some 20 acre down spacing, which is typical for that area.

Most companies are following that suit. And we have been moving in the 40 acres and we will look forward to maybe doing some additional down spacing over there. But we have been very active and it's been a nice boost in production.

Holly Stewart - Howard Weil Incorporated

How many rigs do you guys have running there?

John S. Richardson - President and Chief Operating Officer

We just have one rig running.

Holly Stewart - Howard Weil Incorporated

Okay. And what percentage of that is operated versus non-op?

John S. Richardson - President and Chief Operating Officer

All of the increase in production is operated with the exception of one horizontal well, which was drilled lately by an outside operator in one of our units over there.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Holly, this is James. We've pretty much been in charge in East Texas and North Louisiana, it's a different situation, where as you know we probably… we have our working interest percentage is about 25%, 30%. We have one field that we operate around the Vancherie Dome [ph], which is the sales field, but the others are operated by our other operators.

Holly Stewart - Howard Weil Incorporated

Okay. And then just one other one James, given everything that's going on here with Chesapeake right now. Have these guys given you any indication that they might not want to move forward here on the Alabama shales project?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

None, whatsoever, Holly. We do plan to meet with them, in the next four weeks to discuss that but we do not have… that has not been conveyed to us.

Holly Stewart - Howard Weil Incorporated

Okay, perfect. Thanks, guys.

Operator

[Operator Instructions] Your next question comes from the line of Crystal Troy [ph] from Raymond James. Your line is open.

Crystal Troy - Raymond James

Morning.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Hi, Crystal.

Charles W. Porter, Jr. - Vice President, Chief Financial Officer and Treasurer Energen and all Subsidiaries

Morning, Crystal.

Crystal Troy - Raymond James

Hello, I'll follow-up on that question on the East Texas, North Louisiana side. From what I remember you're targeting at the Cotton Valley in the Houston, have you done much work… I know it's non-operated, mostly on the Louisiana side. But have you done… have you seen anything from the Cotton Valley? And I remember that it was… had some exploratory potential there.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Crystal, I'm going to turn that to Johnny as well.

John S. Richardson - President and Chief Operating Officer

Well, you're right; we mainly focus some Travis Peak in East Texas and some potential in the Cotton Valley there. We do focus on the Houston. Those programs are pretty much what they were. We've got a few ideas about a few deeper things in East Texas, but we haven't brought those forward yet. But we mainly stick with our bread and butter there; we're just doing increased density and field development in those areas.

Crystal Troy - Raymond James

Thanks. So for next year's program, it might be a bit early, but do you have just a very general rough break down of CapEx by region; obviously not including the Alabama shales?

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

We do have that, San Juan Crystal, $114 million. I'm just going to round them; Permian $127 million; North Louisiana and East Texas $27 million; Black Warrior $13 million. We've got about $4 million or $5 million on other property plant and equipment and we've got $10 million of exploratory items in the budget as well. So, that should get you very close to our $295.

Crystal Troy - Raymond James

Thanks, great quarter.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Thank you.

Operator

And your next question comes from the line of Sara Nazada [ph] from Millennium Partners. Your line is open.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Hi, Sara. Sara? Kevin did we lose, Sara?

Operator

I don't believe so, sir. I'm showing her in the conference, but she might be on mute. I believe she disconnected, sir.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Okay.

Operator

[Operator Instructions] There are presently no questions in queue.

James T. McManus, II - Chairman and Chief Executive Officer Energen and all Subsidiaries

Okay. Seeing no further questions, let me just say this one thing about the S&P review. The reason they're looking at us is, it's a recognition of our change of business mix. It has nothing to do with concerns about the financial stability of the company and I just want to make that clear.

Thank you all for being here with us today on this call. We plan to host lunch meetings with the investment communities in Boston on December the 2nd and in New York on December the 3rd. I hope you'll be able to join us. We appreciate you being with us. Have a great day.

Operator

Ladies and gentlemen, this call has been recorded for an encore playback, which will be available approximately two hours after the conference call ends. It can be reached by dialing 1-800-642-1687 or 706-645-9291 for international playback. Your conference ID for this playback is 65325770. This concludes today's conference call. You may now… I am sorry sir. You may now all disconnect .

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