Pride International Inc. Q3 2008 Earnings Conference Call Transcript

Pride International Inc. (PDE)

Q3 FY08 Earnings Call

October 30, 2008, 11:00 AM ET

Executives

Jeffrey L. Chastain - VP, IR and Communications

Louis A. Raspino - President and CEO

Kevin C. Robert - Sr. VP, Marketing and Business Development

Brian C. Voegele - Sr. VP and CFO

Rodney W. Eads - EVP and COO

Leonard E. Travis - VP and Chief Accounting Officer

Steven D. Oldham - VP and Treasurer

Analysts

Arun Jayaram - Credit Suisse

Judd Bailey - Jefferies & Co.

Roger Read - Natixis Bleichroeder

Ian Macpherson - Simmons and Co.

Byron Pope - Tudor Pickering Holt

Robin Shoemaker - Citigroup

Collin Gerry - Raymond James

Michael Urban - Deutsche Bank Securities

David Smith - JPMorgan

Alan Laws - Merrill Lynch

Knut Nilsson - Skagen Funds

Thomas Curran - Wachovia Capital Markets

Presentation

Operator

Thank you for waiting and welcome to the third quarter 2008 earnings call conference hosted by Pride International. As a reminder today's conference is being recorded. Your lines are currently muted and will be opened at the end of the formal presentation for a live question-and-answer session.

I am pleased to introduce your conference host today Jeff Chastain. Please go ahead sir.

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Thank you, Trish and good morning to everyone on the call. And welcome to our review of third quarter 2008 financial results of Pride International. A copy of the press release covering the financial results along with supporting statements and schedules is posted on the company's website and that's prideinternational.com. Also you will find the most recent monthly fleet update issued last evening the 29th of October. And as a reminder, I would like to note everyone there is details about the company's analysts meeting, which will be held on Tuesday November 18th at the Omni Hotel here in Houston. So, all of the details regarding that meeting are on the website, if you do plan to attend if you would please note that with an RSVP as soon as possible.

Joining me this morning on the call are the following executive officers of Pride International. Louis Raspino, President and Chief Executive Officer, Rodney Eads, Executive Vice President and Chief Financial Officer, Brian Voegele, Senior Vice President and Chief Financial Officer, Kevin Robert, Senior Vice President of Marketing and Business Development and Len Travis Vice President and Chief Accounting Officer.

Before I turn the call over to Louis, I will remind you once again that during the course of this conference call certain forward-looking statements may be made. These statements may relate to among other things our expectations of future performance, demand for drilling services, future results and cash flows and completion of asset sales. Any such forward-looking statements in addition to other information discussed in this call are within the Safe Harbor provided by Federal Securities regulations. These statements reflect our current views, but actual results could differ materially from those projected due to the factors discussed in the call or in our filings with the SEC. And again those filings are posted on our website.

Also note that we will use various numerical measures in the call today, which are or maybe considered non-GAAP financial measures under Regulation G. You will find the required supplemental financial disclosure for those measures including the most directly comparable GAAP measure and an associated reconciliation on the website.

That brings us now to the opening comments. So, I will turn the call over to Louis.

Louis A. Raspino - President and Chief Executive Officer

Thanks, Jeff and welcome to everyone on the call this morning. As usual following my opening comments Brian is going to discuss our financial results in more detail and Kevin is going to give the marketing perspective and I will return for some closing comments in our go-forward strategy.

In Q3 Pride turned in yet another quarter of record earnings from continuing operations, which increased 18% sequentially and 55% year-over-year and we are at the high end of our guidance. Our strong financial performance was driven by yet another quarter of solid operating performance, with excellent utilization of our floating fleet, increased utilization and dayrate improvements in the U.S. Gulf of Mexico, rollover of several of our older legacy contracts to current dayrates, and strong cost management. Now Brian will review the details of this in just a minute.

In addition our strong financial and operational performance we continued executing our strategic plan by further rationalizing our asset base, entering into agreements to divest our non-core eastern hemisphere land-rigged operations, consisting of five rigs in Chad, one rig in Pakistan and one rig in Kazakhstan. We completed the sale of the Kazakhstan rig in October and expect to complete the remaining rig sales in stages going into the first quarter of next year. Upon completion this divestiture will increase the total proceeds from divestiture of non-core assets to $1.7 billion.

Also we took a major step in the divestiture of our mat-jackup operations by naming Randy Stilley, as CEO of that business. Most of you know, that until earlier this year Randy was the CEO of Hercules, where he grew that company's enterprise value from $60 million to over $4 billion over only a 3.5 year period. We are very excited to have Randy on Board. He is sitting here today and we expect that he will name the rest of his senior management team in the very near future. We hope to complete the eventual separation of this business from Pride in the first half of next year.

From a growth perspective we have now committed to our fourth ultra-deepwater drillship under construction, the first three of which are already under long-term contracts. All four of these drillships are among the most technically capable rigs in the world for both exploration and development operations in ultra-deepwater. And we have a lot of client interest in the PS4, which Kevin will discuss in a minute. We are following a very low-risk execution plan for the construction of our four drillships, as we are using a proven shipyard with one of the world's best on-time and on-budget delivery records, a proven engineering design, with no serial Number ones. We are using fixed price contracts and we have significant project management synergies, as all four rigs are being built in sequence in one shipyard. This brings our total investment in deepwater growth since 2005 to $3.6 billion dollars.

Now I will turn the call over to Brian for a financial perspective.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Thank you, Louis. I am going to take a few minutes to highlight key drivers of our financial performance for the third quarter, what to expect for the fourth quarter and then end with comments on the current events affecting the banking and financial markets and give you more detail on our sound liquidity position.

Generally it was another strong quarter for us, especially in light of the challenges of hurricane season and the downdraft in the financial markets. Representing another record for the company reported income from continuing operations for the third quarter totaled $180 million or $1.04 per fully diluted share. Excluding the negative impact on the quarter from a one time accrual of $8 million or $0.04 per share of additional tax related to assets sold earnings for continuing operations would have been $1.08 per share exceeding our previous guidance of $1.00 to $1.05 per fully diluted share. This outperformance was largely the result of the strong performance of our floating fleet driven by the commencement of new contracts at higher dayrates for the Pride Angola, Pride Brazil and Carlos Walter along with the return to service of the Pride Mexico, adjusted EBITDA for the third quarter was $296 million, an increase of $61 million or 26% from the prior quarter.

Total revenue for the third quarter of $607 million reflects an increase of $65 million over second quarter revenues of $542 million. Revenue from our floating fleet was $362 million up 25%, when compared to the second quarter. Making major contributions to this revenue gain the Pride Angola, Pride Brazil and Pride Carlos Walter each commenced new contracts with significantly higher dayrates. As a result average daily revenue for the deepwater fleet increased to $333,600 per day in the third quarter, compared to $298,300 per day in the second quarter. In addition utilization for the midwater fleet improved to 84% from 68% in the second quarter, as the Pride Mexico returned to service at the end of July, commencing its five year contract in Brazil.

Utilization for the deepwater fleet also improved during the quarter to 98.5% from 96% including three rigs, which achieved 100% utilization. Higher performance bonuses also contributed to the revenue improvement. Aided by an increase in utilization in the U.S. to 87% from 83% in the second quarter, revenues from our jackup fleet increased $6 million from second quarter levels to $210 million. Also average daily revenue for the U.S. Gulf of Mexico fleet improved to $71,700 per day from $67,800 per day in the second quarter.

Operating costs in the third quarter were $291 million, an increase of approximately $19 million over the second quarter. Approximately $8 million of this increase was the result of higher utilization for the fleet. During the third quarter, our fleet spent about 77 days in the shipyard or mobilizing. Both periods were certain operating costs are capitalized either as part of a capital project or in the case of mobilization deferred in amortized over the firm contract period. This compares with approximately 233 days the fleet spent in the shipyard or mobilizing during the preceding quarter.

In addition during the third quarter we recorded an accrual of $7 million for a customs assessment that is in dispute. These increases were partially offset by reduction in client reimbursable expenses of $2 million. Adjusting for these items, operating costs grew by about 2.5% or $7 million during the quarter, primarily related to higher labor costs and higher repair and maintenance costs. This increase was inline with our prior guidance of 2% to 3% for the third quarter. And consistent with my prior comments, we expect to experience a similar level of increase for the fourth quarter.

As expected G&A for the third quarter was markedly lower. The decrease of $9 million from second quarter spending levels primarily resulted from lower spending on information technology as we completed our major upgrade of our ERP system and experienced lower severance costs. Our effective tax rate for the quarter increased to 27% from the prior quarter tax rate of 22%. Excluding the one-time tax adjustment related to sale of assets, our effective tax rate would have been approximately 24%.

Looking forward to the fourth quarter, we expect to experience more improvement in the utilization of our midwater fleet, as all units are expected to operate for the entire quarter. At the same time, we are expecting this improvement to be at least partially offset by utilization declines in the Gulf of Mexico as activity softens over the course of the quarter. Pemex's release of additional mat-jack ups is also expected to negatively impact the utilization rates. Taking these factors into account, we expect earnings from continuing operations to be in the range of $1.04 to $1.09 for the fourth quarter.

Now just a few comments about the capital markets. In light of the current state of the capital markets, I want to spend a few minutes discussing our capital requirements and the resources we have available. Obviously it is an understatement to say, that the last few weeks in the general capital markets have been turbulent. Yet as we have watched these unprecedented events unfold, along with the serious impact to our competitors, whose business models relied heavily on financial leverage, it has only served to underscore our strong belief that conservative financial management is essential to the long-term viability in a highly cyclical environment like the contract drilling industry.

At the end of the quarter, our balance sheet reflected $730 million of long-term debt resulting in a debt to total capital ratio of 15% or about six tenths of a turn of 2008 estimated EBITDA. Of the $730 million in debt, $500 million represents our senior notes that do not mature until 2014. The balance of our debt portfolio consists of loans amortized by cash flow from two deepwater semis under contract in Brazil until 2016. Annual debt maturities on these loans are approximately $30 million.

With our senior notes maturing more than five years from now and scheduled principal payments on the deepwater semi loans essentially self-funded by existing contracts with Petrobras, we are now faced with the near-term prospect of extending maturities or raising new capital to refinance our existing portfolio, in the current capital market downdraft. Nor does our debt service cause us concern in light of anticipated cash flow.

From a current liquidity perspective, we finished the quarter with a cash balance of $428 million. During the fourth quarter, we expect to incur capital expenditures in the range of $225 million including a payment associated with steel cutting on the PS1. At the same time, we expect our cash balance at the end of the fourth quarter to be higher than at the end of the third quarter. Our $500 million revolving credit facility, which remains undrawn, when coupled with our cash balance provides considerable cushion to address our liquidity needs.

Looking forward to 2009 were more than 80% of our revenue is contracted, we expect to be able to fund our capital commitments including $700 million of new build-related construction commitments out of our existing cash balances and cash generated from operations during the period.

In 2010, where we have another $700 million of construction-related commitments we expect to do the same. Absent additional new build commitments, major acquisitions or other unforeseen events, we do not expect the need to raise new capital to complete our construction obligations.

In summary our existing contract backlog, strong liquidity position, and low debt levels provide strong support for completing and delivering the four ultra-deepwater new build drillships that we have committed to. In addition, we believe that our financial strength positions us to take advantage of developing opportunities to acquire deepwater assets from companies that are under financial distress. And Louis will talk about that more in a minute.

Now I will turn the call over to Kevin.

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Thanks, Brian. This morning I am going to comment mostly on what we see happening in deepwater. I will finish my comments with our outlook for the international and domestic jackup markets. In spite of the recent drop in commodity prices we have seen an increase in inquiries for deepwater rigs. Most clients drilling in deepwater are long-term focused and plan their work with less regard for near-term commodity prices. We believe most of our deepwater clients have been using oil priced forecasts at around $60 per barrel for economic justification of their projects and have been doing so for some time now.

Deepwater rig availability in 2009 and 2010 remain tight, especially if a client wants to secure drilling services from an experienced contractor. So, we already have interest in our deepwater fleet available in 2010 and beyond, including our fourth new build drillship available in the fourth quarter of 2011.

The Gulf of Mexico deepwater market requires the most technically sophisticated rigs, capable of drilling with heavy mud weights in 10,000 feet of water. Enhanced drillships like the ones we are building are the most efficient rigs for the Gulf of Mexico deepwater market. Our drillships are designed to perform both exploration and development drilling with enhanced offline capabilities, which create significant value for our clients as compared to the general deepwater fleet.

We are currently engaged in discussions with clients for terms anywhere from 5 to 10 years for use of the PS4 in to Gulf of Mexico. In West Africa we continue to see interest in the South Pacific, which is available in the second quarter of 2010. We are currently discussing work for terms of six months to three years. We also have interest in the Pride Africa drillship, which is not available until the first quarter of 2012. We have bid the PS4 on a new build tender offering a five-year term for a rig available in 2011 and expect to see two or three new deepwater tenders issued before the end of 2008 for ultra-deepwater drillship use in West Africa.

In the Mediterranean Sea, the Pride North America is drawing interest for programs commencing in 2011 for periods of two to three years. Water depths for these programs are extending out to 7500 feet of water. We also see some opportunities for our midwater semis commencing in 2010. Both the Pride Venezuela and the South Seas are candidates for these jobs.

In Latin America we expect Pemex to issue a tender for another deepwater rig available in 2009 some time in the next couple of months. We expect the Pemex will have to accept a later start date in order to find a rig that meets their requirements due to the tight market supply. In Brazil Petrobras continues to be focused on increasing its deepwater fleet to meet expected demand for exploration and development drilling of their domestic sub-salt plays. The sub-salt plays in Brazil will likely require rigs with very similar specifications to the PS4. We expect Petrobras to issue tenders early next year for their domestic market. We believe that Petrobras will require rigs employed domestically to be built in Brazil, but there are many questions about the ability of some contractors to deliver and operate the rigs they have already contracted to Petrobras. So, Petrobras may alter these plans. We also understand that Petrobras needs more rigs to meet its international drilling needs, so we are in discussions with Petrobras regarding these requirements again using our new drillship is uncontracted.

In India, we anticipate that ONGC is going to soon issue a tender for a 12,000 foot depth... 12,000 foot water depth capable rig. India has a growing deepwater market, which is dominated by ONGC and Reliance. Water depths do extend out to 12,000 feet. So, India is also going to require rigs with specifications similar to our new builds. As you can see, we continue to be positive about the long-term prospects of the deepwater markets and we continue to evaluate opportunities to grow further in this segment of the management.

Now let me address the international jackup market other than Mexico. Pride has five jackups working in the Middle East, India and West Africa. With recent commodity price drops, we have seen some clients delay issuing tenders in hopes of taking advantage what could be decreasing dayrates driven by uncontracted new build deliveries available in 2009 and 2010. We expect that the international jackup market might have the most downward dayrate pressure as a result of near-term commodity prices and growing rig availability.

Turning to the Gulf of Mexico, we expect Pemex to grow their jackup fleet to about 45 to 50 rigs over the next six to eighteen months, mostly with independent leg rigs. They currently employ about 35 jackups. Pemex is limiting the use of Mat rigs to primarily the northeast region, where their intention is to employ Mat slot rigs for open water drilling. Today we operate seven mat-supported and two independent leg jackups in Mexico. Over time we expect our Mat fleet in Mexico to consist mostly of slot rigs, which means we will swap our cantilever rigs working in Mexico for some slot rigs working in the United States. Cantilever rigs are more valuable in the United States than slot rigs, so this transition is a positive for us. We expect demand in Mexico for our Mat rigs could be up to six jackups.

Pemex's recent tender for independent leg jackups attracted bids at rates of $165,000 to $185,000 a day. Terms were generally about two years. The successful bids were for two rigs that will come out of the Gulf of Mexico. The high dayrates illustrate that the overall supply of jackup rigs in the Mexican and U.S. Gulf is expected to remain tight. We have been working directly with Pemex to extend our Mat rigs as evidenced by the recently completed extensions of the California, South Carolina and Nebraska. We are now working on a long-term extension of the California and a return of the Oklahoma to Mexico.

Dayrates have ranged from the high 80s to the mid $90,000 per day for our recent extensions. For the jackups not extended or recontracted by Pemex such as the Mississippi, we will work... we will seek work in other markets or in the United States with the strategy to protect dayrates. We currently intend to stack rigs returning from Mexico, if we believe working them in the United States could reduce dayrates. However, we also believe if natural gas prices are $7 or better, jackup utilization in the United States would remain at over 90%, which we feel supports current dayrates.

On a side note, we recently bid the Pride Wisconsin to Pemex and we were the only bid submitted for the work. We expect 500 day contract to be awarded within the next week or two. The Wisconsin is a 300 foot independent slot rig. In the U.S. Gulf of Mexico, we believe the supply and demand of jackups will remain balanced over the longer term, however we are seeing some weakness in demand in the fourth quarter, as a result of pipeline infrastructure damage from Hurricane Ike and some scaling back of spending plans due to lower natural gas prices. However, we expect to rebound in demand once natural gas prices are back near $7 and the pipeline infrastructure is repaired. The first quarter could present some market challenges, but it's really too early to tell, how 2009 will develop.

My last comment concerns the quality of our backlog. Our backlog currently stands at $9 billion excluding bonus. Including bonuses that we could earn from our contracts our backlog would be $10 billion. 85% of our backlog is with Petrobras, BP and Total. None of our floater contracts contain provisions that allow our clients to cancel the contract for their convenience, unless they pay us the full value of the contract as a cancellation fee.

Now let me turn the call back over to Louis.

Louis A. Raspino - President and Chief Executive Officer

Okay. Thank you, Kevin. Just some closing comments, first from a macro perspective. As we all know the extreme turmoil in the financial markets and the impact on everyone's equity values is disconnected from the continuing strong long-term fundamentals in deepwater drilling. While the price of oil has dropped from the $150 level earlier this year to the $60 to $70 level now, we all must remember that $150 was the aberration not today's levels. You will remember that oil steadily rose from around $40 in early 2005 to the $70 level late last year, when it was considered to be a strong price and very bullish for our industry at $70. In fact roughly two-thirds of all deepwater rigs being constructed today or being constructed in this up-cycle were placed on order, when oil was in the $50 to $70 range.

We understand that our deepwater drilling customers have never relied on the oil price spike of late '07 and mid '08 to justify their drilling economics. As Kevin said we understand... they understand I am sorry that oil is a cyclical commodity and many of our customers have been using approximately $60 as their long-term view of oil prices for quite some time. This is because they recognize the long-term fundamental trends going on in our industry. That is growing worldwide demand for oil, with accelerated depletion of existing reservoirs, limited supply additions, and the inability for alternative fuels to meaningfully and economically impact supply for an extremely long time.

So, we believe short-term oil price swings will have little impact on our customers' long-term demands for deepwater rigs. Also with increasing inquiries from deepwater customers, we believe we are seeing a flight to quality drilling contractors. As customers are expressing fear of speculators' ability to perform due to their fragile financial structures. Many of course have a very thin operating record if any at all, a very thin safety record if any at all. They have a questionable ability to deliver infrastructure necessary to support worldwide, world class operations, and questionable ability to attract and retain the employees that they have already attracted.

At Pride we continue to execute our strategy, a financial discipline, infrastructure improvements, asset rationalization and focused growth. Since we began this strategy in 2005, we have been deliberate, we have been transparent, and we have been successful. In repositioning this Company from one lacking in focus, with a weak balance sheet, to the Company as it exists today with financial strength, a focused asset base, and a growth strategy leveraging our core competencies in deepwater drilling.

Our financial strength and our $9 billion to $10 billion backlog, which now amazingly stands at about three and half to four times our market capitalization, positions us well to continue executing our growth strategy. We believe we are currently position to deliver one of the highest growth rates in EBITDA, over the next three years in our industry. Our go-forward strategy should no longer be considered a turnaround strategy. Upon completion of the divestiture of our Mat jackups the turnaround will be done.

For many years we have been building world-class operational engineering and project management organizations, the foundation for long-term success for a deepwater drilling. And our go-forward strategy is focused on becoming recognized truly as best in class in all of these areas. Now rewards we are having a strong track record as we do in safety excellence, operational excellence, financial structure discipline, focus on quality contracts with quality terms and conditions, and focused on being an employer of choice, these attributes have never been more valuable than they are in today's market place and at Pride we are very well-positioned to continue prospering in all of these respects.. Jeff?

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Okay. Thank you, Louis. Trish, we are now ready to enter into the question-and-answer period of the call. So, if you please assemble the queue… I will thank everyone in advance, while you're doing that for honoring our one question and one follow-up rule, so that we can address as many questions as possible in the time remaining.

Question and Answer

Operator

[Operator Instructions]. We will go to Arun Jayaram, Credit Suisse.

Arun Jayaram - Credit Suisse

Hey guys.

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Good morning.

Arun Jayaram - Credit Suisse

Hey, Kevin you obviously have extensive experience and knowledge of what's going on in Asia in terms of the shipyards etcetera. I was trying to get some color from you on what you are seeing in terms of the impact from the credit issues on some of the speculators and in your opinion how many of these rigs particularly on the floater side could be at risk if not getting completed because of these credit concern?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Well, I can tell you what I have read more so than anything, but of course the credit crunch doesn't impact only drillers, it also impacts shipbuilders and ship owners. So, you would tend to believe that if it continued there might be some not only projects that are not firm that's what I'm talking about projects that are firm, I think it will go on. The ones that were subject to an option or subject financing or maybe a lot of the ship building slots are held by options, those things could disappear I guess, if funds are not available.

In terms of rigs that are at risk it's a little harder to judge because remember you have got two contracts in place for a lot of these rigs. The ones that have a contract with an operator, there is a contract for providing drilling services and then there is a contract hopefully in place at the shipyard for a rig behind that drilling contract. For the contractors that have not yet secured a slot, I think it's a challenge, especially if they are subject financing.

For the ones that have already secured a slot, but were counting on financing the second half of the down payments or progress payments I think that's also a challenge. No one really knows the fallout yet, but certainly those are a lot of the opportunities that are out there to potentially look at. But until you actually see someone formally cancel, I don't know that it's anything more than just speculation. And to my knowledge nobody holding a contract with an operator has formally can't gone to the operator and asked or told the operator they can't deliver the rig. Not yet.

Arun Jayaram - Credit Suisse

Okay. That's fair. Second Kevin I wanted to… have you been to Brazil recently and can you maybe comment on how you think Petrobras changes their strategy if some of the original… if the last 10 out of 12 rigs do not get completed?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

I think again it is an unknown. Again to my knowledge no one has gone to Petrobras with those contracts and said we can't deliver. What we do know is that Petrobras does have a quite a demand that they have to get more rigs. Our expectation is they have not yet finalized those plans and I think there are a number of strategies they are pursuing. They are a very resourceful company. As you know they also own some rigs so that is also an option for these guys. I think as they look forward they will issue a tender. We do expect that tender to require rigs to be built in Brazil.

But at the same time because of what you mentioned we believe they will pursue rigs that are going to come from outside Brazil like a PS4 type rig. If it fits their specification and it is something they can put to work either internationally or domestically. But again I think… hopefully early next year a lot of this will be a lot clearer. And right now, I don't think Petrobras has finalized their plans. It is a difficult issue when you take all the factors into consideration.

Arun Jayaram - Credit Suisse

All right. If I could sneak one more in there. I know the Mad Dog platform was damaged. What is the impact to you guys from that drilling equipment getting damaged there? From the storm?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Well the Mad Dog contract was a labor-only contract. And at this moment and obviously there is a force majeure clause that would allow them to reduce their costs and effectively stand down the personnel. And we've done some of that but the contract has not yet been officially declared force majeure. So it's still business as usual for right now.

Arun Jayaram - Credit Suisse

All right thanks guys.

Operator

We will go next to Judd Bailey, Jefferies and Co.

Judd Bailey - Jefferies & Co.

Thank you good morning. Kevin you mentioned in your comments the opportunity to potentially, I think you said swap out some of your Mat Cantilever rigs down in Mexico for some Mat slots in the Gulf. Can you remind us, have you… the Mat slots in the Gulf do they have the necessary upgrades to go to Mexico and if not any type of estimate on what that would cost to get that kind of work done?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Yes I have got the Oklahoma actually that meets the Pemex spec. It recently just came out there and Pemex has actually asked us to bring the rig back on a fairly long-term contract, almost a year of work. The Louisiana and the California already in Mexico of course meet their spec. My other slot rigs I have one more that we might be able to put in to operation in Mexico without spending a tremendous amount of money on it. But I have a couple that would be large upgrades, so I don't think we would pursue that.

The other thing that I did not say in my comments is that Pemex is interested in deeper leg Mat rigs even if they are cantilevers. So, I would expect the Texas to stay in Mexico and then we have rigs like the Alaska that have been in Mexico before. They could easily go back down there. So, I have got six or seven rigs that I think, will be attractive to Pemex. And this northeast region they are looking for open water and deeper water than a 200-foot Mat cants can accommodate.

Judd Bailey - Jefferies & Co.

Okay, And this is going to be difficult for you to answer probably but if we think about how this could play out from a timing perspective do you… would you envision… let's just say you do swap out six? Would you take your Mat slots in the Gulf out of service for two or three months and therefore reducing the marketable supply or would the Mat cants come in and just basically replace them at the same time. Or would we potentially be looking at a few months lag with a limit in the marketable supply in the Gulf?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

No I think if you look back at the movement we have had the last few years between the U.S. and Mexico we have always had some downtime between the movement of those contracts, roughly 60 days is probably a good gauge. And certainly if like I said if we… like the Mississippi you know is on its way back. Our plan right now is to stack that rig because we believe that if we tried to work it into the market it would just right now add another rig to the supply.

And potentially we want to protect the day rates in the U.S. Gulf. That's good for both markets. So there is some lag but in general over time I think it is going to actually not only balance out, but with Pemex's increase in demand, rig supply in the Mexican and U.S. Gulf is going to get tighter.

Judd Bailey - Jefferies & Co.

Great thanks I'll turn it back.

Operator

We will go next to Roger Read with Natixis Bleichroeder.

Roger Read - Natixis Bleichroeder

Yeah, Natixis Bleichroeder good morning.

Louis A. Raspino - President and Chief Executive Officer

Good morning.

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Good morning.

Roger Read - Natixis Bleichroeder

Following up on the questions about the U.S. Gulf. What about, most of the drilling recently has been more oil directed? Is that changing with the price having come down or is most of the softness you're seeing in, at least in the near-term mostly the hurricane-related issues. Just inability to drill and tie-in at this point and more of a focus on infrastructure repair?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Most of our clients that have scaled back, have used the infrastructure damage as the reason. They are unable to export their… primarily gas in this case. Not oil. And you know a lot of these guys are small and so that decreases their available cash flow and they generally drill from their available cash flow. They are not out borrowing money to run these projects. So I think that's why we're seeing the fourth quarter softness more so than the natural gas price. I think the natural gas price continuing in this level could start to show some impact in the first quarter.

Roger Read - Natixis Bleichroeder

Okay. And then unrelated follow-up probably more of a question for you Brian as you are looking at the cash flow that you know you have got out of the backlog, your commitments to your new build rigs, and then obviously some financial or let us just call them less career operators of rigs, out there, potentially in dire straits. What would be the consideration you would take into account when you are looking at a rig acquisition and let us assume a mostly completed rig as opposed to taking over a rig, that's being built or a slot in the yard.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Well I think our... there are many considerations that we will look at Roger and your question is pretty broad here but it would be … the similar types of things we do today and did before we committed to PS4. What I understand obviously where the market is, number one.

Number two obviously we are taking into account where we stand with respect to our cash flow. And the interest level that we're seeing with respect to operators in terms of having a dayrate that will meet our return criteria. I think, the other thing in terms of taking over a speculator rig we would be concerned about is, how much risk we are adding potentially to a project. I think a Louis or Kevin mentioned in their prepared comments that some of these will be available and there will be some distress there and these guys don't necessarily have the experience in terms of building units and there are a variety of units out there that are available today that are being built at yards that have limited experience in actually building drilling rigs.

And there are also some cases out there where we see folks out there building drilling rigs and trying the methodology of building the whole in one place and attaching topsides to another. We know that that's a high risk proposition as well. And so all these are from engineering as well as financial factors that would factor into our decision.

Roger Read - Natixis Bleichroeder

Okay. And... I'm sorry.

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Roger keep in mind that in the history of projects blowing up typically has been near the end especially in the commissioning section. And that is a portion of these projects that if the yards don't not match. The drilling contractor has to manage that. So that's a pretty big unknown for a lot of these guys.

Roger Read - Natixis Bleichroeder

So would it be fair to say that your return criteria on acquiring the rig would be measurably higher, than your return criteria on building your own rig from the ground up?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Yes, Roger I think that is fair to say though. The higher the risk on the project the higher return we are going to require.

Roger Read - Natixis Bleichroeder

All right thanks.

Operator

We will go to Ian Macpherson with Simmons and Co.

Ian Macpherson - Simmons and Co.

Hey good morning. First question would be if I could get an update on what you think the timing looks like for the separation of the jackups in light of what is going on in the market? And if you see it materially pushing back from where you thought maybe three months ago?

Louis A. Raspino - President and Chief Executive Officer

Ian we are still working to move as quickly as possible. I mentioned that Randy should have his senior management team in place in the very near future. And I mean very near future. Once that is in place, we will be able to get that team working with our team to focus on SEC filings and focus on everything else that we need to do, tax rulings and just all the organizational and infrastructure things we need to get set up to move this thing forward.

Coming at year end with all the attention we need to give to our own numbers and our own audit etc., its probably going to push us back to... after we get year-end numbers audited. It will probably be the earliest time we can approach the marketplace, which is going to put us into the second quarter of next year in all probability. But we still plan to move forward as quickly as possible. The divestiture here is not one of market timing, it's one of strategic imperative on our part. We strongly believe that the sum of the parts is greater than the whole. We strongly believe that we will end up with two equities that by themselves will be highly desirable equities for what they represent.

As far as investment parameters that we know, investors are looking for Gulf of Mexico U.S. gas plays and investors are looking for deepwater plays, and we think we are going to create two excellent investment vehicles for investors looking for either one of those. So its a strategic move. It is a strategic imperative. We plan to move forward as quickly as possible. I am sure we will have a lot of issues that we are not even contemplating coming up between now and then. But we propose that we are going to work through these as quickly as possible.

Ian Macpherson - Simmons and Co.

Okay thanks. So a quick follow-up would be unrelated, but on the contract extension for the Venezuela that was… I don't mean to make a big deal of it, but a little lower sequentially than where the rig is working now. Is that… is there anything to read into that with respect to the difficulty of pushing rates higher in this market or any color that you would provide on that would be helpful?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Yes absolutely not. In fact it is a little bit longer term contract, so there was a slight difference out here. Basically the rate… the two rates were negotiated in very close timing and the second, the one year extension was actually a new contract. So they had to go back through a original [ph], approval whereas the original six months was an extension of an existing contract, but we negotiated them actually both at the same time. The difference is only $10,000 a day.

Ian Macpherson - Simmons and Co.

Yes. Where was the… where was it before it was extended by six months at 375?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

It was actually in Cabinda. The rig has been working for Chevron. It had a contract with two six-month extensions. The second six-month extension was the 375. Then we at the same time negotiated a new one-year contract which I wanted to get approved.

Ian Macpherson - Simmons and Co.

Okay. Thanks for the clarification there Kevin.

Operator

We will go next to Byron Pope with Tudor Pickering Holt.

Byron Pope - Tudor Pickering Holt

Good morning guys. Brian you did a good job of kind of laying out the new build related CapEx we can expect in '09 and 2010. I was just wondering if you could give us a feel for maintenance CapEx as you think about it?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Generally our maintenance CapEx has been running in the $175 million to $200 million range. But we've been pretty consistent for the last couple of years at those levels. That does include the Mat jackup fleet and I really do not have a breakout between the Mat jackup fleet and our floating fleet. And then you'd have to layer on top of that, there is always a little bit of additional capital that we spend for customer acquired upgrades that come up during the contract execution or during re-contracting of a rig. So we like to put a little bit of cushion on that. But I think in terms of maintenance CapEx, if you assumed $175 million to $200 million you'd be pretty good.

Byron Pope - Tudor Pickering Holt

Okay. And then my second question, I know you guys are probably still going through the '09 budgeting process currently but just wondering, order of magnitude ballpark, how should we think about the cost pressures whether they be wages or R&M. Thinking about '09 versus '08?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Well I think we expect the activity levels in the industry to remain relatively high, especially in the deepwater side. We still think those cost pressures are there. Obviously if we begin to see some softening over the course of 2009, then we'd expect those cost pressures to maybe moderate a bit. But I still think that at least today as we're going through our budget process we're expecting to see similar cost increases into 2009.

Byron Pope - Tudor Pickering Holt

Okay. Thank you.

Operator

We will take our next question from Robin Shoemaker with Citi.

Robin Shoemaker - Citigroup

Thank you. I wanted to ask Kevin, he had some comments about the international jackup market, which… where you expressed some caution about rig supply and potential downward pressure on rates. I guess you were referring principally to the markets here in the Middle East and India. Maybe West Africa as well. Were you addressing all of those markets or in particular the Middle East?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Mostly Middle East and India, Robin. We have got two rigs in the Middle East, two rigs in India. One of them is up for tender late next year. And we've seen clients in both of those markets that have a large demand of… on purpose delayed tenders and wait a little bit, trying to take advantage of what they hope is going to be a dropping market. So we believe that is going to have some impact.

Robin Shoemaker - Citigroup

Okay so you will likely be finding work for those rigs shortly before they come up for exploration? Kevin

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Yeah I think... I think for... for our own fleet I only have one rig in India to renew late next year. I think the impact will be more on someone trying to put a new rig in the country because the existing rigs are very competitive. When they are sitting incumbently in a country it is hard to knock an existing rig out of a job. So I think where this pressure would… you would see it come to bear. You've seen some if it but terms getting shorter over the last 6 months. It is going to be on rigs trying to find their first job and trying to move into a country. That's what we expect.

Robin Shoemaker - Citigroup

Okay. My other question had to do with this new rig construction phenomenon. And in times like this in the past we have seen shipyards and financial institutions ending up owning drilling rigs that was not part of their long-term plan. And they look around for managers to operate the rig, market the rig. And in the past I believe Pride has done some of that. And I just wondered if that were… if that is how this turns out, whether that is an area where potentially you would be interested if it includes an option to buy the rig at perhaps a later date?.

Louis A. Raspino - President and Chief Executive Officer

Robin we will be interested in looking at any opportunity that might come out of the distressed situation we find ourselves in. We are going to I am sure, find out that there are going to be all kind of deal structures out there for companies to consider. We could use our core competencies and deliver tremendous shareholder value to our shareholders for the risk that we are assuming. I am not going to say no to anything right now, but we will look real hard at anything that comes out of the market situation we find ourselves in.

Robin Shoemaker - Citigroup

Yes okay thank you.

Operator

We will take our next question from Collin Gerry with Raymond James.

Collin Gerry - Raymond James

Hey good morning. My question just comes real quick on the mid-water market. You all had a couple of strong contracts in the fleet status we got last night but you and your competitors have kind of told us the deepwater market remains very strong. Is it wrong to think that the mid-water market going forward, might be a little more at risk, and kind of how are the conversations now versus say six months ago?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Okay I think right now the mid-water market, the level of conversation and inquiry now is about the same as it was six months ago and about the same as it was a year ago. The big key in the mid-water market for me has always been watching the North Sea. That is where most of the mid-water rigs are. And in the past when we had a weak mid-water market around the world, its been because the North Sea has been weak and rigs have displaced out of that market.

Two things look positive for the mid-water market. One is the bulk of the fleet in the North Sea is contracted in 2009. so there is very little uncontracted rig availability in the North Sea. The other thing is consolidation. TransOcean has a large number of rigs in the North Sea and I think they are very disciplined in their pricing. I think that is also going to help. So the that is kind of the way I look at it. Now remember West Africa is not a big market. Brazil has been a market, largely controlled by Petrobras, but you do see some independents coming into there. So I would call it a mid-water market not going down but maybe not going up. Maybe kind of flat. But that's how its been over the last 12 months.

Collin Gerry - Raymond James

Okay most of my other questions have been asked or answered. Thank you.

Operator

We will go next to Mike Urban, Deustche Bank.

Michael Urban - Deutsche Bank Securities

Thanks good morning. Louis you were pretty clear on the plan for separating the Mat jackup business. That it is more of a strategic imperative rather than timing. Is there any concern though on structure that's changed with the capital market outlook? In other words, do you now have to fall more firmly in the IPO camp to bring some capital in the door or do you not feel that there is a need given the balance sheet and the cash flow in a straight spin is still something you could consider?

Louis A. Raspino - President and Chief Executive Officer

No, Mike we do not feel there is a need to move to the IPO-type of a transaction. We are not doing this to raise cash. We don't need to raise cash by doing this. We just think it is much more important to complete the transactions quickly as possible. So the Pride shareholders can then experience the full benefits of the extreme large percentage of our future that will be based on floaters. And we will not have to answer so many questions about U.S. natural gas in the Gulf of Mexico from that point forward.

So we believe it is just important to make this happen. We think if we were trying to get an IPO done, then we would have tremendous concerns about the state of the capital markets right now and credit markets. But getting a spin done is more subject to our control than an IPO would be, and so we are as of right now continuing to proceed with that as our first priority.

Michael Urban - Deutsche Bank Securities

Okay great. Then on the operating side in that business particularly in the Gulf of Mexico. Didn't sound like this was the case but given the market situation there do you have any plans to proactively stack any assets there?

Kevin C. Robert - Senior Vice President, Marketing and Business Development

Only the ones that would not be picked up from Pemex right now. The Mississippi is the obvious rig right now.

Michael Urban - Deutsche Bank Securities

Okay. That's all for me thank you.

Operator

We will go next to David Smith with JPMorgan.

David Smith - JPMorgan

Hey good morning.

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Good morning.

David Smith - JPMorgan

Sorry, if you mentioned this already but have you provided… you have provided the revenue backlog estimate. Can you provide an estimate of the cash value in that backlog?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

We haven't tried to calculate a cash value, but I think you can probably back into that applying whatever margin you apply in your model.

David Smith - JPMorgan

Okay. And also what might be the cash requirements to set up SpinCo [ph] on its own in terms of a cushion and working capital requirements?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

That's something we will work through over the course of the next few months as we complete our structuring. We will, depending on the situation, we'll have a limited ability to take cash out of SpinCo. So my guess is that they're going to have some working capital that will not stretch them by any stretch of the imagination.

David Smith - JPMorgan

And for the past year or so and certainly currently they've been fairly strongly cash-positive. And I am just wondering in this environment going forward with the credit constraints with your committed CapEx requirements if you're thinking hasn't challenged your thinking somewhat just having that cash flow in this environment versus spinning it off totally.

Louis A. Raspino - President and Chief Executive Officer

Well I am not going to tell you, we don't talk about that around here but every time we talk about it we still come back to the same conclusion that the strategic importance of getting the transaction completed is much more valuable to our shareholders, than holding on to that cash flow for some indefinite period of time.

And I think we demonstrated through our strategy of trying to get the company focused on deepwater trying to get the multiple recognized as a deepwater multiple and then growing from that point forward as a deepwater company. We believe it is much more strategically important to our shareholders than maintaining exposure to what in the long run will be relatively small cash flow in the big picture, but continuing water down the multiple.

David Smith - JPMorgan

All right I appreciate it.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

I think as a follow-up to that I think part of what I was trying to convey in my prepared comments and I think Louis mentioned this as well is that at least today based on you know the commitments that we have we don't see a tremendous need for raising cash. And so from that perspective it doesn't drive us to the point that we are overly concerned about taking cash out of SpinCo or keeping SpinCo for cash needs.

David Smith - JPMorgan

Thank you.

Operator

We will now go to Alan Laws with Merrill Lynch.

Alan Laws - Merrill Lynch

Good morning. Excuse me if I missed this in the beginning of your comments I got on a little late. But on the M&A side, I know its been a theme for yourselves as you break the company apart to extract value. On the credit backdrop we presently have and I guess where the share values are for everybody, what's the feeling or what's the temperature out there for further consolidation at the corporate level?

Louis A. Raspino - President and Chief Executive Officer

Well I think structurally in our industry long-term trend is going to continue to be for more industry consolidation. I think, what is going on in the credit markets right now and in the capital markets in general, definitely kind of puts that on pause for a little while, as people try to figure out the long-term ramifications of exactly what is happening right now. Share prices are low. Everybody's share price is low. Credit is difficult to the extreme.

So, my belief is, right now you are not going to see much activity, but I continue to believe that the same trends I have talked about for the last couple of quarter or last couple of years, the same forces I talked about are going to continue to drive consolidation in our business. There is a need for critical mass and the importance of critical mass is just one that in my opinion will continue to drive consolidation.

Alan Laws - Merrill Lynch

So there is no…like if you looked at it from a straight heads-up share exchange basis given where everyone's prices are, do you think there is too much debate there to just do that and not sort of step over the credit market or... ?

Louis A. Raspino - President and Chief Executive Officer

Well if you are looking at a heads-up equity to equity exchange it does not matter too much whether you are in an up market or down market. If you are in a down market then you end up with better book values.

Alan Laws - Merrill Lynch

Exactly that's my point.

Louis A. Raspino - President and Chief Executive Officer

Same cashflow. I mean there could be an argument that a down market like this could increase the opportunity for share for share exchanges. I could see that, but I think right now everybody is just trying to figure out exactly what is going on. As we come out of the stunned period of the capital markets, you might see more companies focusing on transactions like that.

Alan Laws - Merrill Lynch

All right. And just with respect to your discussions with Seadrill the past, could you give us a little update as to how that progressed through the summer for the third quarter?

Louis A. Raspino - President and Chief Executive Officer

Consistent with our policy we really never talk about specific transactions in public.

Alan Laws - Merrill Lynch

All right. Well my unrelated follow-up is on Mexico. Mexico, Saudi Arabia then put out there over the last year as periods for pretty material incremental demand for jackups yet. We are pretty much in that market have not really seen an incremental pickup in rigs and I know you are big in that market. Wondered if you could walk through the… what you think the chances of this market staying flat where it is today or even being down by this time next year given the backdrop of lower oil prices and credit or… ?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

We have seen Pemex issue two tenders just recently for independent leg jackups. Picking up an incremental four jackups. One of the tenders was for the Pride Wisconsin. So, I think Pemex is implementing as fast as they can. They are in a steep decline. Their production is down to 2.7 million barrels a day and they are in a very urgent need to increase their rig count.

So, I think their struggle will be getting the rigs because the only rig they can get easily are going to come out of the United States and there is less than 20 independent leg rigs sitting in the United States. Middle East large demand in the Middle East. Saudi Arabia Iran, Qatar, there's a number of rigs there. And I think that's what we are seeing is, even though that demand is there, we are seeing those clients slow- walk it a little bit to try to get rates down.

Alan Laws - Merrill Lynch

All right. Well demand in general is better framed within a time period right? So, if demand were to slide or they did not have the money because they were using it for other things in their economy potentially for bailouts like we are presently doing. Is there a chance here that this is a big engine slowdown, I guess?

Louis A. Raspino - President and Chief Executive Officer

I do not know. I think certainly commodity prices if they stayed where they are at, it would eventually have impact but remember national oil companies like Saudi Aramco, ONGC, Pemex they do not have exactly the same economic incentive to drill. They are looking more at sovereign wealth and they continue with demand, at any price is historically what they've been. So, I think the demand that you need to look at, is the incremental demand that we have had driven by high commodity prices, which has generally come not from national oil companies but from integrated and independent oil companies.

Alan Laws - Merrill Lynch

Okay thanks for the answers. I will turn back.

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Trish two more questions, then we'll close.

Operator

Okay we will go to Knut Nilsson with Skagen Funds.

Knut Nilsson - Skagen Funds

Yes hi. Just a question on the financing side. You have an utilized spread facility of $500 million. I believe that runs on to July of next year. Have you extended that one? That is the first one. And secondly I believe you also have $100 million letter of credit, which you have drawn $3.5 million And on the second quarter can you give us flavor on the maturity of that one? Thank you?

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

First question was what is the status of our revolver.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Yes, our revolver matures in July of 2009. We are in the process of exploring the renewal of the revolver. Obviously, this is a difficult market to be looking at doing that in, but we don't feel we have a gun to our head either, in terms of getting a new revolver put in place immediately or whether it is some time next year. And that what was your second question Knut? I couldn't understand.

Knut Nilsson - Skagen Funds

I believe you have letter of credit over $100 million which worth $3.5 million drawn. If you can give some flavor on that credit. And the maturity of it.

Louis A. Raspino - President and Chief Executive Officer

We are going to let Steve Oldham, our treasurer address that.

Steven D. Oldham - Vice President and Treasurer

The $100 million letter of credit, supplemented part of the revolver, the same comment that Brian made a moment ago. We have very few bonds and letters of credit under that facility. Most of it has been done outside the revolver by on a bilateral basis with our banks may roll over the various time frames. We do not have anything of materiality coming up.

Knut Nilsson - Skagen Funds

Oh okay. So that is in addition to the $500 million. So basically you have $600 million as it stands right now in capacity on the credit side?

Steven D. Oldham - Vice President and Treasurer

It is not $600 million. It is part of the $500 million. It is a set limit…

Knut Nilsson - Skagen Funds

Okay. Thank you.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Thank you. Okay.

Operator

And our last question will come from Tom Curran with Wachovia.

Thomas Curran - Wachovia Capital Markets

Good morning guys. Louis just wanted to follow-up, are you working on or would you consider developing a back-up plan in parallel for the divestiture of the Mat supported jackup fleets, so that should the time arrive when you are ready to move forward with it, if the market conditions just aren't favorable enough you would have alternatives?

Louis A. Raspino - President and Chief Executive Officer

Well Tom I mean we are aware of what all the possibilities are for divesting of these assets. And we are always keeping our eyes on the dashboard of what they all look like. We continue to say that as of right now, the tax-free spin seems to be the most value adding for our shareholders, given our low tax basis.

But even given the soft market conditions we continue to be at that point, but we will always keep other possibilities in mind. And always have an open mind to something that might make more sense when we get closer to execution. But as of right now it looks like the tax-free spin would be the transaction of choice.

Thomas Curran - Wachovia Capital Markets

And are you aware of or currently in any talks that are encouraging with regards to interest pertaining to those other alternatives?

Louis A. Raspino - President and Chief Executive Officer

Well again Tom, we never really talk about specific transactions or specific opportunities. So suffice it to say that we are always open-minded to other possibilities for divesting of these assets.

Thomas Curran - Wachovia Capital Markets

Okay. And then my last one following up on an earlier line of questioning if and as opportunities should present themselves for you guys to opportunistically seize upon a new build project that is in trouble for whatever reasons. How high would you be willing to take your leverage in this current environment to do so, in terms of the maximum level would reach, when you add in all of your existing construction commitments?

Brian C. Voegele - Senior Vice President and Chief Financial Officer

That's a difficult question to... when you tack on that phrase "in this environment". We are being very cautious in terms of the projects we are looking at. Let me tell you in what I will call a "normal" environment. We have guided to folks that we are comfortable with debt in a range of debt to CoCap [ph] from 20% to 40%. Okay, now this environment, this is something that the last few weeks is something unprecedented. Certainly we have never seen it in my lifetime and so I think that causes us to be a little more cautious than we ordinarily would.

I am sorry that I cannot give you a real crisp answer on where we take our leverage but certainly we are not going to put the company into financial distress by undertaking any sort of growth project that's for sure.

Thomas Curran - Wachovia Capital Markets

Okay. Yeah that's... that ceiling is consistent with both what you and Louis have shared in the past. All right. Thanks guys. Thank you for the answers. That is helpful.

Brian C. Voegele - Senior Vice President and Chief Financial Officer

Great thank you.

Jeffrey L. Chastain - Vice President, Investor Relations and Communications

Okay I would like to thank everyone for participating today and make a note that the fourth quarter 2008 conference call is scheduled for February 19, 2009. Thank you Trish for coordinating the call. Good day everyone.

Operator

Thank you ladies and gentlemen for your participation. This does conclude today's conference call have a nice day. .

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