Seadrill's (SDLP) CEO Graham Robjohns on Q1 2014 Results - Earnings Call Transcript

May.28.14 | About: Seadrill Partners, (SDLP)

Seadrill Partners LLC (NYSE:SDLP)

Q1 2014 Results Earnings Conference Call

May 28, 2014 1:15 PM ET

Executives

John Roche - Head, Investor Relations

Graham Robjohns - Chief Executive Officer

Rune Magnus Lundetrae - Chief Financial Officer

Analysts

Michael Webber - Wells Fargo Securities

TJ Schultz - RBC Capital Markets

Sunil Sibal - Global Hunters Securities

Matt Niblack - HITE

Operator

Thank you, and good afternoon, everyone. And welcome to Seadrill Partners First Quarter Earnings Conference Call. Thank you all for joining us today. With me here, I have our Chief Executive Officer, Mr. Graham Robjohns; and also our Chief Financial Officer, Rune Magnus Lundetrae.

Before we do begin, I just like to remind everyone that much of today’s discussion will not be based on historical fact but rather consist of forward-looking statements and are subject to uncertainty. We articulate some of the key items on page two of the presentation and for any additional information you can view our SEC filings or visit our website at seadrillpartners.com.

Graham, over to you.

Graham Robjohns

Thank you, John, and good afternoon, and good morning to everybody. We will start the presentation on slide three with the agenda. We will look at highlights for the first quarter of 2014, quick look at the markets. Growth opportunities for Seadrill Partners going forward, a financial review and then we will open up for question-and-answer session.

So turning over to slide four, we will start with the highlights and Seadrill Partners is pleased to report net income attributable to Seadrill Partners Members of $19.8 million, net operating income of $123.6 million and distributable cash flow of $30 million.

The main impact from an operational point of view on these results has, of course, being the downtime on the West Aquarius during the first quarter of 2014, which we alluded to you last quarter and which I will talk about a little bit more later.

We declared a distribution for the first quarter of 2014 of $0.5075 per unit, which is a 14% increase from the company's fourth quarter distribution. And we -- during the quarter, of course, completed $1.8 billion term loan B, which came with $100 million revolving facility and result of that transaction we’ve reduced the Seadrill into company revolving facility from $300 million to $100 million.

The proceeds of the term loan refinanced in existing indebtedness and to some extent increased liquidity as well. This is an important transaction for us, firstly, to restructure our debt to reduce our level of amortization and also to become more independent from Seadrill in terms of debt structure.

We also completed the acquisition of the West Auriga for $1.2 billion on a 100% basis that was financed with debt and with $355 million to fund Seadrill Partners equity portion of that acquisition which came from the recent common units offering, of course, we acquired 51%, effective 51% interest in West Auriga. As a result of the transaction, management has recommended a quarterly distribution increase to between i.e. up to and 54 -- between $0.54 and $0.545 per quarter.

Turning over to slide five, we show here our progression -- some of our progression since IPO. We've had and since -- made some significant progress and we sincerely expect more growth to come.

We acquired the two small Tender rigs, T-15, T-16 and West Sirius and West Leo in the transaction just before the year-end. Obviously completed the $1.8 billion term loan transaction that I just described and of course, most recently acquired the West Auriga.

Distributions have increased significantly from $1.55 that we started at IPO, which is up to $2.03 on an annualized basis for the first quarter of 2014, which represents 31% increase and then there will be another approximate of 6% to 7% increase as a result of the recommendation -- expected recommendation following on from the Auriga transaction, which will give, of course, 40% increase since IPO, which is -- which we are very pleased with and it is above the expectation of an annual 50% -- 15% growth that and the Board had that at the time of the IPO back in October 2012.

Turning over to slide six, just a few details on the West Auriga transaction and the contract dayrate is $565 a day, that is excluding daily mobilization fee that we get in cash, is not an accounting entry in cash on a daily basis over the term of the contract, which expires in October 2020, so 6.4 -- 6.5 years to run and its obviously a modern deepwater drillship.

As I mentioned the purchase price is $1.2 billion, $0.51 per share of that was $632 and with the existing bank debt on the rig and an inter-company discounted loan note from Seadrill of $100. Our equity portion was left at $355 million, which was of course financed out of our common unit offering.

On slide seven, we have a summary of the term loan B and the structure of that and it's a much more efficient capital structure for us. It only has 1% annual amortization profile, which dramatically reduces our amortization payments as compared to traditional bank finance and release -- effectively releases those funds which we reserve for replacement CapEx to invest in further fleet growth.

It also extends the profile of our loan and it comes at relatively speaking and relatively cheap cost, it is secured debt and so we have swapped to that to effectively to fixed rate over the term -- of the term loan at an all-in cost of 5.5%.

And the four rig names that you can see asterisks there on slide seven the West Aquarius, the West Capella, the West Leo and the West Sirius are the assets that secure the term loan financing. It’s being successful transactions. It’s a good market and it’s one that we will look to return to in the future.

Turning over to slide eight, we return to distribution growth and overtime and which I said is growing from $1.55 up to $2.03 currently and then expectation up to $2.16 to $2.18 annually post the Auriga acquisition.

Turning over to slide nine and just a little bit on the market and this slide you will -- those of you who listen to the Seadrill presentation will assume this slide also, much of course has been written about the weakness in the current offshore drilling market, but in our view this is relatively speaking short-term event and that the fundamentals of the markets still look good in the longer term.

We don’t believe that shale and unconventionals alone can meet the incremental forecasted demand and offset the significant production declines and we think that deep and ultra-deepwater players are well-positioned on sort of marginal cost curve of $56 a barrel in comparison for example to North American shale.

And of course, there’s been significant discoveries in the offshore space over the last 10 years or so giving a reserve to production ratio way in excess of pretty much every other -- every other sector.

So we think the market will recover, particular as newbuild ordering is slowed down and as result of the current market weakness and that SDLP’s ultra-deepwater units will be effectively will be redeliver into market towards the end of the decade and that could be in a very strong and attractive position.

Moving over to slide 11 and then following on from that and we set out here Seadrill Partners assets and contract terms. And as you can see other than the West Vencedor that its contract expires in the first -- at the end of first quarter 2015. We don’t have any other rollover contract risk until 2017 and we expect 2017 and ‘18’ if not before the environment to be significantly better than it is right now.

The West Vencedor of course isn’t deepwater rig, it’s a semi-tender working down in West Africa and there is more work down there four rigs of that type. We having some initial discussions with regard to its rollover and we are reasonably confident that will happen in time.

I think -- the other thing I should point out, is that the number of our rigs are not at the kind of high-end of leading edge rates, whatever that might be at the moment. But you notice for example in particular West Capricorn, the West Sirius, dayrates start with full number of others at the sort of mid low-end of the 500 and the Auriga.

And the West Capella has a rate of 627, 500, but the effective rate that we are distribution on is 562. So that rate is recently increased to 627 and the West Aquarius, of course, at 548. With the addition of the West Auriga we have an average remaining contract term of 3.74 years and an order backlog of $5.5 billion, which again puts in a very strong position.

And moving over to slide 12 to have a look at future growth potential which is in our view significant and this is a list of Seadrill's total floater fleet, the rigs shaded in black on the left hand side are the ones that already in the MLP fleet. But as you can see from this list there are significant numbers of other rigs and that also have longer-term contracts that would be suited for dropdown into the MLP.

In addition to that there is a possibility of jack-up rigs, jack-ups weren’t really part of the IPO strategy and but the market in that space has changed quite a bit and modern jack-ups with long-term contracts is something potentially that the MLP would be interested in.

And of course, we shouldn’t forget the additional OPCO units as a source of growth and we have three ultra-deepwater units and one Tender rig in one of our OPCOs that we only own 30% off, so we have another 70% of that OPCO to buy and then we have the three U.S. gulf rigs sitting in another operating company that we only own 51% of. So we have a further 49% of that OPCO to acquire as well. So, all-in-all, there is a significant amount of growth capital and assets for us to acquire moving forward.

So turning over to Slide 14, financial performance and then starting on Slide 15 with the income statement. And I guess I should start out here by saying something about deconsolidation. Again, if you’ve listened to the Seadrill Partners and call today and results release, you’d have seen the comments around deconsolidation of Seadrill Partners from Seadrill and the impact that has had on Seadrill's financials.

As far as Seadrill Partners is concerned, it has two main impacts and the effect is that assets are acquired from Seadrill are no longer under U.S. GAAP, deem to be acquired as common control transactions. And therefore firstly, the asset goes on to our balance sheet at market value rather than book value. And secondly, that the earnings and income from the rig are recorded from the date of acquisition rather than our results being effectively restated to include the historical results of the acquired rigs stating back to their commencement of operations.

And turning to the operating income results themselves. Of course, the main items for operating income is the downtime on the West Aquarius. We had 60-days downtime in Q1 relating to mooring equipment failures. And of course this has impacted revenues and operating income and the main reason for the decline in those other than the West Aquarius and the 17-days downtime that we had on the capital. And the rest of the fleet actually performed pretty well at around 98% uptime in the first quarter.

Having said that, the indications thus far in Q2, although, we are back to a good operating level with 97% uptime to date for the fleet. And if that good performance continues then we should be back up to at least to a target level of 1.1 times coverage ratio for the second quarter.

Moving over to Slide 16, continuing with the income statement and the main item I should point out here is the loss gain on derivative financial instruments around the middle of the slide. That was a loss of $49.2 million in the first quarter of 2014, and a gain of $16.1 million in the fourth quarter of 2013.

The vast majority of the $49 million loss relates to non-cash interest rates swap mark-to-market valuations, which are accounting adjustments that as I said are non-cash and in fact will never be cash, if the interest rate swap continues to maturity. That loss is there because of the decline in longer term interest rates during the quarter, and of course because of the fact that we entered into particularly large slot swapping in connection with the term loan B.

Moving over to Slide 17 on balance sheet assets, couple of points to make here on accounts receivable, that has gone up substantially from $175 million to $270 million at the end of the first quarter 2014, which is at somewhat unacceptable high level. Some of that’s related of course to the acquisition of the rig. But I’m pleased to say that a significant proportion of that $270 million that's been collected post quarter end. As also you will note in current assets, a large balance shown as amounts payable, amounts due from related parties, $510 million.

That is offset by related party payable in current liabilities and those balance sheets relate to acquisitions in connection with the Serius, Leo and Auriga and will be flushed through in time and netted off. Drilling units, balance of course has gone up from $3.4 billion to $4.4 billion, which relates to the Auriga acquisition.

Turning over to Slide 18, we have balance sheets liabilities. The main impacts here are of course the term loan B and the assumption of Auriga debt. You will note on the current liabilities that with the revolving credit facility that was drawn down $125.9 million at the end of 2013 has been repaid, so proceeds from the term loan B and then you see the related party payable of $614 million I was referring to earlier.

Long-term external long-term interest-bearing debt has increased nothing to $2.18 billion, that is the term loan B and the Auriga debt. And as a result of repayment of indebtedness in connection with the term loan B, the long-term related party payables which is the Seadrill back-to-back debt has gone down from $1.8 billion to $700 million.

As of December 31 -- sorry I should say as of March 31, 2014, total debt was $3.1 billion. 97% of that debt has being swapped through an average fixed rate of 2.02%. With the term loan refinancing and with the acquisition of the Auriga and as we move forward into the second quarter, we think we are going to have a relatively low net debt to EBITDA ratio, which gives us significant financial flexibility to invest funds and acquisitions without going to the equity or necessarily going to the equity markets, which we think is a big advantage for us.

Moving over to Slide 19 and distributable cash flow, here we work from EBITDA for the quarter down to distributable cash flow and of course take out non-controlling interest elements, which relates to the -- of course the proportion of the OPCO entities that we don’t own.

Two things have impacted distributable cash flow. We have actually increased from $23.2 million to $30 million but of course we have got -- we have more units and the coverage ratio is impacted by the new units issued to acquire the Auriga which we paid full quarter’s distribution on. But of course we had only four days operating earnings from the Auriga and of course, it’s also being impacted by the poor performance on the Aquarius.

The coverage ratio in Q1 if we had only paid distributions pro rata for the 11 days that the Auriga was within the fleet would have been 0.92 and then of course the only impact on that ratio which is still below 1 would be the Aquarius downturn.

Turning over to Slide 20. In summary, we have made a significant progress since the IPO with more than doubled the fleet. We’re on track to increase distributions by some 40% which exceeds the expectations of the Management and the Board at the time of the IPO. And we are putting in place a more efficient capital structure with the term loan B transaction. There are some headwinds in the broader offshore market although we think the medium term fundamentals in the sector are very good. We don’t have any exposure however to dayrates in 2014 and only the semi-tender, the Vencedor in 2015 are meant with improving market fundamentals moving into sort of ‘16, ‘17, ‘18 period.

We actually end up with a position where we could be recontracting rigs into rising market, particularly as newbuild ordering has decreased quite a bit as a result of the current weak market. And finally, of course, we have extremely visible growth opportunities for acquisitions from Seadrill, which provides us with a really solid foundation for strong distribution growth potential moving forward.

Thank you. And with that, I’d like to hand the call back to the operator to open up for questions and answers.

Question-and-Answer Session

Operator

(Operator Instructions) We will now take our first question from Michael Webber from Wells Fargo Securities. Please go ahead.

Michael Webber - Wells Fargo Securities

Hey good morning Graham. How are you?

Graham Robjohns

Hi Michael.

Michael Webber - Wells Fargo Securities

Couple of questions and wanted to start off with something pretty high level that you went through the growth you guys have seen since IPO and then obviously there is a lot on the docket. But if you kind of hone that down to kind of an annual rate and try to put a number on it, it seems like you guys are running at about 30% growth per year. And it seems like there is certainly the potential lamination to keep that number in place for the next several years. Is that a pretty fair assessment around that kind of 30% growth number on an annualized basis?

Graham Robjohns

Yeah. I mean, yeah, clearly we’ve grown to significantly more than 15% but we set out -- having said that 15% growth was sort of a long-term target.

Michael Webber - Wells Fargo Securities

Right.

Graham Robjohns

Obviously growth gets a little bit tougher as you go up the incentive distribution long-term table but certainly the least are growth targets. So over the longer term are at or above the 15% level.

Michael Webber - Wells Fargo Securities

Sure. And then just – just a near-term ballpark, somewhere around that their threshold seems like…

Graham Robjohns

I think, I mean, pretty clear in -- for ‘14 where we’re going to be significantly above 15%.

Michael Webber - Wells Fargo Securities

All right. Now just kind of put a number on it. Just wanted to move to the deck, I know you kind of went through the different growth opportunities in terms of additional drillships, OPCO stakes and then -- and the jack-ups. Is it fair to think about, I guess, the way you’ve ordered that is kind of a priority in terms of the way, kind of, looking at the drillships first, jack-ups and then bringing in the OPCO stake, that’s not the case. How do you guys think about prioritizing where you find your next slug of growth?

Graham Robjohns

Not particularly. I think, we -- certainly when we started out, the priority was very much on acquiring new assets to increase the diversity. We kind of get into the point now where we’re in a significantly better position. And therefore the possibility of buying OPCO units as opposed to assets makes -- is beginning to make more sense although I think our focus, the moment is still on additional assets acquisitions.

And then I think it is also another -- the number of elements taken to account, what is the margin on the rig, how high is the right, how long is the turn and there are number of factors that come into bear that we need to consider obviously longer is better. Higher right is clearly margin but you’re taking more residual recontracting risk.

So we look at it and assess the acquisition relative to the assets we already have where it might be recontracting as well as simply -- whether it’s an ultra-deepwater rig or whether it’s a jack-up.

Michael Webber - Wells Fargo Securities

Okay. That’s fair. One more question and I’ll turn it over. And you kind of went through, you talked a bit about the weaknesses you’ve seen in EDW space and the partnership is well insulated from that and then one piece is market exposure, you do have is Vencedor in ‘15 and as a tender rig, I believe that rate is 215 and is falling back on the deck check. How do you think about that asset specifically whether or not that’s going to get extended obviously even if you see a considerable amount of downside for there to be any degree of cannibalization or competition from larger assets on that space. I mean, how should we think about that asset getting extended?

Graham Robjohns

Well, as I said, I think our view there is that there is more work in terms of that type down in West Africa, West Chevron is operating. Chevron is kind of big supporter of the tender rig concept. They of course, the contract is on the T-15, T-16 out in South East Asia. So I think we are reasonably confident that the contract term will be extended. And at the moment, I don’t think we have any large concerns that there will be any kind of degradation in the rate.

Michael Webber - Wells Fargo Securities

And do you get a sense on term yet or is it a bit too early?

Graham Robjohns

We have an idea, but I don’t think I want to comment on it. It’s a reasonable extension period.

Michael Webber - Wells Fargo Securities

All right. I will stop there and turn it over. Thanks, Graham.

Graham Robjohns

Okay, thanks.

Operator

Thank you. We will now take our next question from TJ Schultz from RBC Capital Markets. Please go ahead.

TJ Schultz - RBC Capital Markets

Yes, thanks. You mentioned the West Capella, I think the comment was that the effective rate of 562 is what you are distributing on, could you just clarify what do you meant there, is that basically just a higher…

Graham Robjohns

Yes, so some of the IPO, the Capella rate was actually 540 and it’s since escalated to 562 as of March 2014. And of course that was to compensate for operating cost increases over time. But our level of distribution was set at the IPO on the Capella based on that rate, the 540, that’s now 562, it was 562. In April ’14 the rate increased because it moves into its extension period, 3-year extension period from 560 to 620, 627, 500, but we haven’t increased distributions on the back of that rate increase. So my point was that the rollover risk is not 627 to whatever the market rate is at the time in 2017, its 562 effectively. Does that make sense or not?

TJ Schultz - RBC Capital Markets

No, it makes sense. There is just something more about you look at it is carrying extra cover to the cash flow in lieu of distribution increase at this point. On the debt refinancing, I think you mentioned you look to be back to that market, any kind of comment on when you would look to go back to that market?

Graham Robjohns

I think we could lightly come back reasonably soon, certainly obviously depending on market conditions I think certainly within the next six months maximum.

TJ Schultz - RBC Capital Markets

Maintenance replacement CapEx I think was $33 million, $34 million in the quarter, is that a run rate to use, or is there anything one-time elevated this quarter versus some of the downtime you guys had?

Graham Robjohns

No, we wouldn’t -- we don’t particularly flex the maintenance CapEx for downtime, that’s we built into coverage overtime, so it’s a reasonable run rate, yes. Well I say that except for the fact that it will go up because we only the had the Auriga for part of the quarter, so it will go up a little bit in Q2.

TJ Schultz - RBC Capital Markets

Right. Understood. Just lastly your view on debt and equity mix kind of funding when you look at the next acquisition just in the context of the comment that you acquire assets even without using the equity market? Thanks.

Graham Robjohns

Yes, I think, I mean as a general rule, we look at over the longer sort of term period to acquisitions being funded sort of around the sort of 60% debt, 40% equity, but depended on contract terms and rate etcetera, etcetera, but we have -- we’ve raised quite a bit of equity recently and I think our net debt to EBITDA ratio once we‘ve got the Auriga EBITDA for sort of full quarter and there will be relatively slow. So we think we’ve got quite a bit of debt drypower to invest in new assets without raising additional equity.

TJ Schultz - RBC Capital Markets

Thanks.

Operator

(Operator Instruction) We will take our next question from Sunil Sibal from Global Hunters Securities. Please go ahead.

Sunil Sibal - Global Hunters Securities

Hi, good afternoon, guys. A question on the OpEx, so we saw a drop in the OpEx this quarter from last quarter, is that all related to the downtime on the vessels or is that something else which might have impacted that?

Graham Robjohns

And it’s particularly related to the downtime, I think it’s a bit of a mixture of OpEx is quite high, the previous quarter been kind of relatively low on a number of rigs this quarter. So I don’t expect tend to bounce a little bit from quarter to quarter when you any got 9 rigs in the fleet, it can kind of up 1% and down the next.

Sunil Sibal - Global Hunters Securities

And then just thinking a little bit philosophically on the maintenance CapEx as you will probably aware it’s been kind of hot bottom you shown on the MLP space. So I just wanted to get your pick on how do you pick of maintenance CapEx, most of MLPs kind of think of it as capital you need to replace physical assets and that works fine pipe end etcetera but I guess assets in your case shifts which are significant amount of recontracting versus just to say is there any thought process at the deep with regard to that?

Rune Magnus Lundetrae

Yes, indeed. I think and we in common with, most if not all the offshore MLPs looking to slightly differently to pipelines and that we have two elements of CapEx reserve, one is replacement CapEx and one is maintenance CapEx. We accept that whichever you look at. even though there are rigs out there that built in nearly 70s if not before that ultimately a rig does have a finite life and that will we built up a fund that we refer to replacement CapEx to replace the rig at the end of its useful life which we deem to be 30 years from newbuilds, as I said there are plenty of rigs out there that are more than 30 years old. But that’s what we build the reserve upon, that isn't to cover recontracting risk and hence that's designed to, as I say to replace the asset. And then maintenance CapEx is the -- obviously operating expenses cover day-to-day maintenance expenditures.

But then there is a cycle of five-yearly classing maintenance CapEx, where the rig will go down. In some cases, possibly go into a drydock and perform a significant amount of maintenance to say, on sort of cyclical basis. And that is the maintenance CapEx that we reserve on a quarterly basis. So it’s kind of split into total a little bit different from a pipeline which, I guess people effectively assume has an infinite life.

Sunil Sibal - Global Hunters Securities

That’s helpful. And then just last one on that. So to the extent that you have recontracting risks, so you said -- you’re setting aside capital in order to be able to buyback or to replace the asset but whether you will get the same cash flow from the asset is a different kind of a risk which I guess excess…

Graham Robjohns

Yeah. That’s dealt with through, I mean, obviously, mitigation factors such as the things have kind of alluded to which are on the Capella for example perhaps and if you got a rate increase, not increase, not distributing all that rate, number of the rigs in the fleet are relatively low contract rates. Having rigs that don’t all run over at the same time and of course our base level coverage, which -- it is set at 1.1 times, although recently we haven’t hit that for last couple of quarters. But we fully expect that to be addressed in the second quarter.

Sunil Sibal - Global Hunters Securities

All right. That’s very helpful. Thanks.

Graham Robjohns

Thank you.

Operator

Thank you. (Operator Instructions)

John Roche

Operator, if we have no further questions, I think this concludes today’s conference call.

Operator

We have just received a question, if you wish to take it.

Graham Robjohns

Okay. Let’s just go with one more then.

Operator

We have a question from Matt Niblack from HITE. Please go ahead.

Matt Niblack - HITE

Sure. Just wanted to get -- ask a couple of quick questions to get comfortable with the long term view of rates here. The first would be understanding the build cost of these rigs, so taking the West Auriga as an example. What would be the rough build cost of this kind of rig?

Graham Robjohns

Rune, do you want to take that one?

Rune Magnus Lundetrae

Say again, the rough build cost?

Matt Niblack - HITE

Yes.

Rune Magnus Lundetrae

A drillship, I mean, that varies quite a bit, according to when you order them. I think we in bid, we've been traditionally pretty good at timing of the purchase of newbuild. So we’ve been able to buy them when they have been reasonably priced. I think today’s market, you’ll probably have to pay around $550 and then you add another $80 million to $100 million to make it ready for drill. The turnkey is about $550 in today’s market.

Matt Niblack - HITE

Okay. So was that kind of the build cost, I guess it seems perplexing that you're able to generate enough outsized returns over the long run to be able to sell the rig in the MLP at twice the build cost and sort of expect rates to remain supportive over the long term?

Graham Robjohns

I think, what you’ve got to take into account is Rune is quoting that the contract cost and then the add-ons, then you’ve got to actually mobilize the rig to the rig side and that takes time and money, some of that you may recover over the contract term. But it takes a significant amount of time. So you’re laying out funds long time before you actually get the rig onsite and get up and running. Then you got to get the rig kind of commissioned and set up and running on contract and of course, it’s not an insignificant matter of winning a long-term contract.

Matt Niblack - HITE

You’re right. I guess, I’m not certainly talking about, where the markup is appropriate there. I’m just trying to get a sense of what that -- what would be that total cost be then to get…

Graham Robjohns

Let me put it another way. We don’t think anybody is going to be ordering new drillships. If they don’t think the long-term rates is in the sort of $525 to $550-ish range because it just doesn’t give you enough return to make it acceptable.

Matt Niblack - HITE

Okay. So you think that there has been sort of supply response at that level that should put a long-term floor around there even if in the short term, there’s a bit of a dip?

Graham Robjohns

Yeah. Which is why newbuild ordering has dried up.

Matt Niblack - HITE

Okay. And I guess, looking then at the West Aquarius as an example that this is sort of pay out of space on a 540 day rate. I guess if that would have dropped something like 520, what percentage of impact would that have on your distributable cash flow?

Graham Robjohns

I don’t know and I couldn’t.

Matt Niblack - HITE

I can.

Rune Magnus Lundetrae

I’ll think I will find and speak to IRR, so too detailed.

Matt Niblack - HITE

Okay. Well and we can do the math. I was just curious on how you thought about it. Okay, thank you. Very helpful.

Operator

Thank you.

Graham Robjohns

Operator, that concludes today’s conference call. Thanks everyone for joining us.

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