Denbury Resources (DNR) Philip M. Rykhoek on Q4 2015 Results - Earnings Call Transcript

| About: Denbury Resources (DNR)

Denbury Resources, Inc. (NYSE:DNR)

Q4 2015 Earnings Call

February 18, 2016 11:00 am ET

Executives

Ross M. Campbell - Manager-Investor Relations & Media Contact

Philip M. Rykhoek - President, Chief Executive Officer & Director

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Christian S. Kendall - Chief Operating Officer

Analysts

Jason A. Wangler - Wunderlich Securities, Inc.

Timothy A. Rezvan - Sterne Agee CRT

Neal D. Dingmann - SunTrust Robinson Humphrey, Inc.

Charles A. Meade - Johnson Rice & Co. LLC

Ryan Oatman - Cowen and Company

Tarek Hamid - JPMorgan Securities LLC

Pearce Wheless Hammond - Simmons & Company International

Adam Leight - RBC Capital Markets LLC

Gail Nicholson - KLR Group LLC

James A. Spicer - Wells Fargo Securities LLC

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Gregg William Brody - Bank of America Merrill Lynch

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Denbury Onshore Fourth Quarter 2015 Earnings Release. At this time, phone lines are in a listen-only mode. Later, we will have a question-and-answer session. Instructions will be given at that time. As a reminder, today's conference call is being recorded.

And at this time, I'll turn the call over to Manager of Investor Relations, Ross Campbell. Please go ahead.

Ross M. Campbell - Manager-Investor Relations & Media Contact

Thank you, Nick, and good morning, everyone. Thank you for joining us today. With me on the call from Denbury Resources are Phil Rykhoek, our Chief Executive Officer; Mark Allen, our Chief Financial Officer; and Chris Kendall, our Chief Operating Officer.

Before we begin, I would like to let you know that we have slides, which will accompany today's discussion. For those of you that are not accessing the call via the webcast, these slides may be found at denbury.com homepage by clicking on the Quarterly Earnings Center link beneath resources.

I would like to bring your attention on today's call that we will be including forward-looking statements that are based on the best and most reasonable information we have today. There are numerous factors that could cause actual events to differ materially from what is discussed on today's call.

You can read our full disclosure on forward-looking statements and the risk factors associated with our business in this presentation, our most recent SEC filings and today's news release, all of which are posted to our website at www.denbury.com.

Also, please note that during the course of today's call, we will reference certain non-GAAP measures. Reconciliation and disclosures relative to these measures are provided on today's news release as well as on our website.

With that, I'll turn the call over to Phil.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Thank you, Ross. Good morning, everyone, and welcome to our fourth quarter year-end call. These are obviously tough times for everybody as the low commodity prices have substantially lowered cash flow and therefore put a significant priority on the preservation of cash and liquidity.

I believe if you examine the facts, you'll find we've taken several proactive and leading steps in response to this downturn. And in addition, we have many inherent advantages over our peers, because of our asset base and our capital structure.

Let me highlight some of those for you. One, we have taken and we'll continue to take steps to lower our cost in all categories of our business. This is evidenced by our eighth consecutive quarterly reduction in lease operating expenses per BOE; a 30% reduction in Q4 cash, general and administrative costs year-over-year, 4% reduction on an annual basis; and by the ongoing efficiencies in our capital spending program. While we are benefiting from vendor discounts and reductions, most of our savings is attributable to the hard work of our team, and these savings will remain in place after oil prices improve and vendor rates return to normal.

For example, our team has significantly reduced the CO2 required to generate a barrel of oil. They've improved our use of root cause analysis to reduce the number of required workovers. We've tweaked our facilities to maximize performance and minimize power consumption. And we continue to rework every field in our inventory and look for ways to optimize future spending. These optimization efforts will benefit us both today and well into the future even after oil prices rebound.

Secondly, we generated substantial excess cash flow during 2015 and repaid $220 million on our bank line, improving our liquidity position. Our bank debt is up a little bit since year-end, generally running between $200 million and $250 million outstanding on a $1.5 billion committed line, or over 80% to 85% undrawn. Even if this ability is reduced, our next borrowing base redetermination in May, we still expect to have substantial available liquidity at that time.

Further, Mark will discuss our recently obtained covenant relief, which should enable us to meet the revised bank covenant test through the end of 2017 based on current strip prices. To put it simply, this is not a severely distressed company as some have portrayed.

Third, we are one of the first to significantly reduce our capital spending, cutting it by over a half for 2015, and now we're cutting it in half again for 2016. In spite of these capital cuts, our production decline relating to depletion will be a mid-single-digit decline, an inherent advantage we have over our peers in this environment. Our total production decline will be between 7% and 12% as we also have over 2,600 BOEs per day of production that's shut-in today that's either uneconomic to repair or produce.

And our forecast assumes that additional barrels will be shut-in during the year. Chris will give you more color on this, but our team has done a great job at isolating the uneconomic portions of each field, shutting-in that production and, as a result, increasing our cash flow. Bottom line, we are pursuing cash flow and value, not production, and we will continue to make that trade every day.

Lastly, we recently entered into additional hedges for the last half of 2016 and just a little bit in first quarter of 2017. Currently, we have 24,000 barrels a day of our crude oil production hedged at an average price of about $44 a barrel in Q3, and we have about 30,000 barrels a day hedged at an average price of around $38 a barrel in Q4; as I mentioned, just a little bit in 2017, about 3,000 barrels a day. These are not great prices, but they protect our liquidity and will minimize our borrowings in the event that prices are lower for longer, because these hedges are above our total current cash costs.

We're also fortunate that our production is 95% oil, and this isn't liquids, this is good quality crude oil. Therefore, even though we do have higher op costs than the average shale player, if you look at the production netbacks – what I mean by that is revenue less operating cost, you'll find we're quite competitive. In fact, we were in the upper portion of our peer group using our latest published numbers from the third quarter of 2015. The key point here is that yes, we do have somewhat higher op cost per barrel, but that is more than offset by having one of the highest revenue rates per barrel in the industry.

So, while it's not a pleasant environment, we feel good about where we are. Looking forward, we do not expect oil prices to recover to the recent historic highs. So, we've realized we must adjust our business to compete in an oil price environment that is likely to be less robust than it was. We are doing this by our continued efforts to lower costs as previously discussed. In addition, we also realized that over time we must reduce our overall debt levels to adjust to this anticipated lower-price environment.

Our subordinated debt has traded down to historically lower levels, providing an opportunity to reduce total debt at a substantial discount. We plan to review our options to enable us to take advantage of that opportunity, while at the same time maintaining our liquidity and financial strength. Of course, such activities will depend on the availability and cost of capital, relevant market conditions, oil prices and market trading levels of our notes. So, while highly focused on the preservation of cash and liquidity, we also want to be opportunistic and take advantage of this low-price environment.

If you go to the next slide and take a look at cost reductions going into a little more detail, you'll see we're able to lower our recurring LOE in every quarter of 2015, down 15% per BOE from year-end 2014, down 26% of the highs in late 2013 or early 2014. A large part of this reduction in LOE has been due to lower overall CO2 usage, which is down 25% from the fourth quarter of 2014 to the most recent quarter.

We were also able to drive down G&A by 7% on a per-BOE basis compared to full-year 2014 and 19% if you look at the respective quarters. While pleased with these results, we continue to look for additional cost-reduction opportunities in 2016 and increase value for every dollar we spend.

Moving to the next slide, we've included our 2016 guidance. We are currently anticipating our 2016 capital spending program to be approximately $200 million and that's excluding capitalized interest, of which we expect nearly 75% to be spent on developmental capital items.

The single largest piece of this amount is approximately $55 million at Delhi, which is predominantly an NGL plant. This plant is not expected to be completed until very late in 2016. But while a significant part of our capital in 2016, we will have very little benefit until next year. This is a 51% reduction from our actual 2015 capital expenditures, which totaled $407 million. That means that I'm very pleased with the relatively low rates of decline of our production. If you look at last year and adjust for the uneconomic wells we shut-in, we essentially held production flat by spending about $400 million.

In 2016, we're cutting that spending in half to $200 million and expect a very shallow decline of 4% to 8% excluding the incremental uneconomic shut-ins or a 7% to 12% total expected decline. This type of production profile is a real advantage for us in this current market, helps us preserve our cash and liquidity, which is one of our primary goals for this year.

And with that, I'll turn it over to Mark to give you more financial details.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Thanks, Phil. My comments today will summarize some of the notable financial items in our release, where I'll primarily be focusing on the sequential changes from the third quarter. I will also provide some forward-looking guidance to help you in updating your financial models.

Starting on slide nine, our non-GAAP adjusted net loss for the fourth quarter was $3 million or $0.01 per diluted share. It looks like our DD&A may have been slightly higher than some analyst expectations as we were generally better than analyst estimates on cash flow and EBITDA.

As you can see from our GAAP reconciliation, in Q4, we had a $1.3 billion pre-tax ceiling test impairment as the trailing 12-month oil price continued its downward trend. As you can see here, this quarter's write-down was less than the $1.8 billion we recorded in the prior quarter.

As I have commented in prior quarters, full-cost companies such as Denbury are required to use average first day of the month price for the trailing 12 months, when comparing the PV-10 Value of their reserves against the book basis of their oil and gas properties.

Based on recent oil price levels, we expect that we could record an additional write-down in Q1 of 2016 in excess of $400 million, as current prices would indicate that the average price for the last 12 months will continue to average down. On a GAAP basis, you can see that primarily due to this write-down, we had a net loss of $885 million for the quarter.

Turning to slide 10, our non-GAAP adjusted cash flow from operations, which excludes working capital changes, was $129 million for Q4, down $114 million from the third quarter. This was primarily the result of a decrease in our hedge settlements and lower revenues due to lower realized prices.

Our fourth quarter average realized oil price excluding hedges declined to $40.41 per barrel, down almost 12% from Q3. We recognized $78 million in cash receipts on settlements from our hedges this quarter, which made our average per barrel realized price including these hedges approximately $53 per barrel compared to over $71 per barrel last quarter.

Slide 11 provides a summary of our realized oil price differentials relative to NYMEX oil prices. Our overall realized oil price averaged $1.74 below NYMEX in Q4, down from roughly $1 per barrel below NYMEX in Q3. Differentials weakened for our Gulf Coast tertiary properties, averaging approximately $1 per barrel below NYMEX in the fourth quarter, and that's down from almost $1 per barrel above NYMEX in Q3. For a portion of Q4, we saw LLS prices trade at or below WTI prices, which was the primary reason for the weaker differential.

In the Rocky Mountain region, our Cedar Creek Anticline oil differential improved for the fifth consecutive quarter, selling at around $3 per barrel below NYMEX. Based on differentials, we have seen in early 2016, we currently expect that our overall oil differential could deteriorate somewhat in the first quarter of 2016 as we continue to see pressure on our Gulf Coast sweet crude and Rockies differentials.

Moving to the next slide, I'd like to review some of our expense line items. First, our lease operating expense averaged $19.31 per BOE in the fourth quarter, down slightly from Q3 normalized levels of $19.43 per BOE.

Chris will go into more detail on LOE in a few minutes, but we expect LOE to remain in the $19 to $20 per BOE range in the first quarter of 2016. G&A expense was $27 million in Q4, representing a 17% reduction from the third quarter. This decrease is primarily due to a reduction in our 2015 bonus accrual, workforce reductions in 2015 and our continued focus on our cost-reduction efforts.

For the fourth quarter, $7 million of net G&A was related to stock-based compensation. In the first quarter of 2016, we expect G&A expense to be between $25 million and $30 million, with approximately $4 million of this amount being stock-based compensation. Interest expense, net of amounts capitalized was $40 million, which is up slightly from Q3. Capitalized interest was relatively consistent at just under $7 million. We currently expect capitalized interest to be lower in 2016, averaging approximately $5 million per quarter.

Our DD&A expense was lower again this quarter, due primarily to full cost ceiling test impairments recorded in the first three quarters of 2015. With the additional impairment recorded this quarter, we expect that our DD&A expense will be in the $80 million to $90 million range in the first quarter of 2016. Our effective income tax rate for Q4 was slightly below our estimated statutory rate of 38%. For 2016, we anticipate our effective tax rate will be around 38% with little or no current tax.

On slide 13, we have an updated summary of our commodity hedges. We are around 50% hedged in our production for the first and second quarters of 2016, and we have recently entered into hedges for the third and fourth quarters of 2016 and the first quarter of 2017. You can see boxes around the hedges that we have added, which we did to add some protection in the event that oil prices continue to stay at these depressed levels for an extended period of time.

Although our new hedges are generally in the upper $30s, they at least cover our cash operating cost. Also, we currently estimate that it takes a NYMEX oil price average in the upper $30s for 2016 to balance our cash flow and capital expenditures.

On slide 14, we have added a chart that shows our expected hedging settlements based on various oil price sensitivities. As some of our contracts contain sold puts in the first half of the year, it is difficult to just provide an average hedge price. So, we have included the impacts here at various prices to help you in your modeling.

Slide 15 provides a summary of our current liquidity and capital structure. As of December 31, 2015, our total debt was approximately $3.3 billion, which is down $260 million from year-end 2014. We were able to reduce the drawn amount of our bank line by $220 million in 2015, bringing our year-end balance to $175 million on our recently updated commitment level of $1.5 billion.

Based on current projections, we would anticipate that our bank debt will increase somewhat throughout 2016 and end 2016 in a range of $250 million to $300 million, which includes roughly $30 million in principal payments on our financing leases.

On slide 16, with the continued downturn on oil prices, it was becoming more likely that we might breach our interest coverage covenant in late 2016 under our bank credit facility. As such, we recently obtained amendment to our bank agreement, the significant terms of the amendment are highlighted on this slide. But essentially, the amendment provides more flexibility under our interest coverage test and our senior secured leverage test to enhance access to liquidity under our bank line.

Under the amendment, our interest coverage test was reduced from 2.25 times to 1.25 times EBITDAX, and our senior secured leverage on that was increased from 2.5 times to three times EBITDAX, both through 2017. We currently believe that we can live within these limitations through 2017, at current strip prices.

In exchange for these revisions, we agreed to reduce the commitment under our line from $1.6 billion to $1.5 billion; moved to a semiannual borrowing base redetermination instead of annual, limit the amount of any subordinated debt repurchases to $225 million cash under the bank line, and include an anti-hoarding provision, which will limit the amount of excess cash we can hold at $225 million before having to pay down on the bank line.

In addition, we also adjusted the pricing grid to current market rates, which effectively increased our interest rate on bank borrowings by 75 basis points, and increases the fee we pay for undrawn commitments. The anti-hoarding provisions required by the banks are reaction to recent facility draws by certain companies.

The banks did not review our borrowing base as part of this amendment. So, we will be going through that process with the banks over the next couple of months. It is hard to determine exactly what our borrowing base will be since the banks use its own price decks in assessing our reserves.

However, based on our initial estimates, using a recent bank's price deck, we anticipate that it could potentially be in the range of or slightly below $1.5 billion commitment level that we have now. But we cannot speak for the banks or as to what price decks they will ultimately use.

Bottom line, it appears that our commitment level could come down a bit from where we are currently, but we expect to still have a substantial amount of liquidity under our bank line. In fact, at current strip prices, the three times EBITDAX limit on our senior secured debt could become the limiting factor rather than our borrowing base, particularly in 2017.

And now, I'll turn it over to Chris.

Christian S. Kendall - Chief Operating Officer

Thank you, Mark. Our company continues to keep a sharp focus on generating value and preserving cash across the business, and I'm very pleased with our success on a number of fronts. Leveraging the low capital needs of our unique business model help drive our full-year CapEx, excluding capitalized interest even lower than the reduction we forecasted in our last earnings call, finishing the year at $407 million, over 60% lower than our 2014 spend.

We have continued to reduce our recurring operating costs, reaching a new multi-year low of $19.31 per BOE in the fourth quarter, nearly 15% lower than the fourth quarter of 2014. As we enter 2016 still in this low price environment, I am especially encouraged with how our teams have found ways to maximize the value and cash flow of our business, and I will go into some specifics on that a bit later.

Finally, I'm particularly proud of the team's accomplishments in safety and environmental compliance, where we reached multi-year records in every single measure. We remain committed to keeping people safe and taking care of the environment.

Starting with the look at reserves on slide 18, Denbury's total estimated proved oil and national gas reserves at December 31, 2015 were 289 million BOE, of which 98% were liquids and 79% were proved developed. CO2 tertiary operations account for 57% of the proved reserves. Adjusting for 2015 production, the 289 million BOE represents a net reduction during 2015 of 122 million BOE, nearly all of which was due to commodity pricing.

About half of the price base reduction was a 368 Bcf reclassification of natural gas reserves at Riley Ridge, which reduced our proved reserves by 61 million BOE, but had very little impact from a value perspective. I'd also like to mention that we added positive performance-related revisions totaling nearly 14 million BOE in Tinsley and Oyster Bayou, two examples of good fields that keep getting better.

Additionally, our largest non-price-related reduction, about 11 million BOE at Heidelberg was based only on changes to development timing due to the current price environment, which shifted these proved undeveloped reserves out of a five-year development window.

The estimated discounted pre-tax net present value of Denbury's proved reserves at year-end 2015, using a 10% discount rate was $2.3 billion compared to $8.7 billion on December 31, 2014. Lower realized oil prices accounted for nearly all of that difference.

Now, I'll discuss our operations beginning with an overview of production. As you can see on slide 19, overall company production was just over 72,000 BOE per day for the fourth quarter, 1% higher than our production in the third quarter, and 4% below the fourth quarter of 2014.

And as Phil mentioned, about 2,600 BOE per day were shut-in for economics. Our full-year 2015 production was about 72,900 BOE per day, 2% below 2014. After adjusting for the shut-in barrels and the weather-related flooding downtime, we kept 2015 production essentially flat versus 2014.

Looking exclusively at our tertiary fields, production during the fourth quarter was nearly 41,200 barrels per day, an increase of 1% from the prior quarter and a decrease of 2% from the fourth quarter of 2014. Offsetting the production shut-in for economics or production gains at Delhi and Tinsley, as well as at Bell Creek, where tertiary production increased 26% from the third quarter to a record 2,800 barrels per day, as we continue ramping up phase three of that flood.

Non-tertiary production was even with the third quarter and down 7% from fourth quarter 2014 levels. Production shut-in for economics partially offset by strong performance at Cedar Creek Anticline drove the main difference compared to the prior-year quarter. At the end of 2015, we had approximately 1,700 barrels per day of shut-in production.

We've mentioned production shut-in due to economics. And as a reminder, these are wells that are uneconomic to operate at today's oil price or wells that require uneconomic repairs. We have continued to refine our process of working systematically across the business to ensure we are maximizing cash flow from each field.

And so, shutting-in production is on the table in today's price environment. In some cases, this may mean shutting-in specific higher cost wells, but it could also entail shutting down uneconomic tank batteries or compressions.

A representative example is our mature Little Creek Field, where we identified an opportunity to add incremental cash flow of over $2 million this year by shutting down one of our gas compressors. We deferred about 150 barrels per day for the year, but the energy and maintenance costs saved by shutting down the compressor resulted in more cash flow than producing those barrels. We are repeating this analysis across our portfolio and we continue to find and implement similar opportunities to reduce operating expense and increase overall cash flow and returns.

Turning to slide 20, on an absolute basis, our normalized lease operating expenses totaled $128 million in the fourth quarter, essentially flat with the prior quarter and down about 18% from the fourth quarter of 2014. On a per BOE basis, total quarterly LOE, adjusted for non-recurring items averaged $19.31 per BOE, 1% below the prior quarter and 15% below the fourth quarter of 2014.

Our fourth quarter CO2 costs were about $0.53 per BOE higher than in the third quarter, nearly all of that due to workover activities carried out at Jackson Dome during the fourth quarter. Even with that incremental cost, our normalized LOE per BOE has decreased in each quarter for all of 2014 and 2015; and on an annual basis, is at a level that we have not seen since 2010. The largest drivers of this decrease are reduced workover expense and lower CO2 costs, which I'll discuss in more detail next. We expect LOE in 2016 to remain below $20 per BOE, as we aggressively target each component of our cost structure.

Going into more detail on our cost on slide 21, we continue to drive significant sustained improvement in our CO2 efficiency. We reduced our total company CO2 injected volumes by 25% from 942 million cubic feet per day in the fourth quarter of 2014 to 705 million cubic feet per day in the fourth quarter of 2015. Comparing sequential quarters, our volumes were up slightly from 678 million cubic feet per day to 705 million cubic feet per day in the fourth quarter, mainly a result of pressure maintenance in the Tinsley field, that has helped drive the production gains we've recently experienced.

We continue to monitor CO2 utilization to ensure that we are maximizing cash flow, which requires a careful balance of CO2 purchase expense; incremental LOE to a compress, pump and transport the CO2; and the oil production and sales revenue generated by the CO2 we use. Working that balance has caused us to trade some temporary production shortfalls or overall improved cash flow, and we will continue to make that trade as we go through 2016.

I'd also like to highlight several other significant benefits of reducing our use of CO2, including extending the life of our CO2 supply at Jackson Dome; reducing the development and maintenance expense required to maintain our CO2 supply; reducing development capital on new floods due to lower CO2 processing requirements; and ultimately unlocking the company's opportunity set for new CO2 floods in the future.

Now, I'll turn it back over to Ross.

Ross M. Campbell - Manager-Investor Relations & Media Contact

Thank you, Chris. That concludes our prepared remarks. Nick, can you please open up the call for questions.

Question-and-Answer Session

Operator

Certainly. And we'll go first to the line of Jason Wangler with Wunderlich. Please go ahead.

Jason A. Wangler - Wunderlich Securities, Inc.

Hey. Good morning, guys.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Morning.

Jason A. Wangler - Wunderlich Securities, Inc.

Just on the budget, and you mentioned it Phil, in your remarks, about Delhi being a pretty big portion of it. How do you see that spending kind of going throughout the year? Is that something that's going to be back-end loaded specifically about Delhi, or just kind of how you see the cadence of the spend throughout the year?

Christian S. Kendall - Chief Operating Officer

Hi, Jason. This is Chris Kendall. Delhi, while Phil mentioned that the plans would be on line at the end of the year, we see the majority of the expenses weighted closer to the front of the year associated with our installation activities and the completion of the components that are fabricated and being brought in for assembly onsite.

Jason A. Wangler - Wunderlich Securities, Inc.

Okay. And Chris, you mentioned, just kind of walking through the plans about shut-ins and things. I mean, obviously, there's an estimate of when things will go down, and that's kind of a moving target, but as you're moving through, I guess, the procedure, like you mentioned, one of which kind of shut-in for the $2 million savings, is that an ongoing process, and it's obviously pretty dependent on where prices move? Or is that something that you kind of settled on now, and now we're just kind of looking for more natural, I guess, shut-ins, so to speak?

Christian S. Kendall - Chief Operating Officer

I'd say two things. One is it's absolutely continuing to go on, Jason. We have process in place where we're, on a weekly, daily basis, looking at our fields, what makes sense to continue to produce at current prices, and as the situation changes, we'll keep adjusting that.

Jason A. Wangler - Wunderlich Securities, Inc.

Okay. I'll turn it back. Thank you.

Operator

Thank you. Our next question will come from the line of Tim Rezvan with Sterne Agee. Please go ahead.

Timothy A. Rezvan - Sterne Agee CRT

Hi. Good morning, folks. I wanted to follow up on the shut-in theme, if we look at kind of the guidance, maybe you're talking about a 7,000 barrel a day decline if we use the midpoint. And you talk about 40% of that from shut-ins. You're getting to, call it, 2,800 a day. I guess my question was, as – if we see an incremental increase in oil prices, do those shut-ins come back online? Can we think about that in any kind of linear format if we get to, call it, a $50 oil price?

Christian S. Kendall - Chief Operating Officer

Tim, this is Chris again. I'll take that question. First, I'd like to mention we have built into the budget numbers that you've seen for 2016 an additional – about 1,000 barrels a day, takes us up to total shut-in of 3,700 per day for the year, so we have that built in to the budget. What I would say is that there is – along with that process of looking at our shut-in production continually, as prices increase, we will be ready to bring that production back on at whatever level is required to do that.

Timothy A. Rezvan - Sterne Agee CRT

Okay. And that could be a pretty, I guess, tactical response on a field-by-field basis?

Christian S. Kendall - Chief Operating Officer

Absolutely.

Timothy A. Rezvan - Sterne Agee CRT

Okay. Okay. That's helpful. And then, I guess, my second question was for Mark, you spoke a little quickly, kind of, on the credit, the borrowing base redetermination. I guess, you're kind of signaling that we should expect something below $1.5 billion, but can you be any more granular on kind of the level of decline we could see?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

I wish I could. I think what we're seeing is quite a bit of disparity across the banks in terms of what price decks they're using based on what I hear. And obviously, we have some time yet before we even get to the redetermination. So, a lot of them are just now kind of setting their price decks. So, the information that I'm working off of is from one of our lead banks. And so, I'm running numbers based on their price decks. And so, that's kind of how it shakes out.

Now, I can't speak for the other banks. And under our facility, we need about two-thirds approval – right at two-thirds approval of the banks for the borrowing base. So, it really gets back to what price deck the banks are going to use and how they evaluate things.

So, I think we could be in that range, but I also think based on what I hear from some of the banks, it could slip a little bit, just seeing what they're doing with their price decks. So, I wish, I could give you more clarity at this point, but that's as best I can do for right now.

Timothy A. Rezvan - Sterne Agee CRT

Okay. Okay. That's fair. And then just to make sure I heard correctly, you talked about the borrowing level maybe being at $250 million to $300 million by the end of 2016, is that kind of what you're thinking now?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

That's right. Yes.

Timothy A. Rezvan - Sterne Agee CRT

Okay. So even if – it's still a lot of capacity. Thank you.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah. That's the point here. We still have a lot of liquidity, even if we do – it does come down slightly. So, we'll just keep monitoring it, but that's why we've been so judicious about maintaining our liquidity here, so...

Timothy A. Rezvan - Sterne Agee CRT

Thanks a lot.

Operator

Our next question comes from the line of Neal Dingmann with SunTrust.

Neal D. Dingmann - SunTrust Robinson Humphrey, Inc.

Good morning, guys. Phil, I was just looking at either that slide six or 20, where you nicely outlined the cost. I guess, particularly on that slide 20, where you kind of list those costs, how they've continued to come down, your thoughts, I mean, Phil, you did mention about obviously the lower CO2 usage. I'm just wondering, I guess, some of those – the two higher costs in there being the power and fuel or labor and overhead. If you could comment on either of those, are there some further cuts that you all see continuing this year? I mean, you hear about that from obviously the traditional guys when they talk about getting more out of their drilling and more out of their fracs, but just wondering what you guys could address?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, it's something – it's hard to forecast. We keep looking at it and trying to minimize as much as we can. Actually, on power, ironically, we're facing some increasing rates. So, we're trying to offset that by using less power, but we're fighting a little bit of inflation actually.

In labor, we try to continue to get more efficient. So, we're guiding to 19 to 20. We'll keep working it and since we have a nice record year of eight consecutive drops in a row, so we hate to not keep that string going. But admittedly, it does get a little harder the lower we get.

Neal D. Dingmann - SunTrust Robinson Humphrey, Inc.

And I guess is it fair to say, Phil, I mean, it obviously never really comes up in this kind of environment about M&A, and given you are shutting some things in, does that – are you just really continue to look at M&A as far as bolt-ons, or if you could just address that at all.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Sure. Well, as Mark mentioned, we've been very careful about using our bank line, because that's our liquidity. And so, because of that, the acquisitions we have looked at are ones that don't require a lot of upfront money. So, we did two of them in 2015. They both were small, Manvel and [Gastrol] and those are the type of things that we might be interested in.

I don't think we would work to without some other form of financing or some other type of capital jump on a big transaction, but these little ones that we can pick up that may be a minimal production in our future EUR targets would be something we would definitely consider.

Neal D. Dingmann - SunTrust Robinson Humphrey, Inc.

Very good. Thanks, Phil.

Operator

Next, we'll go to the line of Charles Meade with Johnson Rice. Please go ahead.

Charles A. Meade - Johnson Rice & Co. LLC

Good morning, Phil, and to the rest of your team there. I'm wondering if you can give us your narrative of the trajectory of that debt exchange offer that you guys put out in December, and withdrew in January. And maybe wrap it up with any comments you have on how that affects your appetite or posture to try another one?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, as you know, we pulled that exchange; and quite simply, we just didn't get the participation level that we had hoped for to make it worthwhile. And the reason it wasn't worthwhile is the new note had more restrictive covenants and so forth. So, we didn't want to restrict ourselves unless it was a significant gain or significant reduction in overall debt. So, that's why we pulled it.

I mentioned in my comments that we know we'd like to work on our debt level over time and it is potentially an opportunity that sub debt is trading at historically low levels. So, we're looking at those options. The key is, we want to maintain our liquidity with our bank line; and secondly, we can't use too much there anyway. But, we have a very flexible capital structure. We have a very simplistic structure as far as debt levels. And the covenants are also in good shape. So, we're looking at our options.

Charles A. Meade - Johnson Rice & Co. LLC

Got it. And is there anything to – there was that wrinkle that as first designed, the new note that you are offering for holders to exchange into wasn't secured. And then, it had that, that makes it different from some of these other exchanges that have gone off. Do you think – if you did it again, would a secured feature have to be part of it?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, actually, we changed the covenants part way through the exchange.

Charles A. Meade - Johnson Rice & Co. LLC

Right.

Philip M. Rykhoek - President, Chief Executive Officer & Director

And made them pari passu with a second lien. So, while maybe they didn't technically have a second lien, they were equal.

Charles A. Meade - Johnson Rice & Co. LLC

Right. I was just wondering if maybe people just didn't – took a look at it the first time, and then moved on, but I think you addressed it. Thank you, Phil.

If I could sneak on one more in on – this is maybe for Chris about the shut-ins. I think you've hinted at this when you said that you have 3,700 BOE a day of shut-ins built into your guidance. But, to me that suggests that the bigger opportunities have already been uncovered, and then we're kind of – the future cash flow improvements and shut-ins are likely going to be smaller in magnitude, but is that the right read?

Christian S. Kendall - Chief Operating Officer

I think that's a fair statement, Charles. The majority of the provision that we have in for the rest of the year, assuming that we stay in this current price environment, is driven by wells that – for example, let's say you have a failure and it's not economic to repair. We don't know what that well would be, so it's just an assumption on that. But, certainly at these price levels, we've looked hard at what we should shut-in and have shut-in at this level.

Charles A. Meade - Johnson Rice & Co. LLC

Got it. Thank you for that detail.

Operator

Thank you. We'll go now to the line of Ryan Oatman with Cowen.

Ryan Oatman - Cowen and Company

Hi. Good morning, everybody.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Morning.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Morning.

Ryan Oatman - Cowen and Company

Mark, thanks for the detail on slide 16. I do see the significant relief there. You mentioned that some of the additional constraints to the bond repurchase, a limit of $225 million, obviously the debt exchanges are different than those bond repurchases. I just want to clarify, I mean, this agreement, wouldn't prevent or limit in anyway Denbury's ability to conduct a debt exchange, if it wanted to. Is that correct?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yes. We still have that flexibility, potentially on what additional securities we could offer that might require bank approval; but, no, we still have decent flexibility around that, so...

Ryan Oatman - Cowen and Company

Got you. So, additional securities such as perhaps preferreds or some of that event may require the banks to get involved.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Right. Like second liens, potentially, banks would have to sign off on that, so...

Ryan Oatman - Cowen and Company

Got you. Makes sense. And then, with regards to the PV-10 Value, is it fair for us to assume a similar split between developed and undeveloped, as for the reserve reports, and namely approximately 80% there?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, I think the developed piece would have a higher value, because the undeveloped piece has more costs against it. So, I don't know what that split is on a PV basis, but your PDP is going to be worth more or your proved developed is going to be worth more.

Ryan Oatman - Cowen and Company

Okay. And then, with regards to the bank debt agreement, is essentially the PV-10 Value that's supporting that, or are there other assets that are supporting that bank debt agreement?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

The banks, in setting the borrowing base, generally look to the reserves, oil and gas reserves.

Ryan Oatman - Cowen and Company

Got you.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, let me just add – just, because I think it's a real feature of our assets. One, we do have a higher percentage PDP. But two, when you kind of look at it, that PDP value doesn't decline very rapidly, just as our production doesn't decline very rapidly. So, I think from a banking perspective, we probably have a much better asset package, as far as making them feel comfortable with the future than maybe some of our other peers.

Ryan Oatman - Cowen and Company

That makes sense. Is there any thoughts to pledging as collateral additional assets, say that aren't upstream assets, or aren't upstream oil and gas assets, against that bank debt?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

The banks have basically, first, interest in most everything. I mean they have – it's not just the oil and gas properties, but that is what's primarily security and we have to mortgage for them. So, that's predominantly it, in terms of the primary security, but they have access to other things as well, so...

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, they have a negative pledge. Just as Mark said, if you were to do a second or issue a lien to anybody else, we would have to have their consent.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah.

Ryan Oatman - Cowen and Company

Great. I appreciate it. Thank you, guys.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yep.

Operator

Next, we'll go to the line of Tarek Hamid with JPMorgan.

Tarek Hamid - JPMorgan Securities LLC

Good morning and thanks for taking my questions.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Morning.

Tarek Hamid - JPMorgan Securities LLC

On the liabilities sort of management front, given kind of everything that you've gone through already but also the $225 million you sort of carved out of the bank facility for bond repurchases, could you maybe just sort of prioritize how you're thinking about sort of future exchanges versus bond repurchases, versus sort of other potential deferred equity, or other type of exchanges going forward?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, I don't think we can probably give you a lot of help on that. We're looking at all the options, and I guess we just have to leave it at that. We'd love to reduce our debt, but I can't give you a sense of what the priority would be at this point.

Tarek Hamid - JPMorgan Securities LLC

Fair enough. I get paid to ask the question. And then, as you go through, and this is more back to just the shut-ins again, maybe talk a little bit about, and I know it's hard to do, but just sort of the hypothetical capital required to reverse future shut-ins, if we were to get a material move in the commodity. Sort of, how would you think about that? What would the timeline be? What with the rough capital order of magnitude be?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

What I'd say is that the capital is very nominal to bring those wells back on and the timing would be nearly immediate. And that would be the first wave of activities that we'd take part in when we do see oil prices moving back in that direction.

Tarek Hamid - JPMorgan Securities LLC

That's it for me. Thank you.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Thanks.

Operator

And we'll go next to the line of Pearce Hammond with Simmons & Company.

Pearce Wheless Hammond - Simmons & Company International

Yes. Do you have any assets that you think could be candidates for divestiture, that could help bolster your liquidity?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, most of our assets are core. So, they're either current pledge, future pledge or assets that produce CO2. So, we have very minimal assets that don't fit that category. So, we're very protective of those assets.

I guess secondly, it's kind of a tough environment to be selling assets when oil's current price is $30 and the strip price is pretty low. And I guess thirdly, we have a lot of liquidity. So, we don't feel like we have to do anything. We have substantial bank line and substantial liquidity. So, we're not really strapped day to day.

Pearce Wheless Hammond - Simmons & Company International

Okay. Perfect. And then, as we look at the oil production profile, throughout the year, are you expecting that to have a steady smoother decline? Or will it be a little more sawtooth?

Philip M. Rykhoek - President, Chief Executive Officer & Director

This is actually pretty steady. I mean, I guess, it's part of that straight line, but it's not too far from it.

Pearce Wheless Hammond - Simmons & Company International

All right. Thank you very much.

Operator

Thank you. We'll go next to the line of Adam Leight with RBC Capital Markets.

Adam Leight - RBC Capital Markets LLC

Good morning, everybody. I think you've been pretty exhaustive on most of this, but just one clarification from Mark on the bond repurchase. Is that a dynamic number? Is that kind of a hard code? Does it change with availability on whatever the borrowing base may be redetermined to now?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah. So, right now, it's just a firm number.

Philip M. Rykhoek - President, Chief Executive Officer & Director

It's not percentage of the borrowing fees, Adam...

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah.

Philip M. Rykhoek - President, Chief Executive Officer & Director

... it's just a fixed cap.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah.

Adam Leight - RBC Capital Markets LLC

Okay.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Always could be renegotiated, I'm sure.

Adam Leight - RBC Capital Markets LLC

And then, other people have tried to get an answer out of you on this, but if you were to sort of prioritize – it sounds like you're prioritizing liquidity over leverage, as you kind of move through this lower for longer cycle. Is that a fair statement for now?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, that's probably fair. I mean, we have to maintain liquidity. We have to maintain our cash position, because that protects the company. So, it's balancing that, that has to be number one priority, balancing opportunities like the low trading levels over debt, just trying to balance those two priorities, but liquidity and – this has to be the highest priority.

Adam Leight - RBC Capital Markets LLC

So for – if it were possible to do a second lien or one and a half, is there an explicit decline from the banks on your borrowing base related to that?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, I'm sure if we did a second or any – one and a half, or however you structure it, there would probably be some reduction in the bank line, because they would take into account the additional debt. Now, it may not be one for one, but we'll just have to work through that. But I'm sure there would be some reduction.

Adam Leight - RBC Capital Markets LLC

Just trying to get a sense if that's something that's changing like these anti-hoarding provisions, so anyway, that's it for me. Thanks. Appreciate it.

Operator

Next, we'll go to the line of Gail Nicholson with KLR Group.

Gail Nicholson - KLR Group LLC

Good morning, gentlemen. Just a quick question, you talked about with an improving oil prices that incremental capital dollar will probably get spent to bring the shut-in production online. After that, if we get maybe oil back in let's say a $50, $60 environment, where does that incremental additional cash flow generate might be spent? Is it to reduce debt and further improve the balance sheet? Is it maybe potentially buying back stock or is it maybe looking at spending money at Webster for future production growth? How do you guys look at that?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, I think the best bang for the buck is probably continuing to expand the floods that we're currently operating. So, Hastings has development left, Bell Creek has development left, Delhi does. And we've curtailed that in 2016. So, there is very little future development occurring, and I think that would probably be the first thing we'd turn on because that's your best value.

At some point, we will need to start new floods, and probably, the likely first one on the list will be Webster, partly because the pipeline is already there. So, I think we just have to work through that and see what we have to spend. I think we're very conscious of keeping our cash flow and expenditures as close as we can to a match. And I think we obviously would like to spend a little bit more to stabilize our production, so I think those would probably be the priorities.

Gail Nicholson - KLR Group LLC

Great. And just for the $35 million that you're spending in non-tertiary this year, is that predominately directed towards CCA?

Philip M. Rykhoek - President, Chief Executive Officer & Director

I think it's kind of spread around. But, yes, I mean it is. A lot of that is CCA. CCA is our single biggest non-EOR field, in fact, the single biggest producer. But that number is – all these numbers are kind of spread around.

In fact, in some cases, they're actually kind of just baskets of allocated money that we haven't even specifically identified yet. We're actually being very careful in taking a review actually every month by senior management to look at every dollar we spend. So, we are watching cash like a hawk.

Gail Nicholson - KLR Group LLC

Okay. Great. Thanks so much.

Operator

We'll go to the next call from James Spicer with Wells Fargo.

James A. Spicer - Wells Fargo Securities LLC

Hi. Good morning. The two CO2 facilities in the Gulf Coast and the gas processing facility in the Rockies that you are purchasing, how much are you spending on that in 2016? And is there any other acquisition CapEx that we should be thinking about?

Philip M. Rykhoek - President, Chief Executive Officer & Director

The CO2 facilities, we're really not spending hardly, virtually zero, I guess on any incremental CO2 supply. One of the real pluses is in the Gulf Coast – well, both places actually we have plenty of CO2 for current needs. And Jackson Dome, as an example, is capable of producing more than we're currently using. So, we don't see any real capital needs for additional CO2 in at least in the near-term.

James A. Spicer - Wells Fargo Securities LLC

Okay, I thought that you had, that there were two facilities that you were in the process of actually purchasing.

Philip M. Rykhoek - President, Chief Executive Officer & Director

I'm not sure what you're referring to.

James A. Spicer - Wells Fargo Securities LLC

Okay. I'll figure that out and may get back to you offline.

Philip M. Rykhoek - President, Chief Executive Officer & Director

Maybe call us offline.

James A. Spicer - Wells Fargo Securities LLC

Yeah. Yeah. And then my second question back on the debt reduction, just sort of looking at it a different way, perhaps, with the $225 million in cash carved out of the credit facility, based on where your bonds are trading, that would imply that you could theoretically buy back $1 billion plus of debt. Just wondering if you have a target amount of debt in mind, when you think about reducing debt. And is there any sort of timing considerations or maturity considerations that you're thinking about there?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, we're probably going to dodge that question, too. I mean, you're right, theoretically, that would be a mathematical correct answer, but I think we're just looking at the options. So, I don't know if I can give you specific guidance on that.

James A. Spicer - Wells Fargo Securities LLC

Okay. Thank you.

Operator

We'll go now to the line of Maryana Kushnir with Nomura.

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Hi. I wanted to clarify, you mentioned the projected balance on the revolving facility and part of the reason why it will go up, because you have scheduled payment on capital leases. Could you quantify how much that payment is?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Down $30 million.

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Okay. Also, regarding shut-in production, what's the average LOE for those barrels that are going to – incremental barrels that are going to be shut-in?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

I don't have the average, Maryana. But I would say, it's probably on the higher end as many of those were shut-in for economics.

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Okay. So, I'm just trying to understand, if your LOE guidance is kind of in line with the recent performance, and you mentioned some cost pressures on power, but it seems like you're managing to use less power. But then, if you shut in higher cost barrels, so then, should we take your cost guidance as rather be – rather conservative? It just seems like, if higher cost volume is coming down then average LOE should also come down.

Philip M. Rykhoek - President, Chief Executive Officer & Director

I mean, that's a fair point, and we obviously hope we can do better on LOE. You'd also have to take into account, though, that production is going to be slipping a little bit. So...

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Right.

Philip M. Rykhoek - President, Chief Executive Officer & Director

...that does affect your per BOE numbers.

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Okay. Okay. And then, going back to the asset sale question, and I guess you quantified your assets as being core, but regarding your large footprint of pipelines and facilities, is there a transaction that can be structured, and still I realize, very difficult environment, but where you get upfront liquidity even if you pay a higher operating cost to use those facilities?

Philip M. Rykhoek - President, Chief Executive Officer & Director

Well, that's a common question we've had over the years. I think that's always an option that we could monetize pipelines. Yes, I think we could probably raise money, but it does come with a repayment obligation. So, you're – it's akin to borrowing money, even if it's not on the balance sheet.

And secondly, it's probably long-term or permanent, if you actually sell the asset. So, I guess, there is high cost. Of course, we don't have real high tax bases in our CO2 pipelines, so we'd have to pay Uncle Sam a significant portion, which raises the cost of that financing.

So, we would look at this long and hard. I think it is always an option. Conceptually, I think we're a little more interested in doing something with pipelines maybe to fund future ones, rather than existing, because we don't have the tax issue. But it is always an option. But I don't think it necessarily is a real savior when it comes to cash flow and so forth, because it is not low cost debt or low cost financing.

Maryana Romanivna Kushnir - Nomura Corporate Research & Asset Management, Inc.

Okay. Understood. Thank you.

Operator

We'll now go to the line of Gregg Brody with Bank of America.

Gregg William Brody - Bank of America Merrill Lynch

Hey, guys. Just some follow-ups. Just to be very clear here, the $225 million of bond repurchases, that carve out – if you have $250 million borrowed on your revolver, can you no longer use that at that point, or is it...?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

No. That does not apply to the bond limitation, the repurchase limitation. Yes.

Gregg William Brody - Bank of America Merrill Lynch

Okay. And then on the revolver forecast you gave for year-end, does that number include some bond repurchases in there? And maybe if you could tell us what deck you're using for that $250 million to $350 million range.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Yeah. It's just running out our current projections for 2016 at recent kind of strip prices, so it's just our internal model, using strip prices.

Gregg William Brody - Bank of America Merrill Lynch

And that does not include buybacks?

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Nothing factored in there.

Gregg William Brody - Bank of America Merrill Lynch

And then the last question for you, just anti-hoarding provisions, was there a requirement to have – to allow for cash as collateral as part of your borrowing base with that? Or is that not the case?

Philip M. Rykhoek - President, Chief Executive Officer & Director

No. We don't have to – the anti-hoarding is just to prevent a draw on your bank line and taking it up to the max and then sitting on that cash as several companies have done recently. And so, the banks are very sensitive about that and it's really just to prevent that. So...

Gregg William Brody - Bank of America Merrill Lynch

Got it. Thank you very much, guys. I appreciate the time.

Mark C. Allen - Chief Financial Officer, Senior Vice President, Treasurer & Assistant Secretary

Sure.

Operator

Thank you, gentlemen. I'll turn it back over for any closing remarks.

Ross M. Campbell - Manager-Investor Relations & Media Contact

Before you go, let me cover a few housekeeping items. Recently, we updated our Corporate Responsibility Report for 2015, which we think illustrates our commitment to these principles and the transparency with our stakeholders regarding our economic, environmental and social performance. It can be found on our website at www.denbury.com.

On the conference front, Phil and Chris will be attending the Credit Suisse Energy Conference in Vail, which will occur next week. The details are available on our website and the webcast for Phil's presentation will be accessible through the Investor Relations section.

Lastly, for your calendars. We plan to report first quarter 2016 results on Thursday, May 5, and hold our conference call that day at 10 A.M. Central.

Thanks again for joining us for today's call. We look forward to keeping you updated on our progress.

Operator

Thank you. And also, this conference was recorded back for reply and you may access that AT&T replay system running through today at 12:30 through March 18 at midnight. The phone numbers to join the access is 800-475-6701 or international callers may use 320-365-3844. Either number will require a common access code of 324020.

The numbers again are 800-475-6701 or 320-365-3844 with an access code of 324020. That does conclude our conference for today. We thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.

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