Hornbeck Offshore Services (Louisiana) (HOS) Kenneth Dennard on Q2 2016 Results - Earnings Call Transcript

| About: Hornbeck Offshore (HOS)

Hornbeck Offshore Services, Inc. (Louisiana) (NYSE:HOS)

Q2 2016 Earnings Call

August 04, 2016 10:00 am ET

Executives

Kenneth Dennard - Chief Executive Officer & Managing Partner, Dennard-Lascar Associates LLC

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Analysts

Gregory Lewis - Credit Suisse Securities (NYSE:USA) LLC (Broker)

Turner Holm - Clarksons Platou Securities AS

Joseph D. Gibney - Capital One Securities, Inc.

Daniel J. Burke - Johnson Rice & Co. LLC

Mark William Brown - Seaport Global Securities LLC

Coleman W. Sullivan - Wells Fargo Securities LLC

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

Benjamin J. Friedman - Morgan Stanley & Co. LLC

Operator

Greetings and welcome to the Hornbeck Offshore 2016 Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Ken Dennard. Thank you. You may begin.

Kenneth Dennard - Chief Executive Officer & Managing Partner, Dennard-Lascar Associates LLC

Thank you, Michelle, and good morning, everyone. We appreciate you joining us for Hornbeck Offshore's conference call to review second quarter 2016 results and recent developments. We also welcome our Internet participants listening to the call over the web.

Please note that the information reported on this call speaks only as of today, August 4, 2016, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.

During today's call, Todd and Jim will make certain projections about future financial performance, liquidity, operations, and events that are not statements of historical fact and thus constitute forward-looking statements. These forward-looking statements are subject to risks, uncertainties, and other factors that may cause such future matters, including the company's actual future performance, to be materially different from what is projected today.

You can locate additional information about factors that could cause the company's results to differ materially from those projected in the forward-looking statement and Hornbeck's SEC filings and in yesterday's press release under the Investors Section of the company's website at www.hornbeckoffshore.com or of course, through the SEC website at sec.gov.

This earnings call also contains references to EBITDA and adjusted EBITDA, which are non-GAAP financial measures. A reconciliation of these financial measures to the most directly comparable GAAP financial measure is provided in the press release issued by the company yesterday afternoon.

And finally, the company uses its website as a means of disclosing material non-public information and for complying with disclosure obligations under SEC Regulation FD. Such disclosures will be included on the company's website under the heading Investors. Accordingly, investors should monitor that portion of the company's website in addition to following the company's press releases, SEC filings, public conference calls and webcasts.

Now, with that behind me, I'd like to turn the call over to Todd Hornbeck, Chairman, President, and CEO of Hornbeck Offshore. Todd?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you, Ken. Good morning and welcome to the Hornbeck Offshore's second quarter 2016 conference call. With me today is Mr. Jim Harp, our Chief Financial Officer. After my brief comments, Jim will take you through the numbers in a little bit more detail.

On our last call we commented that the dismal market conditions we observed in the first quarter of 2016 were not an exception to the beginning of the end, but rather represented a new normal of market conditions for the relative near-term. I wish I could say we were wrong, but as expected, market conditions in the second quarter were even worse than the first.

The combined effect of low offshore exploration and production activities and overcapacity of new generation vessels has produced a collapse in vessel utilization and pricing across our industry and in every market that no company is immune to. Anyone calling for a market bottom in the OSV space at this point is very likely mistaken.

Our revenues were down by 30% from the first quarter. We eked out EBITDA of just under $7 million and our cash balance decreased by $31 million. What this means is that, we used about $6 million of our cash for purposes other than funding commitments under our newbuild program.

During the second quarter, we took additional steps to shore up our ability to endure this punishing down cycle, but – and emerge on the other side with one of the largest and most relevant fleets of high-spec new-generation OSVs and MPSVs in our core markets.

Let's talk about vessel stackings first. Through today, we have stacked 45 vessels of our 62 vessels new-generation OSVs. By the end of September, we expect this number to peak at 48 vessels. Our aggressive stacking together with the associated cost cuts will drive an expected $210 million of cash savings to the business on an annualized basis. At this point, with an average operating fleet of 14 OSVs and eight MPSVs projected for 2017, we think that stacking more of our vessels would be counterproductive.

We have observed utilization rates in the mid-70%s for our active fleet of OSVs for the past couple of quarters, which is not to say that the market is invalid, it's far from it. We just think it makes more sense at this point for us to operate our active fleet of vessels at whatever dayrates we can achieve in order to best be positioned to capitalize on recovery whenever it happens.

We all agree stacking across the industry is a responsible way to help to stabilize market condition. At this point, we have done more than our fair share, having stacked over 75% of our high-spec fleet of Jones Act qualified OSVs by the end of this quarter. In contrast and by our estimation, our competitors have only stacked about a third of the remaining supply. So, we believe that onus is on them to stack additional vessels.

An additional challenge we see compounding the current situation is the nature of contract terms being dictated by certain of our customers that are pretty unusual and only compound the financial risk profile of operating at such low dayrates, which in many cases, are already below cash breakeven.

We are seeing some clauses that, under the right circumstances, could be company killers, especially given the current strain on the financial health of the entire service industry. These unrealistic contract demands whereby operators must assume an unjustifiable amount of risk makes such jobs untenable to bid. We are careful to avoid these clauses, but it seems like others are more willing to run into the storm.

Turning to our liquidity. We announced yesterday that we have reached an agreement with our revolving credit lenders that aligns the covenant package contained in our undrawn facility with the current reality of our business.

Under the amendment, which was unanimously adopted by our eight-member bank group, we can avail ourselves of an interest covenant holiday that if exercised could last up to four quarters, through the end of 2017. Even if we don't use the holiday, our banks have agreed to relax certain aspects of our covenant package giving us more flexibility than previously.

While, we haven't used the revolver and may never do so, we believe the amendments give the company continued access to an additional liquidity buffer through the next few years and reflect a strong vote of confidence by key financial constituents of our company.

Also accretive to our liquidity, we reached an agreement with the shipyards constructing the last two of the remaining four MPSVs that extends to the delivery dates of those vessels into the first and second quarters of 2018. Given that we believe 2017 market conditions will look a lot like what we are seeing today, and maybe even worse, we are not too concerned about the opportunity cost associated with pushing back the delivery of these MPSVs.

Moreover, by extending their delivery dates, we will not incur the significant daily operating cost associated with those two vessels during an anticipated soft market in 2017.

Finally, and most significant, we rearranged the construction milestone payments required under those contracts to backload a significant portion of the remaining cash outlays. In total, we have shifted $43 million of the remaining $79 million committed under this program into 2018. The majority of the 2018 construction draws will be due to the shipyard upon the final delivery of the vessels.

We are currently finalizing the outfitting of our next two Jones Act qualified MPSVs for expected delivery during the third quarter of 2016. These two vessels are equipped with 250-ton active heat compensated cranes making them among the most capable Jones Act qualified MPSVs in the market.

We have said previously that we believe Jones Act compliance cost and risk will drive the Gulf of Mexico's subsea construction and IRM customers to use Jones Act vessels as they become available in the market.

Our view was fortified a few weeks ago, when we saw the announcement by Customs and Border Protection that it has created the National Jones Act Division of Enforcement, which it calls JADE, to be headquartered in the Gulf South region. This announcement seems to indicate that CBP is taking seriously its role as the principal enforcer of Jones Act.

The decision to headquarter JADE in the Gulf South region is likely not an accident. The fact of the matter is that CBP has signaled for years that OCS Jones Act compliance is a problem that it wants to solve. The creation of JADE is a step in that direction.

In closing, while we continue to lack near-term visibility to a scenario in which demand for our vessels will improve, we continue to believe that a recovery will eventually develop, likely fueled in part by the lack of exploration and development activity the industry is currently experiencing.

In addition, many of our customers have recently affirmed through public disclosures that deepwater exploration prospects in our core geographic markets remain among some of their most attractive drillable inventory, and will continue to attract budget dollars as they eventually ramp up their capital spending in the years ahead.

Meanwhile, we continue to focus on ways to position our company to exit this cycle in the pole position by focusing on what is important: cash preservation, sound operating practices and safe service delivery to our customers.

Now, I'd like to turn the call over to Jim, to take you through the quarter's numbers in greater detail. Then we'll open it up for questions.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Thanks, Todd, and good morning, everyone. Yesterday afternoon, we reported our second quarter results, announced some new recent developments with regard to our revolving credit facility and our newbuild program. We also updated the forward-looking guidance information contained in the data tables to our press release.

The guidance now reflects our current and projected fleet counts for the third quarter and all of 2016 and 2017. We will continue to update this information quarterly to reflect our latest market assumptions as we move through 2016. Keep in mind, this information is based on the current market environment, which is always subject to change.

As Todd already mentioned, and we announced yesterday, last Friday, we closed on an amendment to our revolver that will provide greater flexibility under certain of our maintenance covenants and will allow us to maintain the revolver as a source of standby liquidity.

I'll take you through some of the details of that amendment a little later, but we view this as an important milestone to have behind us in this uncertain oil field credit environment and shows the confidence our banks have in our company and our management team to navigate through this downturn.

As the financial results we reported yesterday indicate, the operating environment in our core markets continues to be extremely challenging. There is little on the horizon, and we don't see any near-term catalyst that would cause us to believe there will be any improvement in the markets for our OSVs or MPSVs for the relative near term.

So we have and will continue to follow our strategy. We stacked additional HOSMAX vessels during the second quarter and increased our projected total stacked vessel count to 48 vessels by the end of the third quarter. We continue to hunker down with respect to our vessel operating and shoreside costs.

Through the increased stackings and other continued proactive cost containment measures implemented shoreside and in our fleet, we have achieved approximately $25 million in additional annualized cost savings since our last call, which brings our annual run rate total to around $210 million, or as I alluded to last quarter, $285 million when compared to our projected operating cost and G&A for our current 2016 fleet complement as of two years ago.

Not included in these figures is the roughly $28 million of cash maintenance CapEx cost that we deferred during 2015 and so far in 2016 for 21 vessels and another $27 million we expect to defer during the remainder of 2016 and in 2017 for another 21 vessels, if all such vessels remain stacked throughout 2017.

Our cash balance at the end of the quarter was $225 million, down roughly $30 million from last quarter, largely due to growth CapEx of $25 million, as we were able to generate a modest amount of operating cash flow. We only have $79 million of growth CapEx left to spend with about $13 million of that to be incurred during the second half of this year.

Now, let's review the details for the second quarter. Our second quarter loss was $21 million or $0.57 per diluted share. As a reminder, due to the net loss under GAAP, our diluted share count for purposes of calculating EPS is deemed to be equal to our basic share count.

Our reported operating loss was $22 million or 40% of revenues in the current quarter compared to an operating loss of $1 million or 1% of revenues in the first quarter of 2016.

Second quarter EBITDA was $7 million or 76% lower than the sequential quarter EBITDA. These decreases were primarily due to continued softness worldwide for our high-spec OSVs and MPSVs and the roll-off of charters set in the last upcycle.

Based on current activity levels and the continued lack of charter visibility, we expect our EBITDA to remain at reduced levels for a while. However, given the historically low levels of EBITDA, we are currently producing it is prudent to note that short periods of spot contract awards or downtime between spot jobs, especially for our MPSVs can swing our quarterly EBITDA meaningfully.

Adjusted EBITDA, which is a defined starting point that we use to compute ratios for the financial covenants in our undrawn revolving credit facility was $10 million for the second quarter of 2016.

For additional information regarding EBITDA and adjusted EBITDA as non-GAAP financial measures, please refer to the data tables in yesterday's earnings release including Note 10.

Revenue for the second quarter of 2016 was $54 million or 30% lower than the sequential quarter. This sequential revenue decrease was primarily attributable to the increase in the average number of stacked vessels from 34 vessels to 42 vessels, and to a lesser extent a decrease in average dayrates and utilization for our MPSVs.

Average new generation OSV dayrates for the second quarter of 2016 were approximately $26,650 or about $2,100 higher than the sequential quarter. However, utilization for our new generation OSVs for the second quarter of 2016 was 24% compared to 35% sequentially.

Adjusting for stacked vessel days the effective utilization on our active fleet of new generation OSVs was 74% compared to 77% sequentially. Accordingly, our effective or utilization-adjusted dayrates were down $2,300 sequentially.

Operating expenses of $34 million for the second quarter were roughly $3 million below the low end of our guidance range or were down just over $6 million or 15% from the sequential quarter.

For the full calendar year 2016, we have reduced the midpoint of our operating expense guidance range by roughly 10% since our last quarterly call, and now expect aggregate cash operating expenses for the full-year 2016 to be in the range of $135 million to $145 million.

We project cash OpEx for fiscal 2016 to decrease from prior levels, primarily due to an average of approximately 43 vessels expected to be stacked during 2016, companywide head count and wage reductions, and across-the-board pay cuts for shoreside and vessel personnel.

As a reminder, we have provided you with updated full-year and third quarter 2016 OpEx guidance in our press release issued yesterday afternoon. Consistent with our cash OpEx guidance for prior periods, these estimated ranges are good-faith estimates based on best available information as of today and are only intended to cover our currently anticipated active fleet complement, geographic footprint, charter mix and industry market conditions.

While our updated guidance is predicated on an assumed average stack fleet of 42.5 vessels for fiscal 2016, we may consider of stacking additional vessels if market conditions warrant, although unlikely for the reasons Todd mentioned.

Our second quarter G&A expenses of $12 million, were 23% of revenues compared to $9 million and 11% of revenues for the sequential quarter.

G&A expenses were higher compared to our recent historical range, but in line with the high end of our prior guidance range. The sequential increase in G&A expenses was primarily attributable to an incremental $1.1 million in bad debt reserves offset in part by $600,000 of lower short-term incentive compensation expense related to the 2016 planned year.

In addition, the first quarter of 2016 was favorably impacted by $2 million of lower long-term stock-based incentive compensation expense and $1.1 million of lower short-term incentive comp expense related to the 2015 planned year.

After adjusting for these reconciling items, G&A expenses for the first two quarters of 2016 were actually pretty comparable at $11.8 million and $11.9 million respectively. For calendar 2016, we have lowered our guidance range for G&A and now expect G&A expenses to be in the annual range of $40 million to $43 million.

I will now review some of our key balance sheet related items for the second quarter. Yesterday, we announced that we reached an agreement with the shipyard to postpone the delivery of our final two MPSVs to the first and second quarters of 2018 without any additional cost to us.

In addition, the payment terms for the remainder of our contract were adjusted to push $43 million of construction milestone payments from the remainder of 2016 and 2017 into 2018 allowing us to preserve near-term liquidity.

The aggregate cost of our fifth OSV newbuild program is expected to remain on budget at approximately $1.3 billion, of which $13 million, $22 million and $43 million are expected to be incurred during the remainder of fiscal years 2016 and in fiscal 2017 and 2018 respectively.

From the inception of this program through June 30th of 2016, we have incurred roughly 94% of the total expected project cost including roughly $25 million that was spent during the second quarter of 2016. We expect to incur newbuild project cost of $9.2 million during the third quarter of 2016.

For an update on our historical and projected regulatory drydocking activity as well as expected cash outlays for maintenance and other CapEx, I would refer you to the data tables on page 12 and 15 of our release yesterday afternoon.

On July 29, 2016, we amended our existing revolving credit facility to reduce the borrowing base, increase the collateral coverage, and modify certain covenants to provide us with greater financial flexibility through the down cycle and beyond. I am pleased to say that our bank group continues to be very supportive with all eight of our existing lenders renewing their ratable share of their prior commitments under the facility.

Please see our press release yesterday and the Form 8-K that was filed this morning for more discussion of the amended provisions and the full document as an exhibit to the Form 8-K for all of the specifics. The amended facility will provide continued access to standby liquidity for working capital and general corporate purposes.

A few of the key changes in the amended facility are as follows: Our borrowing base was reduced from $300 million to $200 million. The minimum interest coverage ratio was reduced from 3 times to 1 times with a step up to 1.25 turn for the third quarter of 2018 and a step-up to 1.5 times for the first quarter of 2019. We were branded the option of taking a one-time election to suspend the interest coverage ratio for a holiday period of no more than four quarters ending no later than December 31, 2017, with a single permitted rescission.

If the interest coverage holiday – interest coverage ratio holiday is exercised, the borrowing base will be capped at $75 million during the holiday, the minimum collateral coverage ratio was restored to 200%, which is where it had been through the life of this loan until a year ago of the borrowing base from 150%, which resulted in an increase in the number of vessels pledged from 10 OSVs to 12 OSVs valued in excess of $400 million. All other vessels in our fleet remained unpledged to any lender.

Our previously unscheduled step down in the total debt capitalization ratio as defined from 55% to 50% was delayed by six quarters to commence with the third quarter of 2018. And we retained an accordion feature allowing for an expansion in the borrowing base up to $400 million. It is important to note that we remained in compliance with all revolver covenants both before and after the amendments of last Friday. As of today, there are no amounts drawn under the facility.

Our total cash and cash equivalents at quarter end were roughly $225 million, which put our net debt position as of June 30, 2016 at $852 million, up from $818 million sequentially. We currently have a blended average fixed cash coupon of about 4.4% on roughly $1.1 billion of total outstanding face value of publicly traded long-term unsecured debt that matures in three tranches in the years 2019, 2020 and 2021 respectively. We anticipate addressing each of these tranches of debt well in advance of their respective maturities either by refinancing or otherwise retiring such debt.

For fiscal year 2016, we expect to incur an annual run rate of cash debt service in the amount of roughly $50 million. We expect to pay about $3 million in cash taxes for the full-year 2016 and are projecting our annual GAAP tax rate to be approximately 35% for fiscal 2016.

For detailed guidance and a granular breakdown of our GAAP interest expense as well as our projected cash interest, and taxes by quarter and annually, please see our guidance tables on page 13 of our earnings release yesterday, which are also available in Excel format in the Investors Section of our website.

We project that even with the current depressed operating levels, cash generated from operations together with cash on hand should be sufficient to fund our operations and commitments at least through the end of our current guidance period without drawing on our revolving credit facility.

With that, I will turn it back to Todd for any further comments or to entertain questions?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you, Jim. Operator we will now take questions.

Question-and-Answer Session

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Gregory Lewis with Credit Suisse. Please proceed with your question.

Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker)

Thank you and good morning.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Good morning. How are you doing?

Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker)

Hey, Todd – I am surviving. Hey, Todd, just as we think about the MPSV fleet, I mean, clearly utilization for that fleet was a little bit softer, just as we think about that in the back half of the year, whether we get through hurricane season, are we seeing any inquiries for maybe some of the idle vessels, is there anyway – is there going to be anyway that cobble together some work for the MPSV fleet in the back half of the year to maybe getting up a little bit utilization?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yeah, I think we're seeing a little bit more demand now, I mean just from last quarter to this quarter, probably about another 15% more, dayrates are all over the page. So I think when you look at, as we go through this market, the MPSV is most likely as the down part of the market takes hold, I don't think we are at the bottom yet in the market for the OSVs. So, the MPSVs most likely in the future will be more cash flow generating than the OSVs, ironically. You may have not seen that last quarter, but I think in future quarters, as this thing continues to stay down, the MPSVs will be the ones that will generate more cash.

Just because of their ability to do a lot of different things and as maintenance and IRM in traditional maintenance has been pushed out to the right, that usually catches up with itself and has to be done. So we anticipate that there will be a flurry of activity later on – later, deeper in the cycle, whether that's a second quarter – I mean, that's a third quarter or the fourth quarter, right now, there's just not a lot of visibility and you are hearing it, across the whole spectrum that oil companies and our customers are pushing all expenses they can to the right, unless it's absolutely necessary for their operation, they're not spending the money. So, that – I just think the MPSVs is going to be volatile.

Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker)

Okay. Great. And then Jim, congratulations on readdressing the revolver, I mean, clearly you made some progress with that. Was there any thought or in the negotiations was it ever discussed about extending the revolver beyond the initial term? And is that something that we should expect the company to do – try to do sooner rather than later or it's just still too far away to think about?

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Yeah, it's too far. We certainly in this environment, as you well know the banks are under siege in terms of all their other – we're one of the best credits relatively speaking in their portfolio. And so as their credit committees are kind of weary of all the other uncertainty that's affecting their other customers more dramatically that actually have funding – funded lines and maybe are still even relying on additional credit to be extended to fund negative cash working capital, and it's just so uncertain that it doesn't really make sense on their part or our part to try to extend it now.

As you know, to extend it, we've got three major senior unsecured bond maturities within 18 months of one another in late 2019 to early 2021. And so naturally a senior secured lender wouldn't want to be primed by $1 billion (30:12) of unsecured debt, so to move it out, there is really no room to go.

Having said that, it's not something that I'm overly concerned about, we both, our lenders and we view late 2018 as the natural time to have that discussion. We will get through a lot of the uncertainty, the balance of this year, all of next, and call it the first half or so of 2018, where we're going to see a lot of cards between now and then.

And so we're going to hopefully be in a better place than we are today, in which case, the amendment extend will take on a certain tone, and if God forbid, we're still in a really bad situation like we are today, then as we already have said in our press release and our call today, all that while we certainly are mindful of our capital stack and the need to be proactive in addressing the actual maturities of funded debt well in advance of their maturities.

And so, this is a dynamic equation as we both not only try to preserve our window of optionality, which we've now done by relieving ourselves of the tighter covenants, it gives us the opportunity to have some standby liquidity, while not being concerned quarter-to-quarter of busting a covenant, but getting to see cards in the marketplace.

Every day, Todd and our commercial team are out, as we continue to see cards as the market demand develops, then we will begin to have a picture emerges to what our sustainable EBITDA generating capacity might be on a forward basis in advance of the need to refinance something that will inform our judgment as to how we approach things. So, that's kind of where we sit today.

Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker)

Okay. Sounds great. (31:50).

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

We are not planning on drawing the revolver, that's why we've got all the cash on our balance sheet.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Yeah, we're relying on the cash as our margin of safety with the revolver being just an optical – a backstop as a kind of – we're in a fire break glass kind of option.

Gregory Lewis - Credit Suisse Securities (USA) LLC (Broker)

Okay. Got you, guys. That makes a lot of sense. Have a good rest of the summer.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

All right. Thank you, sir.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Thank you.

Operator

Thank you. Our next question comes from Turner Holm with Clarksons Platou. Please proceed with your question.

Turner Holm - Clarksons Platou Securities AS

Hey, good morning, gentlemen.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Good morning.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Good morning.

Turner Holm - Clarksons Platou Securities AS

Hey, there. Hey, I would like to open, just ask a big picture question. I mean, clearly activity is very depressed at $40 of crude, but I mean, Jim or Todd, what level of crude price do you think is necessary to get rig and OSV activity up and going again in the Gulf of Mexico?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

I think, I've said this for a couple of quarters. I don't think it is much a crude price as you might think for deepwater as it is crude pricing stability. I mean, our customers, depending on whether they are doing tiebacks or they are doing exploratory drilling, tiebacks probably anything over $35 even at this level at $40, they can make the tiebacks work in deepwater.

New infrastructure is going to take something higher than that. To me, it's a moving target right now, where things are going to settle out as the permanent strip going forward not just in commodity price, but in cost.

Obviously, where the costs are today for OSVs in support equipment is not a sustainable price for our customers in a normalized market. If this thing stables out at a price around $50 a barrel or more, I think it's a doable market for them, I think they can go forward, but the pricing in which we're seeing in the market today is not sustainable for any of the both companies even if they didn't have any debt. We can't operate these fleets at the pricing that the customers think they are enjoying today. If they think that's sustainable, that can't happen.

So, there is going to have to be some rationalization in the market not only with equipment coming out, but equipment attritioning, and probably before it's over some consolidation through the market, we're starting to see that in the North Sea, force consolidations are starting to happen now.

Turner Holm - Clarksons Platou Securities AS

Sure. Yeah. And just to follow-up on that point, are you starting to see the stress among some of your smaller competitors down in the Gulf? And so how does that play out, I mean, maybe in the short-term here you are seeing some desperation in very, very low rates, as they try to keep the boats working, but I mean over sort of the medium and longer term, are they forced to take assets out of the market...

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes. I do think...

Turner Holm - Clarksons Platou Securities AS

... (34:55)

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes. I do think that's coming to that realization because the pricing in which is being offered today in the market, and that's being achieved in the market, is not sustainable for any company to operate in very long, because it's burning cash.

And a lot of our peer group, I don't think have – they don't have a lot of cash on the balance sheet. So you put – connect the dots, I think it's not too far in the future. Either they're going to have to stack the equipment or they're going to be in a situation in which their lenders, or the people that actually own the equipment, will have to take it over and maybe force consolidations or put it with viable companies that can operate the equipment.

I do think that's coming. If the market stays down the way we think it will stay down, that's more of a scenario that I think will develop in the future as these companies run out of working capital.

Turner Holm - Clarksons Platou Securities AS

Okay. Thank you very much gentlemen. I appreciate it.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Joe Gibney with Capital One. Please proceed with your question.

Joseph D. Gibney - Capital One Securities, Inc.

Thanks. Good morning guys. Jim, just a quick clarification, just curious on your stacked cost now as we go to 48 vessels. In your last call you talked about some of your 300 class boats being in that sort of lukewarm stack status, and just as we think about your next 48 boats that are laid up here, what's a reasonable assumption on stacking cost per day?

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Well, on the non-HOSMAX boats, the number is still around $500 a day. On the HOSMAX boats that number would be certainly above $1,000 in that, maybe $1,500, something like that I would say.

Joseph D. Gibney - Capital One Securities, Inc.

Okay. Helpful. And Todd, just as it pertains to the company killer clauses and contracts, could you give a more color like specifically what kind of risk is being asked to be shifted on the operator here, some of the stuff that you're seeing out there, it would be helpful.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Well, the clauses that would force service companies to put their whole balance sheet at risk instead of the single asset or the value of that asset being at risk or insurance clauses that we're insuring things that aren't really attributable to our services. People are asking for more insurance coverage around the whole entire operation that we may not be privy to or that we may not be liable to in a traditional sense of the services that we provide, but are asked to insure a portion of that. That is just not reasonable long-term.

We're also seeing companies starting to adopt Draconian penalty clauses for even rendering services, being able to penalize and claw back value for things that may or may not happen. That is not – that's not reasonable as well.

In some of these clauses we're looking at are uninsurable risk. And if you can't insure them, then that's where we say that's a company killer. And at the dayrates that people are earning today, which is at breakeven or below cash breakeven, when you compound some of these outlandish requests from operators to put on to the service companies, it just doesn't – let me be frank, it doesn't spell mother.

So you can't – it's just not something that this industry could endure long-term. So that will force – if that is the new state of play going forward, I think that's going to be a catalyst, not only just the dayrates, but the terms, because I think the boards and the lenders are going to have to get a hold of that and make sure that it's not destroying their assets in the process.

Joseph D. Gibney - Capital One Securities, Inc.

Okay. I appreciate the color. Thanks. I'll turn it back.

Operator

Our next question comes from the line of Daniel Burke with Johnson Rice. Please proceed with your question.

Daniel J. Burke - Johnson Rice & Co. LLC

Yeah, good morning, guys.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Hey. Good morning.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Good morning.

Daniel J. Burke - Johnson Rice & Co. LLC

Todd, I thought I heard earlier in your comments you noted with the remaining active fleet, you'll look to operate at what dayrates you can achieve. And I guess I wanted to understand – make sure I understood that comment correctly. Does that apply to the MPSV side of the fleet as well? Not surprising to hear that that's the ration – that's where the OSV market is, but wanted to hear how that applies to the MPSVs?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Sure. It applies to both fleets. We stack what we're going to stack. We think the complement of equipment that we've left in the market is the most attractive equipment in both segments for our customers, meaning we have – there is a tremendous amount of value there.

And to keep our organization in all of the applicable rules and regulations and operating procedures and safety management systems and all the things that are needed to be able to work in this industry, to keep all that machine going, we're going to keep that complement of equipment in and just price the market whatever the market may be that day.

We think we are in a down market, this is a cyclical business; eventually that will firm. Whether that firms because other equipment leaves the market either via being stacked or bankruptcies or the market turns up, and there is more demand that will shore the dayrates up, either way we think that eventually will happen, and we think we have the balance sheet and the right type of assets to play that model now, to play that structure.

Daniel J. Burke - Johnson Rice & Co. LLC

That's helpful. And then we get limited commercial commentary from you on the MPSV side, so I appreciate the small data point on seeing a little bit more demand in the current quarter. I know it's just the current quarter, but when you talk about 15% more, can you elaborate just a little bit on what that 15% means, is that inquiry levels, utilization levels?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Utilization levels. I am sorry, it's around today, and the reason we don't give a lot of color on this during our one-on-ones or anything of that nature as we believe, this is the time in which every 90 days we give color on the market. The current color today and what happened in the last 90 days, and as of – as the new quarter started, we're just a month into it, we've already seen about a 15% to 17% increase in utilization. And the dayrate – blended dayrate of the MPSVs is up a $3,000 to $4,000 a day. So we are seeing.

And that may just be a flurry of activity, just getting things done before the end of the summer. It may be – there maybe – there's a lot of different drivers, a lot of it is – it's all spot work. We do have the situation which JADE has been put in. We do think that as we deliver, remember the vessels we're delivering this next couple of weeks, will be the first vessels that have 250-ton crane capacity under a U.S. flag.

So, that adds a new element into the market that has never existed under the Jones Act fleets. So we are – we think bringing that type of capability to the Jones Act fleet and under U.S. flag will also bring new opportunities that we haven't been able to explore here before.

Daniel J. Burke - Johnson Rice & Co. LLC

Okay. Great. That's helpful. And maybe I will cram one last one for Jim. Jim, the language in your liquidity paragraph talked about maintaining liquidity through the end of the guidance period. You used to say through the end of the newbuild period. I think the right interpretation is, in both cases, you are referring to the end of 2017, but just wanted to make sure I understood that language adjustment?

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

You are exactly right that the way we use the word it, was implicitly through the end of 2017. And so as we approach this press release given the murkiness of the current outlook, we just wanted to – we added the at least, it's not like we have some reason to know that we can't have continued to sustain into 2018. It's just that 2018 in today's world, it just seems like eons away that it felt more prudent to at least contain the guidance to the guidance period.

And as you know, our press release template and our reference pages 12 and 13 of the press release expressly, because we give you basically the current year and forward year at all times. So we basically are saying, as you said the same thing, end of 2017, but we did have the words at least there. We are not telling – we don't believe we can go into 2018, but we felt like it was important to put a end date on the guidance, and then both of us can think about 2018 and consider whether that same statement could be made for that year. Certainly today, I believe it does, but it's just a belief, the lack of visibility of when the market is going to turn is hard to call.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Let me qualify something, when we talked about the MPSVs as well, and we are talking about a little flurry of activity and that we think that the majority of the cash flows will start to come from that side of the house. The reason we say that just within the first month of the third quarter, we have seen rates on the PSVs even dip much, much lower.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

And utilization.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

So I think you have seen on some other calls that they think 300s are going between 10 and 15, we are seeing people dip way below 10. So we are saying that is no way sustainable, and can't last for very long, but that's where the true market is today. It's all over the board, but that is not something that I think an operator, an oil company can hang their hat on that that's going to be the market. That can only last – well, we don't know how long, until people run out of cash, but we are seeing it's – people are desperately pricing below 10 now and in some cases well below 10.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

And just to keep it evenhanded since Todd did give you a couple of data points, which we rarely do. But since he mentioned that the MPSVs quarter-to-date, which basically means one month into the quarter we're up the numbers that he said, the utilization is up about 15%, 17%, and therefore the effective dayrate is up a few thousand dollars on the MPSV side, well as of the same moment for the same first month on the OSV side, utilization is down 3% and dayrate is down $1,200.

So it's a moving target in terms of obviously it goes without saying, it's your and our interest that people would adjust their financial models on our forecast, we don't give guidance, but we give you a lot of anecdotal color and we give you a lot of cost and other type of guidance that hopefully as people recalibrate their consensus first call estimates for the third quarter and beyond, we're trying to keep this thing real and give you more forthright information as possible. So we can guide expectations that things are not getting better. We've not seen a bottom, but we certainly feel highly confident in our cash position, our financial flexibility and our fleet complement in the right market, so we are prepared for an upturn, just don't know when it's going to be, not this quarter.

Daniel J. Burke - Johnson Rice & Co. LLC

Got it. Okay guys. Look, I really appreciate all that detail.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

All right. Thank you.

Operator

Our next question comes from the line of Mark Brown with Seaport Global Securities. Please proceed with your question.

Mark William Brown - Seaport Global Securities LLC

Hey Todd, hey Jim.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Hi Mark.

Mark William Brown - Seaport Global Securities LLC

I just had a question – hey, I just had a question with the JADE commentary, it seems that Jones Act enforcement, as you guys have talked about for a few years has really started to get stepped up, and I was curious what sort of competition you have for the work that's out there for your MPSVs? I know that there are many foreign flagged MPSVs at least when the market was strong that you had to compete against, are you starting to see those foreign flagged MPSVs move out of the marketed fleet and not wanting to face the risk of Jones Act enforcement?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Well, the fact of the matter, the whole entire world, we're not just talking about the Gulf of Mexico is off, and a lot of the tonnage that has been built in the subsea arena, particularly in that genre, that type of equipment has been built in the North Atlantic region. A lot of it, Norwegian flag has pushed out across the globe, and they are running anywhere they can to try to get any revenue.

A big thing that a lot of those companies are facing today, and this is not – you can look it up most of them are public, they have seriously financial stress in their balance sheets, they are out of cash. So that's why, even to run out of the Gulf of Mexico once they are here costs a tremendous amount of money to go somewhere else. And where do you run today? No, there is not a safe haven to run to.

So I think it's going to be coupled with a desperation situation in which they're going to try to get any work they can, probably some of it will be skirting in the gray area of whether it's legal or not, in my opinion, but they're going to probably do it out of desperation if they can get away with it.

And the other is to physically run somewhere costs money, and these companies are already basically out of cash. So a perfect storm, excuse the pun, but that's what we are looking at with the current foreign flagged fleet that is in the Gulf of Mexico.

Mark William Brown - Seaport Global Securities LLC

Okay. That makes sense. And I had a question on Brazil. Earlier today Transocean mentioned on their call that with Statoil purchasing a block in the Santos Basin, that that they were somewhat encouraged by increased foreign participation in that region, and I was wondering if you could update us on your thoughts about Brazil?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes. We think that of the three areas that we operate, the Gulf of Mexico, Brazil, and Mexico proper, of course we do work in between there in that hemisphere in Trinidad, Guyana and places like that. But of the major markets we think the Gulf of Mexico with its fields that reside in the Gulf are world class. The same thing with the pre-salt in Brazil. We are very encouraged by what's happening there, that the government seems to be moving more toward a trend of pushing pre-salt and other areas to operate into Brazil to the IOCs. We find that very positive, and we welcome the IOCs becoming more of the operators in that market and transitioning from Petrobras to the IOCs.

So that is positive. I can't tell you that it's something that's going to happen overnight or when it's going to happen. But we do believe that's the movement. But, with the commodity prices as volatile as it's been, I think it's making difficult for our operators or our customers to spend any cash anywhere on the planet even in Brazil. So, it is still going to be a tough market until the commodity price stabilizes.

Mark William Brown - Seaport Global Securities LLC

Very good. Thank you very much.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Cole Sullivan with Wells Fargo. Please proceed with your question.

Coleman W. Sullivan - Wells Fargo Securities LLC

Hi. Thanks guys. I appreciate the color you guys have given on the MPSVs and the PSVs so far in 3Q. But I was wondering if – as we're recalibrating your models, how to think about the rates on the PSV side were up in 2Q on mix and then down a little bit in 3Q. How do we see the rollovers progressing on any legacy contracts that are still in that average? And when do you think we will be – we will be on a sort of a more of a market rate basis in the fleet?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

We have only had two vessels left on vessels that are going to roll over, one will be at the end of the third quarter and one will be first of next year. So, it's already basically in our bloodstream and DNA. So, I don't think that's as big a mover as it was, so.

And then the question is, by the end of the year, the first quarter of next year, what is the current environment on the low end of the dayrate, has it bounced off the bottom? That's a $64 million question I think we are all asking. And does that comes from demand, or does it come from more vessels being pushed out of the market and going to stack.

I tend to lean right now not on the positive side of that equation, meaning there is going to be more demand, I tend to lean that it's going to be more stacking of equipment that's got to come out of the market to balance it, so that we can have some stabilization on rates.

How that equipment comes out of the market is also a big question. Is that going to come out from a standpoint of companies just not being able to financially underwrite their customers, because it is below cash breakeven. So basically, we're all underwriting the oil company today to work for them. Does that eventually come to an end, because they're out of cash and it get stacked, or is it more of a proactive stance where companies finally realize that is the answer, is to go ahead and put their fleets to the beach to stabilize this thing?

Coleman W. Sullivan - Wells Fargo Securities LLC

Okay. I think all my others have been asked already. I will turn it back.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Thank you.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Steven Tittsworth with Stifel. Please proceed with your question.

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

Hi guys. Thanks for taking my call. Sorry if I – if it's already been answered already, but I wanted to talk to you about the accordion feature associated with this. Am I correct that you can go on an additional $200 million for a total of $400 million of borrowing availability?

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Yeah, that's a provision, it's been in there from the beginning. My main point of even mentioning it was that we left it in because we don't know how things can turn on a dime, and it is the feature that allows us to rapidly mobilize and request and increase an our borrowing base. But I would point out that it does require, of course, the banks to commit to that incremental credit request.

So, the plumbing is in place to efficiently and quickly increase the borrowing base, for example, if we should have a compelling use of proceeds and the banks agree with us, then we can very quickly – it's optionality is what it is, but it's certainly not something that is at this moment, something I would expect to engage in. But, I think we mentioned it mainly out of – to be complete about it is that was not taken out of the instrument in our amendment, and left in for the unknowable opportunity that presents itself that allows us the financial flexibility to quickly increase our borrowing base either back to where it was or back up to the full $400 million. But it's really optionality, and it's not in play so to speak, it requires an incremental level of commitment on the part of the banks at their option.

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

Understood. That makes sense. The prior presentation, I think it was back in June, you put down your coverage ratios based on book value, market value and replacement costs.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes.

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

Based upon the numbers that I see with the additional collateral being posted for the revolver, would you be putting out a revised version of that? It would appear though because of market conditions obviously, vessels are freighting for less in the secondary market, and I would just like to get a revised view on what the coverage is to that, for the vessels?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes. We always update all of our slides every time we have a quarterly earnings call. We then go back for our full slide deck and update them for the then current reality. And so the next slide deck we post will be updated. Now, I will tell you that the degradation in value on some of the vessels that we pledged as collateral in the big scheme of things are relatively modest than what you might think.

We were able to appraise the boats that we have pledged at still above net book value. And so, given the fleet complementing the size of it, I don't think that number is going to move materially. Because the approach to fair value is not wholly out, is not wholly determined by some appraiser for a one-off assignment for a loan instrument. It's a composite of evaluation methodologies, DCFs (57:33), other evaluation. So we use all of the evaluation methodologies in approaching that exercise of giving you what we believe the fair value is based on objective data.

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

And that's a great chart and it's very helpful to just get a sense of the coverage or the assets versus the debt profile. So we look forward to seeing that.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yes, of course.

Stephen M. Puckowitz - Stifel, Nicolaus & Co., Inc.

And thank you very much for taking my question.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Thank you.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Ben Friedman with Morgan Stanley. Please proceed with your question.

Benjamin J. Friedman - Morgan Stanley & Co. LLC

Hey, guys. I appreciate you fitting me in the back end of the call here. Sorry to beat the dead horse.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

We didn't do that Ben, we asked – requested you at first, but.

Benjamin J. Friedman - Morgan Stanley & Co. LLC

I appreciate it. So, on the MPSV demand I know you discussed and I appreciate the color throughout the call. I just wanted to know is there any aspect of this work that might be more regulatory driven would you have additional foresight moving forward, and in terms of demand levers that may come back? And if you could just provide also more color on the types of work that these MPSVs are trying to get? I know you mentioned the IMR in maintenance, but is there anything else out there that these vessels are tendering for?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Yeah. I mean, the decommissioning market, we'll see how that goes, as a lot of our customers have gone back to their regulators and trying to get some sort of time to decommission pushed out in the future, just because of the state of the financial health of the industry.

But I think the decommissioning market is one, we do so many different things with the MPSVs between flotel and accommodation services for turnarounds on floating production units to well flow back opportunities, well intervention spreads that can go on for not just P&A type work, but for actually cleaning wells out and hydrate remediation, things of that nature.

So a lot of different work packages can go on the vessels to do a lot of the maintenance, a lot of the integral maintenance that it takes to keep this infrastructure in place over time, which has a lot of ware on it as you know; being in the environment that it is, in saltwater and very, very deep applications. A lot of things can go wrong, and I say go wrong just from fatigue that have to be touched quite a bit.

So, that's where those MPSVs can play up and down the chain. Our MPSVs are pretty unique, because they all carry fluids, so we can offer something to our customers that most of our peer group cannot. We can carry chemicals and we can carry weight material in the fluid form, or we could do liquid mud transfers, things of that nature that could spread us across the whole spectrum of the oil company instead of just working for one department.

Benjamin J. Friedman - Morgan Stanley & Co. LLC

All right. That's great color. I appreciate it. And then kind of a piggybacking on that to some extent, so I am curious behind the rationale of stacking MPSV vessels, I know, you mentioned that the costs are probably higher maybe within the $1,000 to $1,500 a day range, but does it ever make sense given the high-spec nature of the vessels to keep the vessel running at any cost?

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

No, I think, you really have to start balancing out. This business is a risk business, a lot of it is not going to be very transparent to any of us right now, getting information and planning exactly what the demand is going to be in the future is as clear as mud. So I think just knowing the business and understanding the infrastructure of the business, we've been doing it so long, we've kind of picked our strategy based on what we think demand will be during the course of the year or a couple of years, knowing what's coming into the market, what's already been deployed into the market.

So I don't want to tell you that our MPSVs, that we would never stack an MPSV, that's not true, what we have done on a few MPSVs is taking cost considerably out of having them – I don't want to call them stacked per se, but lukewarm, so we have been able to cut some costs on a few MPSVs to transition into maybe some spot work as it becomes available on a very short notice.

And we just have to play that daily as we get new information in and new data points, we'll drive what decision we make, but that's extremely fluid, that's not something that's a prescriptive far out into the future, you really have to just monitoring the market.

The reason we've been so aggressive on OSVs is because of so many that are – in the market that are staying in the market that it's so – there's so much overcapacity, that's why we've taken a more aggressive approach on that segment of our business.

Benjamin J. Friedman - Morgan Stanley & Co. LLC

Awesome. Thank you. Thank you so much, guys.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

Okay. Thank you.

James O. Harp, Jr. - Chief Financial Officer & Executive Vice President

Thank you.

Operator

That concludes our – Oh! Sorry.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

No, go ahead.

Operator

That concludes our question-and-answer session. I would like to turn the call back over to management for any closing comments.

Todd M. Hornbeck - Chairman, President & Chief Executive Officer

All right. I want to thank everybody for joining us today on our call. Just so, you know, our third-quarter conference call will be November 3rd. We look forward to talking to you then. Thank you very much.

Operator

This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!