Seadrill Limited (NYSE:SDRL) Q2 2014 Results Earnings Conference Call August 27, 2014 12:00 PM ET
John Roche - Head, Investor Relations
Per Wullf - CEO
Rune Magnus Lundetrae - CFO
Lukas Daul - ABG
Darren Gacicia - Guggenheim Partners
Good day, ladies and gentlemen. And welcome to the Second Quarter 2014 Seadrill Limited Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Roche. Please go ahead, sir.
Thanks, Alex. Good afternoon, and welcome everyone to Seadrill Limited Second Quarter Earnings Conference Call. With me today I have Per Wullf; our Chief Executive Officer and Rune Magnus Lundetrae, our CFO.
Before we get started, I would like to remind everyone, that much of the discussion today will not be based on historical fact, but rather consist of forward-looking statements that are subject to uncertainty. We articulate some of these items on page two of the presentation or additional information, please view our website at www.seadrill.com.
To begin discussion today, Per is going to walk us through some of the highlights for the second quarter and subsequent events during the third quarter. We have a number of contract wins, a number of strategic developments, and also a number of funding successes that Rune will walk through later in the call.
Per will also address Seadrill strategy and market outlook. We're an evolving group. We’ve come a long way since our IPO in 2007. We think this is a great opportunity to address the current structure of the group, how we arrive there and also how it helps us to compete in the current environment.
Finally, Rune will then address our financial highlights and take us through the many successful transaction and developing capital structure of the Group.
With that, I’d like to turn over the call to our CEO, Per Wullf.
Welcome everybody. We've had a good second quarter and Seadrill has posted record result over the last two quarters and we are well placed for the future. We continue to have best-in-class operations performance and we have an excellent safety track record. You all know the license to operate is actually a safe and efficient operation.
We're expanding our areas of operation attracting new businesses and increasing the number of assets we own. We also have strongest financial position in our history and have decided to maintain the dividend of $1 per share. We expect to be able to support this dividend level for foreseeable future.
Seadrill remain partner of choice for the world's leading oil companies with the most modern fleet and the most competent work forces. If this combination of an ultra modern fleet and highly trained work force that actually make us partner of choice for most oil companies.
Seadrill Limited's uptime during the second quarter was 96% for floaters and 93% for jack-ups. The utilization for jack-ups was affected by the mobilization of a number of rigs to Mexico for start-up during the third quarter.
We expect utilization to return to the high 90s for the jack-ups in third quarter. Actually we already see that, we had 98% as we speak for third quarter.
I'm very pleased with the recovery and operation performance for the entire group during the second quarter having posted a consolidated uptime of 94%. The Management Team and employees did an outstanding job of working through the challenges during the first quarter and we see the benefits of a uniform fleet. It’s fantastic to run light units when we have challenges because we can all held this around.
Operational excellence is a corner focus of Seadrill and it leads to repeat businesses and has established the company as a partner of choice for the world’s leading oil companies.
In order to sustain this performance, we continue to invest heavily in training and development and improve our maintenance systems etcetera and we are focused on increasing the competencies on all our employees.
We are proud of the fact that our dedication has produced result in terms of uptime and we have an excellent safety track record and our incident rate remain below the industry average.
In addition to operational excellence Seadrill has an industry leading growth profile. Our best-in-class assets, global footprint and history of safe and efficient operation allow us to maintain long-term customer relationships and expand into new areas of operation.
The recent contract wins with Pemex and Rosneft are great examples of the benefits of scale. Unique fleet and operational track record have resulted in continued strong growth.
The Group has posted two consecutive record quarters and expect to grow significantly over the next 12 months as new units enter operation at solid day rates.
Second quarter EBITDA for Seadrill grew on a consolidated basis of $865 million and for Seadrill Limited $641 million primarily reflects the successes we have had operationally. We're also consistently sustaining the Seadrill Group’s consolidation order backlog around $20 billion.
And I am pleased with the record list of result for the second quarter and expect third quarter EBITDA to be roughly in line or just above with the second result for the Seadrill Group on a consolidated basis.
The Group is on track to earn a good figure of $10 million in EBITDA per day by the end of the year. The growth going into 2015 is impressive as Saturn, Jupiter and Neptune will come into services. As you know they are all out and ready to leave Korea as we speak for the respective positions in West Africa and in U.S. Gulf.
The expected growth strategy roughly $20 billion of order backlog and continued access to capital market makes the Board highly confident in the company's ability to support the dividend well into 2016. Rune Magnus will take us through the financial position and strategy later in the call.
We executed a number of new contracts during the second quarter adding roughly $1.5 billion to our order backlog. We have been busy. Contracts were secured for five jack-ups, West Tucana, West Telesto, West Ariel and West Prospero and we also extended the contract for the West Mischief.
We also signed a five-year contract for the West Jupiter at a robust $567,000 day rate. This contract is a great win and adds to our visibility and dividend supporting going forward.
We sold $230 million shares in SapuraKencana, raising roughly $300 million proceeds. This sale represents the monetization of shares acquired as part of the consideration for the sale of our tender rig business last year.
Our joint venture in Brazil continues to develop and the PLSV program is moving ahead having recently taken a unit into operation. Actually that PLSV we took into operation have been running at 98% uptime since she came into service a month ago.
Finally Seadrill Partners completed a $1.1 billion add-on term loan B. This is a continuation of the financial strategy implemented in the first quarter, which Rune will address later in the call.
Additionally during the third quarter to date our contract wins have continued on the back of our investment and cooperation agreements Roche is announcing during the second quarter, we announced five contracts representing roughly $4.1 billion in contract backlog, which we'll be commencing in Russian waters stack up between 2015 and 2017.
I would like to point that the West Alpha recently began operations in the Kara Sea and she is doing it very well and we are pleased to have the first rig in the Russian Arctic and believe the highlights it will state as a trusted partner to the major oil companies.
Additionally we recently announced our intention to acquire 150 land rigs from Rosneft and Rosneft’s intention to take a 30% stake in NADL. We are pleased to have Rosneft as the strategic partner and we look forward to close the transaction in fourth quarter.
Another important contract win for us was the West Saturn. The rate of $634,000 a day adds another $0.5 billion of contract backlog. It’s meaningful in locking up capacity and securing our dividend payment going forward.
On the financial side, lately we completed an impressive $1.35 billion secured funding facility for the West Pegasus, West Gemini and West Orion.
As Rune will go through later this along with many other transaction completed this year, will help us also understand what has been accomplished as well as a remaining funding requirements. Finally, the completed the voluntary exchange offer for our $650 million convertible bond with dues in total debt outstanding.
Seadrill priced itself as being innovative. This is how best in class returns are generated for our shareholders. In 2005, while we were the only driller that focused on high end assets that tend to be employed throughout the cycle, industry participants recognized the success of this strategy and are attempting to replicate it to a degree.
The evolution of the maturity of Seadrill has brought us to the point in time where we are capable of providing both single assets, but also solution assets to clients.
This is actually what we've done in U.S., Mexico, Brazil, Saudi Arabia and as you know most recently with Rosneft. It’s not a shift in strategy, but rather evolutionary process that continuously keeps the company on the front foot in order to drive growth and value creation for our shareholders.
The establishment of subsidiaries also creates companies focused on a particular theme. For Seadrill partners its long-term contracts for North Atlantic, Haas and Arctic environment. This focus provides investors with an opportunity to participate in unique themes, but at the same time providing the company’s with new sources of funding.
It is this evolutionary process that keeps Seadrill a step ahead and the industry and the result are tangible, no matter where a unit visit as instructor of Seadrill Group operations are consistent across the fleet with the same management system, process and stand art.
It’s extremely important for our oil companies so they can recognize us. This resulted in our customer see, the Seadrill name in all our entities.
Moving a little bit to the floater backlog I am pleased to be able to report the recent backlog addition and what continues to be a trend in floater market. The Seadrill Group consolidated floater backlog currently stated at $17.4 billion and provides significant visibility for our business going forward.
For 2014, we have only one rig available the growth of call it 3%, 2015, 22%, and fleet availability for 2016 is 40%. The long-term fundamentals for the floater business are strong.
High and stable oil prices continue. Except for a brief period, oil prices have actually remained above $100 barrel in the last three and half year and the global economy continues along the growth path following the financial crisis.
Even these strong macro fundamentals oil companies seem to be unable to generate free cash flow to grow the businesses and have entered into a period of selectivity of projects and cost escalated across the entire portfolio of projects.
The majority of low cost project has been produced, we know that and oil companies are entering into a new phase in which recently discovered oil must be developed in order to grow production. These reserves are in the deep and ultra-deep water and are far more complex than reserves discovered in prior periods.
We can hereby assume, thereby assume that the amount of rig capacity which are needed to produce a barrel of offshore oil in the future will increase.
The number of newbuild announcement has rapidly declined and exciting newbuild projects are extending delivery days. Major oil companies continue to focus their activity on sixth generation units.
We like that actually. With high variable deck load capacity, dual BOPs, dual activities, capabilities etcetera, etcetera and a bit to advance the safety and efficiency of the rigs they employ.
However, this is not simply a matter of preference that can anticipate if customer preferences change. This migration to a higher specification fleet is in part dictated by the increasingly challenging project requirements of recent discoveries.
As far our short term outlook, the market continues to be challenging. However, Seadrill is well-positioned with few rig exposed to the near term pricing weakness. You can see it on the slide, day rates are falling faster and all the units and is important to be focused on the high end assets as you will see Seadrill combines both of these elements.
Our largest five competitors have an average 38 units each delivered prior to year 2000. Seadrill has only two. These units are simply not competitively Seadrill fleet. Seadrill also have the lowest percentage of rig that are free and clear from today until 2016.
The near term market is partly driven by a reduction in exploration drilling. However, there is a evidence of positive developments in the number of tenders that have materialized for 2015, 2016 and ongoing.
In the meantime, independent E&P's could potentially fill some of the exploration gap that has been created by the cuts in exploration spending from the major oil companies. We have seen that opportunistic independent oil companies use the present market weakness to tender for projects where profitability has improved due to lower rig rates in the Gulf of Mexico.
The reduced activity level for major oils also led to a number of sublets which again puts further pressure on the market.
The reported overall contracting activity has increased. However, we do see some industry participants, especially those with older units and significant portions of their fleet requiring renewal in the short term, driving prices down.
The uncertain cash flow profile on older units is forcing contractors to make difficult decisions and lock up their best assets in order to gain clarity on the near term outlook for the business. It is important to note that many of these units are facing high capital expenditures requirements in order to stay part of the active fleet and owners of these assets faces tough decisions along upgrading and actually continue classing the units, swap out the new units, or retire the asset.
We have seen two examples of this recently in Norway, two units go off contract. We are confident that we’ll see more development like this and see additional units stacked or retired going forward.
Our jack-up backlog currently stands at $5.5 billion. For 2014 we had 3% of our jack-up fleet available, and for 2015, 27%.
The near term outlook for premium jack-up rigs is firm. Operators continue to appreciate the enhanced recovery factors that premium units provide and there is still a shortage of cable units in the near term.
From a regional perspective there is a slight oversupply in Southeast Asia due to the region's proximity to yards and the high number of regional players not equipped to operate outside the region. You've also seen that with us, this has resulted us move to more attractive margins in West Africa, Middle East, and Mexico.
Seadrill has taken advantages of its position as a global operator. And you have seen it and you seen it lately the past three months, we have moved five rigs to Mexico. And we have more going to West Africa.
Long term fundamentals, for the jack-ups, the medium term outlook for the business is a bit uncertain take into account 140 new units currently on the constructions. However, among our global fleet of nearly 500 units of which roughly half of 30 years old or more, it appears that these supply additions are manageable in the long term.
It also remains to be seen how many of the rigs under constructions actually will make it to the market given the number of synergy capitalized speculators. We have a lot of smaller investors investing in units out there, that don’t have any operational track record that are pursuing newbuilds. But these units will find a home within the majors as we go forward.
Scrapping activity has subsided in light of the strong near term fundamentals; however it is likely that additional units are removed from the market as the building cycle advances.
Rune as you're seeing, please walk us through the financial performance please.
Rune Magnus Lundetrae
Thank you very much Per, and good morning, good afternoon and thanks for dialing in to our quarterly call. My name is Rune Lundetrae, I'm the Group's CFO.
Starting with some financial performance highlights, we did see significant improvement in the economic utilization. So we have backed up at the 94% level for the fleet on a pro forma consolidated basis and we are very pleased with that. That's also evident in the numbers where we saw increase in revenue again on pro forma consolidated basis of $118 million.
This is due to not only better uptime namely on the West Aquarius and West Alpha compared to the first quarter but also commencement of the Sevan Louisiana, the West Linus and the West Freedom in the quarter.
On the operating expenses side, there is no significant changes and you’ll note that the EBITDA margin is pretty much inline with the previous quarter, of course slightly better due to the improved economic utilization. So OpEx is very much in line with the revenue for this quarter.
EBITDA as Per said, third consecutive record quarter for Seadrill. From 788 in the first quarter to 865 in this quarter and again it's due to the commencement of the three rigs and also significantly better uptime for the working rigs.
Moving over to the balance sheet side, not as volatile as last quarter where we deconsolidated Seadrill Partners. On the asset side, there was a decrease of some $800 million primarily driven by a decrease in cash and also decrease in related party receivables from Seadrill Partners resulting from the refinancing of debt again by Seadrill Partners. We did that in June, the Term loan B facility.
On the liability sides, again a decrease of approximately $960 million primarily due to the repayment of third party debt, related to the Seadrill Partners rig which was refinanced in June and also normal quarterly installments. Slight increase in equity $74 million and this was driven by net income and offset by the dividends paid in the quarter.
As I said on the EBITDA contribution, we see significant increase in EBITDA contribution from the floater side, with the rest Alpha, Aquarius and also Pegasus having a better operational quarter. Louisiana commenced operation, so we had an improvement of some $70 million quarter-on-quarter.
$641 million of standalone EBITDA contribution, $224 million from Seadrill Partners and that comes to $865 million for the fully consolidated pro forma EBITDA. No significant changes from the jack-ups or tenders.
Before we open up for Q&A, I'd like to spend a little bit time on the funding strategy and our successful year-to-date funding of Seadrill - the Seadrill Group. We have raised $7.3 billion in capital this year and made significant progress in addressing our funding requirements.
We are fully funded in 2014 and well into 2015, and have roughly half of our funding requirements in 2015 represented by contracted assets, for example the West Rigel and West Mira. So I'm very confident that we will be able to also fund the outstanding newbuildings.
The majority of the balance of 2015 funding is the jack-up deliveries that are outside the contracting window. It is a bit too soon to secure funding for 2016 commitments due to commitment fees, that we like to push us close to the delivery as possible.
Then going forward you should expect us to use the funding strategy Seadrill has used to-date, including secured bank financing, ECAs, bonds, TLBs, and also MLP dropdowns, going forward to address our capital needs.
As I said, Seadrill is in the best financial position in recent history with cash-on-hand and having open up to a numerous new markets recently.
In fact, our bank funding has been reduced throughout the 55% of the outstanding debt. This is illustrative of the capital structure transformation and balance in funding, we have worked hard to achieve.
The result the way we see, has increased flexibility and also improved margins across the entire capital structure.
By that, I'll give the word back to John Roche and we’ll open up for Q&A. Thank you very much.
Thanks Rune Magnu. Before I do turn over the call to the operator to queue up everyone, we do have a large number of callers today. I do kindly ask everyone to limit questions to one question, plus one follow-up. Also if there is anything that relates to specific accounting items, as always I will speak to all of you in good time and help you get the figures straightened out.
So with that Alex, if we could pause for a moment to assemble the Q&A roster.
Thank you. (Operator Instructions) And we have an opening question from [indiscernible] of Morgan Stanley. Please go ahead. Your line is open.
Hi, thank you for taking my question, I want to first hone in on Mexico which has seen quite a bit of buzz with energy reforms. We know oil companies already gearing up for deepwater licensing rounds, but do you also see these operators coming to the market for incremental floaters within next 12 to 18 months? And have you already started discussions with some potential customers?
We have not started discussions with potential customers for Mexico as we speak right now. We know it is opening up. We have fantastic position, as you know we have the five jack-ups in there that are physically there. Three of them are running as we speak and the two other ones are coming into an earning day ratio within the next couple of weeks.
So, there we are perfectly positioned with Pemex. Furthermore, we also have a deepwater unit in there. We have operated the past two and half year, the West Pegasus and we have had loggish strike for that rig for the past two and half years.
So we have possibly sitting there. We know how to work in Mexico and we are ready to work more for Pemex and also for other companies but right now we’re not discussing directly with the companies other than Pemex.
Okay, thanks. And for my follow-up, you’ve mentioned that several oil companies now are introducing requirements on managed pressure drilling. Could you elaborate on this trend and I am wondering if the idle West Tellus or any of your other rigs could be candidate for this technology and if so what would that upgrade until in terms of engineering costs?
Well, first I would say that managed pressure drilling, we don’t come under, you will go and see a large number of the sixth generation units having managed pressure drilling ongoing for over the coming years.
In all our deepwater units can hold managed pressure drilling, there are various systems in the market not all our units they can support managed pressure drilling. Short term our existing units are prepared to receive managed pressure drilling and typically it is something the oil company, if they have the requirement it is a discussion that is going on in parallel with the normal day rate then it also takes possibly take for you if you can run managed pressure drilling.
We have secured managed pressure drilling packages and these packages can actually work on any of our units, so it’s just a matter of making them suitable to, where they are first required. So they could typically, going to be presently idle in West Palm.
Okay, great. Thanks.
The cost of the units can vary on, depending on the package size plus anywhere between $18 million and $35 million and like I said it’s typically the oil company paying it over day rate or as an lump sum.
Perfect. I’ll turn it over.
Next question please.
We take our next question from [Luthar] (ph) of Citigroup. Please go ahead. Your line is open.
Hello, gentlemen. Could you just please update us on your discussions with Petrobras and how do you see that market developing in the short term? Thanks very much.
Well, as you know, we took a strategic position as we tried to expand our operation in harsh environment and come up into the other area a year ago.
You’ve seen that we're done with Rosneft and you’ve seen the amount of units we have going in there. We aim to appear, this will all go and be done and tested we expect in mid-November then everything has been firmed up and we have five units that will go and commence offshore from 2015 and 2017.
So, from operation point of view this is fantastic. We also have Alpha in there already now drilling up in the Kara Sea. So we look at it as a fantastic opportunity for Seadrill to team up with Rosneft and working in Russia and being in there as a front runner working with Rosneft, we feel we are ideally placed there or are easily going forward.
Sir, I was actually asking about Petrobras, sorry. I was actually wondering about your construction in Brazil.
I thought you were asking about Rosneft, sorry about that.
That was also very helpful.
Okay, you want to know about Pemex as well?
Well, we have agreed on -- sorry about this, we agreed on the two contracts for the extension of two of the contracts down there. They are in packets, Petrobras have gone out to a number of drilling contract as an extended or negotiated extension of contracts and be a part of a packet of, I think it is five units. We are waiting on the Board approval there but everything has been done. So, we’re just waiting on the Board.
Thank you very much.
We’ll take our next question from Lukas Daul of ABG. Please go ahead, your line is open.
Lukas Daul - ABG
Thank you. Good evening guys. First question, Per, you have been restrained from defining the leading edge day rate over the past few conference calls, but looking at West Pegasus where the day rate is being adjusted to market rate. Now, it's down from 555 to 461. Would you say that, that 460 is a leading edge currently for a 60 unit?
Well, that’s hard to say. When you see the adjustment on Pegasus, first if you recall, we inherited this contract with this nice contract wording and yes we get the rig cheap. We also have that wording in there. So, the rate is going a little bit up and down there.
This rate represent actually it follows an index of rigs up to 7,500 feet. So, it is not a thing you can use as a leading edge for day rates, that would be wrong.
It was something that was done with the previous owner of this rig and it’s just an index we have to use in order to regulate the contract and that’s happening every year in August.
Lukas Daul - ABG
All right, good. And then the second thing, you are indicating some down time in the third quarter, actually in excess of 100 days. Could you say a little bit more about, which rigs this relates and what the issue is?
I don’t like to talk about down time because I hate it. But when we talk second quarter, with deepwater units and we can have smaller partners. It can be three kilometer water debt of the consequences when stuff happens off in 2014, 16 days.
You know the amount of the units we have. And it happens once in a while. So, first of all when we guide for third quarter, our EBITDA there, then all the days, the 100 plus days we have put in, that’s the included in there.
We have already taken that in there. Okay, so that’s one explanation. Then when we look at the rigs in question, we are talking about, we are talking about a couple of rigs in Brazil. One rig in Brazil and we’re talking about two rigs in the Gulf of U.S.
Lukas Daul - ABG
All right. That’s helpful.
When we talk about the failure of the rigs, it’s all subsea related forcing us to do a BOP round trip and off when these water depths just around itself take 12, 13, 14 days. Okay?
Lukas Daul - ABG
Next question please operator.
We’ll take our next question from Darren Gacicia of Guggenheim Partners. Please go ahead, your line is open.
Darren Gacicia - Guggenheim Partners
Hey, thanks for taking my question. One of the things you said in your opening comments and in the report was sort in the sea incremental tendering and proving at least the volume of it and I think the market probably has some visibility of kind of the very public tenders but there is also a lot of conversations that happed underneath or beyond the tender market.
The question really is, for me, what do you see in terms of the start dates for some of these contracts? Is there a particular region that you’re seeing some particular strength? Does it kind of make it incrementally more positive, relative maybe the last time you spoke to us? Just some parameters and some profiling of kind of what you’re seeing in the tender market would be great?
I was not that positive about the market when we spoke the last time and I see it actually quite some better and you just see how the market moves. This is three months ago we spoke about this last time and a number of things have happened. First of all we have a number of units coming out and we are already in dialogue about new buildings coming out in end 2015 about securing term contracts.
So, that is a good sign. I did not see that when we spoke three months ago. So, that is an opening -- that's why I say it in the opening here today as well, that’s one thing, but also you have seen Saturn, you have seen Jupiter materialize five contract for Total and the two year for Exxon happening and right behind that we have seen actually a number of operators in the market, both tantalize but we also talked directly about securing term contracts.
We can’t afford to leave Tellus where it is right now, and Las Palmas, so once she get term contract then we will look for infill work for her. So I am little bit more positive about the market. I am still a little bit quieter, but it looks better than three months ago, especially for our new units, that makes a big difference. This bifurcation is in there big, big time I tell you.
Darren Gacicia - Guggenheim Partners
Understood, thanks. Little bit unrelated, I know people are concerned about how everything gets funded in the rest especially with relation of the dividend. When you think about incremental rigs coming, what sort of a capital structure maybe on a per rig basis, is it something where you’re still looking to finance thing kind of 50% with debt, maybe some portion of the MLP?
How does the thought process go there and in terms of incremental adds on the debt side because it seems like the capital markets have been opened to you but I am just trying to understand how you’re thinking about it.
Rune Magnus Lundetrae
Hi, this is Rune. I’ll take that question. What we have done and we’re talking floaters I think that’s what you’re asking about. So, typically what you see us do is to put in 20% to 30% in initial installment through our equity or free cash flow where we ordered rig and then the remaining installment is left on the delivery day.
And what we've done up until now and when we plan on doing also for the new builds under construction is to pay five installment with new debt and the $1.5 billion we did just two weeks ago for the three drillships we take delivery of in this quarter is a good example where the final installment is in the 420ish area and we got funding for about $500 million each.
So that is – that has been the strategy and will continue to be this strategy going forward.
Darren Gacicia - Guggenheim Partners
And are there any preferences on how to structure debt, is the term loan now the better or the best option. Or is that something that kind as very dynamic?
Rune Magnus Lundetrae
No, I think the reason we liked the term loan is that, it fits very well in with the MLP structure because of the low amortization. The amortization was simply too steep for the MLP structure. So we do not plan on using the TLB market for Seadrill Limited meaning as standalone Seadrill Limited.
We still like the bank financing which has an amortization profile over typically 10 years and that allow us to -- when we refinance those facility is actually to raise new capital. A good example is the 1.35 facility we closed in July also this summer where the refinancing brought us about $350 million new capital. And we earned that through the amortization of those facilities.
So, there is a difference in the strategy in the different companies that now form the Seadrill Group.
Darren Gacicia - Guggenheim Partners
And from the bank side, the parameters in which the banks are looking at loan to value on new assets, is it similar to what you’re seeing historically?
Rune Magnus Lundetrae
We can base it on the 2.8 we have closed the summer and I think I can say -- a loud yes to that.
Darren Gacicia - Guggenheim Partners
Great. Thank you very much.
Rune Magnus Lundetrae
As we have no further questions in the queue, I’d like to turn the call back to the speakers for any additional or closing remarks.
Thanks Alex and thanks everyone for joining us today on our second quarter call. This concludes Seadrill's call and everybody have a good day.