Brigham Minerals, Inc. (NYSE:MNRL) Q1 2022 Results Conference Call May 5, 2022 10:00 AM ET
Jacob Sexton - Investor Relations
Bud Brigham - Founder and Executive Chairman
Rob Roosa - Founder and Chief Executive Officer
Blake Williams - Chief Financial Officer
Conference Call Participants
Chris Baker - Credit Suisse
Kyle May - Capital One
Nate Pendleton - Stifel
Grant Adkins - Raymond James
Good morning and thank you for attending today's Brigham Minerals First Quarter 2022 Earnings Conference Call. My name's Sam and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the cal with an opportunity for questions and answers at the end. [Operator Instructions]
At this time, I'd like to turn the call over to our host Jacob Sexton, Investor Relations. Jacob, please proceed.
Thank you, operator, and good morning, everyone. Welcome to the Brigham Minerals First Quarter 2022 Earnings Conference Call. Joining us today are Bud Brigham, Founder and Executive Chairman; Rob Roosa, Founder and Chief Executive Officer; and Blake Williams, Chief Financial Officer.
Before we begin, I would like to remind you that our remarks, including the answers to your questions, contain forward-looking statements. We refer you to our earnings release for a detailed discussion of these forward-looking statements and the associated risk. In addition, during this call, we make references to certain non-GAAP financial measures. Reconciliations to applicable gap measures can also be found in our earnings release. We have a new investor presentation titled First Quarter 2022 Investor Presentation available for download on our website, www.brighamminerals.com. We recommend downloading the presentation in the event we refer to it during the conference call. Lastly, as a reminder, today's call is being webcast and is accessible to the audio link on our IR website.
I would now like to turn the call over to Bud Brigham, founder and executive chairman.
Thank you, Jacob. And thanks to everyone for joining us on our first quarter, 2022 earnings conference call. On both our year-end 2020 and 2021 conference calls, I indicated that companies that are optimally positioned are going to generate substantial returns for shareholders in the current energy supercycle. More Specifically, I stated that Brigham minerals was uniquely positioned to succeed this year, given both our activity [well] inventory and high-quality undeveloped inventory. Our quarterly results reflect that outperformance, our team generated record production revenues, EBITDA dividends, and drilling activity. The exceptional performance was driven by our incredibly strong [indiscernible] conversions, which were almost entirely backfilled by our record drilling activity during the quarter. I believe our high-quality activity well inventory will continue to generate outperformance as we look to the remainder of 2022 and into 2023.
With respect to the current macro environment, despite the recent COVID concerns in China, I see no fundamental departure from my view that we are in the midst of the early stages of an extended energy supercycle. U.S. [Shell] is still moderating production growth, and there are supply chain issues, including a constrained supply of materials, including tubulars and sand. And of course, labor is in short supply. We also continue to see the U.S. [indiscernible] inventory decline, thereby mitigating our industry's ability to quickly ramp up supply. All of these factors and others point to a longer runway of elevated oil and gas prices and strong economic returns. Therefore, companies such as ours that are optimally positioned with premium assets will continue to generate substantial returns for our shareholders.
With that, I will turn the call over to Rob.
Thanks, Bud. Our team generated exceptional operating and financial results during the first quarter of 2022, including record production revenues, EBITDA, dividend distributions, and drilling activity. Furthermore, we closed on approximately $44 million in acquisitions during the quarter, deploying almost the entirety of our capital to the Permian Basin, with an emphasis on acquiring in the Midland Basin under Pioneer Natural Resources and Endeavor -- again, an overall outstanding effort by our team.
Our production volumes were an all-time company record, 12,031 barrels of oil equivalent per day, growing 31% from the fourth quarter of 2021. Our production growth was driven by a record 2.7 net wells converted from [indiscernible] to PDP during the quarter. To put this result into context, we converted 2.9 net locations during the entirety of 2021. Further, three of our top four conversions during the quarter occurred on assets that were acquired pre-2020, pointing to the incredible organic horsepower embedded within our diversified mineral portfolio.
As a reminder, we have an incremental 13,000-plus gross locations and over 108 net locations in our undeveloped inventory at the end of the first quarter, with approximately 60% of those net locations in the Permian Basin. Importantly, we were able to almost entirely backfill our [indiscernible] conversions via the record drilling activity on our assets during the first quarter. During the quarter, approximately 238 gross wells and 2.1 net wells were [indiscernible] on our minerals. The 2.1 net wells [indiscernible] on our assets is also an all-time company record and is significantly higher than at any point during 2019, when 700 horizontal rates running across the lower 48. Similar to our conversions, we saw meaningful contributions to our drilling activity from our organic asset portfolio. During the quarter, approximately two thirds of our drilling activity was attributable to assets that were required pre 2020. Furthermore, we immediately saw drilling activity by PDC in the DJ Basin under our large acquisition that we closed in the fourth quarter.
Overall, a really sound mix of organic development of contributions from recent acquisitions. On the acquisition front, during the first quarter, we deployed approximately $44 million in capital, including closing on our previously announced Midland Basin transaction. Despite a tough ground game acquisition market, which is attributable to strong commodity pricing, our extensive sourcing and streamlined evaluation process has enabled us to continue to source attractive opportunities while maintaining a disciplined underwriting process, which we consider to be of paramount importance, regardless of deal size. We are seeing a significant increase in the number of large mineral opportunities come to market.
As we've said, and approved with our DJ and Midland transactions, any large deal needs to check multiple boxes in terms of being accretive to near term cash, as well as the net asset value. We will continue to endeavor to prioritize a healthy balance sheet in these transactions. As a reminder, we funded both our DJ and Midland Basin in transactions with approximately 50% equity, as it reduces the burden on our balance sheet to provide significant flexibility with respect to future acquisitions.
Looking ahead, our net activity well inventory, which represents the combination of our drilled but uncompleted locations, or DUCS, in our permits was 11.7 net locations at the end of the first quarter, our net DUCs and inventory at the end of the first quarter stayed roughly flat versus the fourth quarter, despite our extremely strong [aforementioned] DUC conversions. We anticipate that PDC, Chevron, Pioneer, Oxy, and Diamondback will convert the majority of our DUC inventory. Given both our strong production growth in substantial activity well inventory at the end of the first quarter, 2022, we now anticipate our production volumes averaging approximately 12,000 barrels of oil equivalent per day for the remaining nine months of 2022. Relative to Q4's 9,170 barrels of oil equivalent per day, this would represent over a 30% increase in our production volumes for the full year 2022.
As a reminder, we plan to formally update guidance in August associated with our Q2 2022 earnings conference call for the next 12 months. Finally, we are extremely pleased to announce the 14% increase in our base dividend from 0.14 cents to 0.16 cents and a 42% increase in our variable dividend from 0.31 to 0.44. Of note, we were able to increase our variable dividend 42% while reducing our payout ratio from 80 to 75%. Overall, we were able to increase our dividend by 33% to 0.60 while, again, reducing our payout ratio to 75%. In summary, just a terrific job by our team. I'm now turning the call over to Blake. So you can summarize for you our financial performance, Blake.
Thank you, Rob. Our daily production for the quarter was 12,031 barrels of oil equivalent per day, up 31% sequentially. And our oil cut remained at 51% with a significant growth out of the Permian Basin. Our portfolio generated a record royalty revenue of $70 million for the quarter, up 49% sequentially due to a 31% increase in production volumes and 16% improvement in realized pricing. Realized pricing for the quarter came in at $64.64 per barrel of oil equivalent. Individually, realized pricing per barrel of oil was $91.90. Realized natural gas was $5.52 per MCF and realized NGLs were $40.90 per barrel of NGL. We also collected $1.4 million in lease bonus during the first quarter. Net income for the quarter was $39.1 million. Record adjusted EBITDA for the quarter was 60.7 million. And the adjusted EBITDA excluding lease bonus was 59.2 million, which was up roughly 53% sequentially. On costs, gathering, transportation, and marketing expenses were $2 million or a $1.85 per BOE.
We expect to see the trend of slightly higher GPM to continue, given the current environment and recent operator commentary on the increase in service costs. Severance and [indiscernible] taxes were 4.3 million, up 6% of mineral and royalty revenue and in line with historic levels. Cash G&A expense was 4.4 million. Subsequent to the release of our year-end results in February, we announced updates to our executive compensation program, which now includes short-term incentives. We believe this change will increase management's at-risk compensation and further align pay with performance. The change results in roughly $2 million of stock-based compensation, moving to cash G&A during the full year 2022. So in that sense, our $13.5 million cash G&A midpoint that we issued in February becomes 15.5 million. And our 9.6 million share-based compensation expense midpoint becomes 7.6 million, with no change to the total cash and stock based compensation for the year. In fact, on a unit basis, total G&A per BOE decreased 18% this quarter, as compared to the fourth quarter, highlighting the scalability of our corporate platform.
Moving to our balance sheet, our prudent leverage and liquidity profile provides us with ample [indiscernible] powder to continue to pursue the highly accretive acquisition opportunities Rob spoke about earlier. We exit the quarter with $6 million of cash and 93 million drawn on our revolving credit facility for net debt of 87 million, which results in leverage 0.4 times net debt-to-last-quarter-annualized-adjusted-EBITDA. Further as a result of our spring redetermination, which is expected to be finalized at the end of May, our administrative agent has given us a preliminary indication of an increase in the borrowing base to 300 million, which will add another $70 million of liquidity, bringing a new total to 213 million. Lastly, as Rob already stated, we declared a dividend of $0.60 cents per share of class A common stock.
This dividend is payable on May 27 to shareholders of record as of May 20. This represents a 75% pay out of our discretionary cash flow excluding lease bonus, which is an incremental 5% reduction from the last several quarters. Going forward, we expect to target a pay out at this percentage level with a potential to move up or down 5%, keeping it in a range of 70 to 80%. The retained cash provides incremental liquidity to fund reinvestment in our business and continue to grow our reserves per share.
I will now turn the call back over to Rob to wrap things up.
Again, we appreciate you joining our first quarter 2022 conference call. As bud and I have indicated Brigham minerals is uniquely positioned to excel during the remainder of 2022 and end of 2023.
Operator, I'll now turn the call back over you to begin the question-and- answer portion of our conference call.
[Operator Instructions] We'll take our first question from the line of Chris Baker of Credit Suisse.
Congrats on a very solid update here. I just want to ask two bigger picture questions, since I think the quarter speaks for itself. The first one is, could you maybe just share your latest thoughts around how we should think about long-term organic [gross] for the portfolio? Like I said, obviously a stellar 1Q and looks like high teens organic gross for the year, but just curious directionally how we should think about Brigham versus say Permian oil or Lower 48 volumes.
Yes, no, Chris great point to bring up -- I think the organic development on our portfolio this quarter has been tremendous, really wanted to highlight that, in both the earnings press release, as well as the conference call, earlier comments that we made, When you think about our portfolio performing as it did, the record drilling results, really wanted to reiterate to everyone that when you think about the 2.1 net wells that were spud during the quarter, roughly 2/3 of those were organically sourced from acquisitions that we had affected prior to 2020. So when we look at some of our bigger drilling units that encapsulates the Patriot [indiscernible] unit, the [indiscernible] Fox unit, the Oxy [indiscernible] unit. So really nice contributions from pre 2020 assets. And so I would think and hope, just given what we're seeing in the portfolio, that we can replicate kind of that 2/3, 1/3 organic for potentially more near term acquisition mix in terms of drilling contributions.
Similarly on the conversion side, when we talked about the record 2.7 net conversions there I point to the fact that three of our four largest conversions during the quarter were similarly sourced from pre-2020 acquisitions. And so when you look at those, that was the Chevron [indiscernible] conversion in the Delaware Basin that we acquired in 2016, the ExxonMobil St. John’s Delaware Basin unit that we acquired in 2018, and then the Chevron [indiscernible] unit, also in the Delaware Basin, that we acquired in 2014. And so really just to reiterate there's 13,000 gross organic locations that we have in inventory, roughly 108 net locations -- 60% of those are in the Permian Basin. So I think we're going to see solid growth across all of our Basins. When you break down production growth of our asset, we had 20% production growth in the Permian, a hundred percent production growth in the DJ Basin, largely as a result of the acquisition that we completed in the fourth quarter.
But also we had meaningful contributions from the Anadarko Basin and Williston Basin, largely a result of organic portfolio. So when you look at the Anadarko, that was up 10%, the Williston Basin was up 12%. So when you thought -- look at those Basins, really not [indiscernible] there. The messaging there was first quarter acquisitions, almost 99% of those were related to -- in the Permian Basin. So when you think about contributions from these other Basins, it's powerful. And so I’m hopeful, we'll be able to achieve similar type levels of organic integration in terms of growth [indiscernible] portfolio going forward.
Great. And as a follow up, I just want to touch on the inventory depth. Slide 5 talks about 13 to 18 years of high-quality inventory based on four [indiscernible] spuds. I'm just curious if there's a -- just sort of ballpark growth [cagr] that would line up with. Is that sort of a high single digit type number, or any additional context there would be great.
Yes, I think as we've said in the past we expect our portfolio to -- given the asset quality, to outperform a basket of the operators. So as these operators continue to put activity back to work and, they’re in the kind of low to no growth as you've seen with this quarter -- we should outperform that, given the quality of the asset and the quality of the operators we have operating across our position.
Yes. And Chris, one thing to point out on put page 16 of the presentations is kind of an in- depth breakdown of that organic import inventory that we have to work with going forward. So on the left part of that slide, the horizontal, the gross wells on the right, the net wells. And again, just to point out48% of that inventories in the Delaware Basin and 11% in the Midland Basin -- so approaching 60% of our net locations are in the Permian. So really powerful in terms of what the organic portfolio can drive going forward.
Okay, great. So I think just so I'm clear, the 13 to 18 years of inventory is certainly on a growth trajectory in the single digits. Is that fair?
[Full slot] scenario.
No, I would not expect that. When you think about another data point, think about the drilling activity, Chris, is the fact that from the end of the year to the end of the first quarter, we actually grew our debt balance. Whereas most throughout the United States, the DUC balance has continued to decrease. So when you look at our DUCs, we grew our DUCs roughly from 850 locations to 930 locations. So tremendous growth there, whereas in the United States, overall DUCs decrease from by about 300 locations. So we're seeing growth in our DUC balance relative to an overall draw down. So that points to you, operators, opportunistically pointing towards development of our organic inventory, because it high IRR returns.
All right, great. No, congrats getting on the quarter. Appreciate the answers.
Next question is from Kyle May of Capital One. Kyle?
Rob, following up on the last comments you were making you were able to capitalize on strong well conversions in the first quarter. We continue to hear producers stress capital discipline. So can you share any additional thoughts about where you're seeing higher activity levels and how you think about conversions for the balance of the year?
We are seeing very high conversion levels in the Delaware, Midland Basins, also seeing nice conversions in the Midland Basin -- sorry, the Wilson Basin and the DJ Basins, . To point outdo reiterate the conversions, they were across all of our Basins. when you think about some of these, they were the, -- in the Midland Basin, we converted the Pioneer Rogers unit. We had those list of organic conversions that I talked about. And then also, I think importantly, in the DJ Basin, we had a conversion by Chevron in the independence unit that we just acquired in December. So we're seeing conversions across the board in all of our units. And so, when I think about it I think we're going to have strong conversions relative to just the generic operators, because our thesis all along, Kyle, has been to target the best rock under the best operators.
So if we've done our job, which obviously I think -- if that has played out and you've proven that this quarter -- we've targeted those operators best that their best rock. And so they're going to deploy the rigs, which you saw through the increase in our record drilling activity, and then they're subsequently to deploy the [indiscernible] to our position. And so we saw that with the conversions this year. Soon both facets, you're seeing us outpace, I think the general basket of Lower 48 resource plays.
And that's really borne out by the 30-plus percent growth in our production volumes in, in first quarter relative to the fourth quarter. So as we think about it, we're still seeing nice activity levels as we looked at occurrences in April. So, hence us then looking forward and given the strong net activity well inventory that we have in inventory, roughly the 11.7 net locations at the end of March us providing guidance for the remaining nine months of the year that we look at -- we're looking at potentially 9,000 -- or sorry, 12,000 barrels of oil equipment per day of production during the remainder of the year. So really a tremendous result because we are seeing such strong conversions and drilling activity on the asset.
Great, appreciate that additional color. And maybe looking at the, the M&A slide you've mentioned the M&A market is a little bit more difficult right now. And in the past, you've talked about the differences based on the transaction side. So just any thoughts more recently about kind of what you're seeing in the current M&A landscape.
Yes. How -- we've talked in the past about bifurcating the market terms of ground game deals. So those are the 50 to 100 acre deals that we've historically done, roughly probably 2,000 transactions thus far over the life of the company, and then the larger deals such as the DJ Basin deal that we closed in the fourth quarter, the Midland Basin deal that we close this quarter. and so when I think about it, the biggest headwind that we face right now is just crude oil pricing. And the fact that sellers and the reservation price, obviously at a hundred -- approaching $110 per barrel it's made sellers less likely to sell, as I've indicated in the past. Our job is to continually stay in touch with those sellers on the ground game constantly reaching out more so than ever, letters, calls, et cetera on the bigger deals , being involved in different processes, reaching out to folks.
And so, again, we streamline the team such that we can very efficiently prosecute both the smaller ground game deals and the larger deals, because we know that the hit rate or our acquisition rate has gone down over the last couple of quarters as it relates to crude oil pricing going. So we've got to be that much more efficient in terms of being able to analyze and evaluate deals. And what I mentioned in the conference call transcript is we try to do that, but of utmost importance is just being disciplined in the process and making sure that we're doing deals that are accretive near-term-cash- flow wise, as well as on a [NAV] basis, because obviously our job is to create value for shareholders. So that's paramount. Number one goal is to once these deals come in, that we bid them appropriate such that we're generating returns for shareholders.
The next question is from Jeanine Wai of Barclays.
This is [indiscernible] for Jeanine Wai. And congrats on the quarter.
So for the first question on the free cash flow priority you have lower pay ratio from 80% to 75%, and you have 93 million balance on the revolver with a low leverage of 25times. Going forward, how do prioritize between mineral acquisition and debt [pay down]?
No, I appreciate the question. So we, we pretty clearly messaged throughout time that at the end of the day, we'd be in the 75 to 8% payout ratio. we've now given just the stellar production growth, as well as the pricing tailwinds, have reduced that to 75%. , now we've indicated that plus or minus 5%, around that 75% level. So basically, we see distributions on an operating cash flow basis between 70 and 80% going forward.
And so I think what that does, it provides quite a bit of flexibility going forward as we think about doing acquisitions going forward, because one important point to make is that that $93 million debt balance is the same as it was at the end of the year. So we were able to execute upon $44 million of acquisitions in the first quarter with basically no change to our debt balance because we internally funded those acquisitions by retaining cash flow. So I think a lot of what we're trying to build around that range of 70 to 80%is providing optionality to do highly creative transactions. And so Blake?
Yes, I'd say certainly with oil prices, these levels where $0.85 on the dollar goes straight to the bottom line, we're going to have plenty of flexibility to manage all of our objectives. And we'll continue to prioritize [indiscernible] and balance sheet management, as well as the acquisitions. I think you can see evidence of this with our DJ and Midland deals where we use stock as some of the consideration. So we've always said that we'll keep net EBITDA below one and a half times, but I think, realistically, in this environment, we we'll plan to keep it below one times and make sure we've got that added flexibility at all times.
Okay. And as a follow up on the 19 million working capital draw during the quarter obviously many of the EMT companies that have reported all have some level of that. Can you please share your thoughts on whether you see further working capital [indiscernible]in the form of increasing accounts receivable for the remainder of the year, or perhaps do you view this as more transitory?
Yes, I think this is just a function of increased production and prices. It's pretty common for us to see this, given the slight delay in payment that we experience as a mineral company,. We usually get data from other sources. So, before we see a check from an operator -- so if price is flatten out, we expect this growth and AR balance to slow, and it'll be more steady state. So it's just when you see differences quarter to quarter in production and prices that this occurs. But it's nothing that we think is a headwind, but something we expected.
Next question is from Nate Pendleton of Stifel.
Congrats on a strong quarter.
Yep. Thanks, Nate. Appreciate it.
From my first question, I want to go back to M&A. Given your diversification and your prior commentary about the strong results from different Basins, can you speak to the most attractive Basins you're seeing for deals going forward?
Nate, we're seeing attractive deals across the Permian, DJ Basins, as well as the Williston Basin. So we're actively working up deals in all of those Basins. The key is -- I've indicated in the past -- is just to be disciplined in the process. So making sure we soundly underwrite these deals from the number of horizons, number of wells [indiscernible], operator timeline for development. So we're actively working up deals in all these Basins. And I, think very opportunistically in the fourth quarter, we're to add a really that really nice $93 million DJ debt acquisition that's immediately paying results in terms of active conversions and developments. And so I think that there's deals that will continue to be deals in the DJ Basin that will [indiscernible] evaluate. Similarly, there will be deals in the Williston Basin that are highly attractive under active operators that we will also continue to evaluate.
But I would say probably the preponderance of our time -- of our evaluation team's time -- will be related to Permian Basin deals. There just seems to be a much larger throughput or deal throughput in those Basins, both in Delaware and Midland Basins. And so we are prosecuting deals there, but I think when I look back at the DJ deal, we're able to achieve some highly economic returns there. When I think about the near-term cash flow accretion, as well as the [NAV] accretion that we generated via that deal. So we'll be opportunistic looking at all these Basins because I think that there's ample opportunity to generate some significant shareholder value in all of those.
Great, thanks. And for my follow up, in Q1, it looked like your lease bonus bounced back quite nicely. Can you provide any insight into the drivers there and how we see the outlook for lease bonuses going forward?
Interestingly Nate, that was the composition of both Delaware, as well as DJ Basin [indiscernible]. So it’s just part of what we've talked about in the past, the perpetual option of minerals -- you hold these mineral lights into perpetuity. So there is events even given the rig count approaching 620 rigs currently with TPAs currently forecasting it to go to 700, operators can't always hold all the acreage. And so I think you’ll continue to potentially see us generate lease bonus going forward. There's just opportunities there that are always going to present themselves. And that's something that we actively monitor and engage with operators. And so I'm hopeful you’ll continue to see some upside from us throughout the remainder of 22 in terms of lease bonus -- that it’s just really, one of the pleasant surprises that presents itself with respect to minerals.
[Operator Instructions] Our next question is from Grant Adkins of Raymond James.
Congrats on the strong quarter. So where I'm going to start is kind of from a production cadence standpoint. So obviously, you guided to 12 [BOE] for the remainder of the year, but is there any, I guess, additional color that we could see on that? We kind of had you all, I guess, ramping up in closing the year around that 12 number, but are you expecting more flat production or lumpier, or how is the -- just any additional color you could give me on that? I'd appreciate.
Yes, so just to level set, so everybody kind of understands how we forecast activity going forward. Obviously in the near term, I would say the next 6 to 12 months, the most impactful piece to production ramp is going to be our DUCs. So that's the 7.1 net DUCs that we have in inventory. Next, kind of when you think about the next 12 to 24 months, that's going to be the permits that are in inventory. So that's the 4.6 net locations that we have in inventory. And so it's really largely the next nine or so months is going to be driven by our DUC inventory. So it could be that just based on the data that we're seeing, obviously it's very early and we don't have perfect information, but it could be more heavily weighted towards the first half of these nine months in terms of production than the latter part. It's just something that we'll have to monitor and, as data comes in, we'll have better insight, but , as being in essence a non-operated position, don't always have perfect data, but it could be that it's more front-end loaded in terms of kind of Q2, the first half of Q3 than the latter part in terms of the growth.
Perfect. And the second question as a follow up is going to be related to, I mean, you've discussed the payout ratio but I'm kind of thinking more from the dividend perspective are you all necessarily targeting, say, maintaining that $.060 cents per share or higher dividend as long as you all can do so remaining in that 70 to 80% range, I guess. And is that payout ratio kind of your flexor? Is that how we should think about it?
I think the payout ratio really is driven by what our opportunity set is in front of us. So we’ve got plenty of acquisition opportunities and again, as we were saying, can use that flexibility with the retained cash in these price environments to help fund some of those opportunities that we see. But we, we did step up the base dividend from $0.14 cents to $0.16 cents. and then we've got the variable piece on top. So we’re just effectively paying out 70 to 80% of our discretionary cash flow. So, obviously we'd like to see the dividend continue to continue to grow, quarter after quarter, but we’re kind of looking at all the different variables that we have to spend capital on between our reinvestments and return of capital shareholders.
Awesome. Congrats on the quarter.
At this time, I'd like to hand the call back over to Rob for any closing remarks.
Now, again, we appreciate everybody joining us on our first quarter 2022 conference call and look forward to getting back together with you in August as we discuss our second- quarter results. Thanks again for joining.
That concludes the Brigham Minerals First Quarter 2022 Earnings Conference Call. Thank you all for your participation. You may now disconnect your lines.