Baytex Energy (TSX:BTE) Q3 2026 Earnings Call

0:00 Thank you for standing by. This is the conference operator. Welcome to the Baytex Energy Corp. Third Quarter 2026 Financial and Operating Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After today's presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. You may also submit questions in writing at any time using the form in the lower section of the webcast frame. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Chris Lessoway, Vice President, Finance and Treasurer. Please go ahead.

0:49 Thank you, Operator. Good morning and welcome to Bay Texas third quarter 2026 results conference call. Joining me today are Chad Lundberg, our President and Chief Executive Officer, Kendall Arthur, our Chief Operating Officer, and Chad Kalmakoff, our Chief Financial Officer. Please note that our discussion today contains forward-looking statements within the meeting of applicable securities laws. I refer you to the advisories regarding forward-looking statements, oil and gas information, and non-GAAP financial and capital management measures in yesterday's press release. All dollar amounts referenced in our remarks are in Canadian dollars unless otherwise specified. We will open the call for questions after our prepared remarks.

1:35 Webcast participants are able to submit questions online. With that, let me turn the call over to Chad Lundberg.

1:42 Good morning. We continue to execute our strategy with strong performance across our portfolio, unlocking an opportunity-rich set of growth options driving long-term value for shareholders. In 2026, we have improved capital efficiency, reduced operating costs, and lowered our decline rate and break evens. Most importantly, safety performance has been strong. I want to thank our teams across the operations for their continued commitment to safety. The improvements we've made have translated into an accelerated growth plan, improved capital efficiency, lower costs, and execution across the DuVernay and Heavy Oil portfolio enable an increase to the 2026 capital program and are the foundation of a higher growth plan for 2027 through 2029.

2:37 This acceleration is driven by efficiency gains, not a change in our commitment to capital discipline. Execution of our strategy was once again illustrated by our Q3 results. production averaged 71,600 BUE per day, up 5% from third quarter 2025, and in line with our four-year plan. We delivered record DuVernay production of 12,800 BUE per day, continued to perform across the heavy oil portfolio, and generated $139 million of free cash flow. We also returned $165 million to shareholders during the quarter, through share repurchases and our base dividend, while exiting with a net cash position of $522 million.

3:29 For 2027, we expect production of 76,000 to 79,000 BUE per day, representing 7% to 11% annual growth, with exploration and development expenditures of $775 million to $850 million. This is the first year of full DuVernay commercialization, which drives Q4 to Q4 growth of 15%. This program achieves a sustaining capital break even of $50 per barrel in 2027, down from $52 in 2026, which allows us to continue returning capital to shareholders. Our updated three-year outlook has improved and now targets 8% to 10% annual production growth, supported by capital expenditures of approximately $800 million.

4:23 This plan is built to deliver. Having exceeded our 15% total shareholder return target through the third quarter of 2026, we expect to achieve it again in 2027. at a mid-cycle WTI price of $70 per barrel, we expect to maintain a net cash financial position throughout the three-year plan, funding production growth, continued share repurchases, and the base dividend. Kendall will take you through the operating performance. Chad Kalmakoff will cover off our financial position and capital allocation in more detail. Kendall, over to you.

5:04 Thanks, Chad. Third quarter production averaged 71,606 BOE per day in exploration and development expenditures for $186 million, both in line with our full-year plan. Beginning with the DuVernay, our second pad of 2026, a five-well pad on our northern Pempina acreage, was brought on screen in late August. The well generated average 30-day initial production rates of 1,489 BOE per day per well, including 973 barrels per day of oil. Drilling and completion performance continues to improve. Full-length 2026 wells achieve drilling completion costs of $930 per foot of completed lateral, better than budget and 11% lower than 2025.

5:51 The shorter cycle times allow us to add two drills in the fourth quarter, taking 2026 programs to 19 wells drilled. Thirteen wells are expected on stream in 2026, with the remaining six brought on stream in 2027. Our third Duvernay pad of 2026, a four-well pad in northern Pembinae, is completed and now on stream. Tuck-in acquisitions completed during the year increased our Duvernay land position by 16% to 106,000 net acres. With efficiency gains and expanded inventory, we can now grow the Duvernay to 25,000 BOE per day, one and a half years faster than our previous plan, and retain over 15 years of whole-plat inventory at that level. Turning to heavy oil, five rigs were active during the third quarter across Peavine, Peace River, Boydminster, and Laurenville.

6:42 With strong well performance and efficiency gains realized in 2026, we now expect to bring in approximately 109 heavy oil wells on-stream in 2026, including five additional clearwater wells at Peavine and four additional wells at Peace River. We are also advancing enhanced oil recovery. The expanded fourth quarter program includes $13 million for additional polymer flood development at Boyd Minster, with production expected in the second quarter of 2027. Looking to 2027, our operating plan advances each of the core businesses. Roughly 40% of our 2027 capital investment goes to the DuVernay, with the balance directed to heavy oil and biking. In the DuVernay, we plan to bring 21 wells on-screen for our average production to approximately 18,000 DOE per day. targeting a fourth quarter exit rate of 22 to 23,000 VOE per day. The Viking will run an efficient one-way growing program with plans to bring 66 net wells on stream in 2027.

7:45 In heavy oil, we plan to bring approximately 130 wells on stream, including 32 at P-Line 78 in Lloydminster and approximately 20 at Peace River. We expect heavy oil production to grow modestly to approximately 48,000 VOE per day. Our updated three-year outlook maintains this pace of development. Annual growth at 8% to 10% takes corporate production to approximately 92,000 VOE per day by 2029. Annual capital expenditures are expected to average $800 million through the plan. Production in the DuVernay will grow approximately 35% per year through this plan, achieving the targeted 25,000 VOE per day level in the second half of 2028. We are targeting further improvements in drilling and completion costs to further improve free cash flow generation from the deep running.

8:35 Heavy oil production is expected to grow modestly while contributing significant free cash flow through the plant. Our deep inventory of primary development opportunities supported by continued delineation in northeast Alberta and expanded enhanced oil recovery provides a strong foundation for the business. Notably, this plan could be enhanced with water flooded in Clearwater and Gemini Modular SAG-B development. At Peabine, five water flood patterns are currently injected at expected rates, with six expected to begin in the fourth quarter. We expect to see a response on these pilots by mid-2027. We have also completed drilling a Rex water flood pilot at Boring Hill with injection scheduled to begin in the fourth quarter. In 2027, we are advancing technical characterization, engineering, and design for Gemini modular sagging project with a target FID in the second half of the year. Gemini has approximately 300 million barrels of oil in place, a successful pilot completed in 2014, and regulatory approval for a 5,000 barrel per day first phase.

9:44 Water flat and thermal development can strengthen our business by increasing recovery from our existing resource-based while adding sustainable production and free cash flow generation. Our three-year outlook is about building stronger, more profitable business. Disciplined capital allocation directs investment towards opportunities that improve returns and strengthen free cash flow. Advancing enhanced oil recovery and thermal is expected to moderate declines and reduce sustaining capital requirements, while continued delineation of our existing land base can deepen our development inventory. These priorities position us to create lasting value from the assets we already own. The operating organization continues to execute safely and efficiently. I want to thank our field and office teams and our service partners for their focus and performance. With that, over to Chad Kalmakoff to discuss the financial results of capital allocation.

10:38 Thanks, Kendall. Strong operating performance and commodity prices supported another solid financial quarter. We generated adjusted funds flow of $313 million, or $0.48 per basic share. Free cash flow was $139 million, or $0.20 per basic share, after exploration and development expenditures of $186 million. During the quarter, we returned $165 million to shareholders. We repurchased 24 million common shares for $149 million and paid a quarterly dividend of $0.25 per share. Our balance sheet remains a significant strength, and we exited the quarter with net cash of $522 million. This financial position supports the accelerated development Kendall outlined and provides resilience across commodity price cycles.

11:24 Improved efficiencies and shorter cycle times have allowed us to accelerate the DuVernay, heavy oil, and advanced enhanced oil recovery development. As a result, our 2026 exploration and development expenditures are now expected to be $665 million, up from $625 million previously. Higher benchmark prices have also increased our royalty rate guidance to approximately 16%. Offering costs are now expected to be approximately $13.30 per BOE, improved from our previous guidance range of $13.75 to $14.25 per BOE. Transportation costs are expected to be approximately $3.75 per BOE, up from $3.40 to $3.60 per BOE previously. For 2027, we've initially allocated $150 million to share repurchases under the normal prices for a bid, with flexibility to adjust depending on market conditions.

12:18 We expect to maintain the quarterly dividend at 2.25 cents per share. At a mid-cycle WTI price of US$70 per barrel, we expect to maintain a net cash position through the three-year plan. Sustainable capital is also expected to decline, reflecting our improved capital efficiency. That financial strength gives us the capacity to fund continued production growth, share repurchases, and the base dividend, allowing us to keep growing value for our shareholders on a per share basis as we grow the business. With that, I'll turn the call back to Chad Lundberg.

12:52 SpaceX is delivering on its strategy. Consistent execution is accelerating our growth plan while our discipline remains unchanged. What has changed is the pace. Stronger operating performance improve capital efficiency and lower costs give us the opportunity to accelerate development. We now expect the Duran-A to reach 25,000 BOE per day in the second half of 2028, one and a half years earlier than our previous plan, with the option to generate further growth or hold flat with an improved 15 years of inventory from that point. Heavy Oil continues to provide the foundation of the company with a deep inventory and enhanced oil recovery projects that extend the value of the resource.

13:41 We are investing in high return organic opportunities, advancing long-term projects in a measured way, and continuing to return capital to shareholders. The result is a business that is growing faster and generating more free cash flow. We exceeded our 15% total shareholder return target in 2026 and expect to achieve it again in 2027 while maintaining balance sheet strength to deliver through the cycle. I would like to thank our employees and service providers for their continued focus in safe execution. With that, we are ready for questions. We will now begin the analyst question and answer session. To join the question queue, you may press star then 1 on your telephone keypad.

14:30 You will hear a tone acknowledging your request. To submit your question writing, please use the form in the lower right section of the webcast frame. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. We will pause momentarily as callers join the queue. The first question comes from . Please go ahead.

15:05 Thanks, and good morning, everyone. I'll start with Peavine Waterfront. It's a bigger question, but can you just remind us of what you need to see to scale up activity, and if you decide to move forward with commercial development, how quickly could that occur, and how would it fit into the three-year plan, or I guess the other option is that it displaces activity that is already in the plan. How are you thinking about that?

15:32 Hi, Menno. I think similar to the messaging in the past, it takes time to understand water flood performance. What are the key measures we're looking for is, one, just injectability check. We've got that. Two is we should see GOR suppression. Three is offsetting production response through design as we type these welds out. I think we expect to see it by mid-2027. I mean, we're going to see markers and tells ahead of that time. So it does take a little bit of time, but it's coming soon. Just in terms of the broader build-out, we are developing the acreage today, leaving gaps for future water flood injectors. If we saw the tells and indicators that we are expecting to see, We could layer in additional capital half through 2027.

16:27 We think that would be in the $20 to $30 million range. Again, that would be a first step to start backfilling some of the gaps we left with the injectors. So I don't know if that gives you the snapshot you're after, but that's how we're thinking about it near term. Just in terms of longer term and how does it fit into the three-year plan, if it works, we should start to see a pickup production performance inside the three years. how much is yet to be determined. I'll leave it at that. Okay.

16:59 Great. Thanks for that, Chad. And then maybe just a second question on land acquisitions. How competitive was the process to secure the additional 15,000 acres in the DuVernay? And are you seeing opportunities to do more? Is it now fairly picked over? And then I guess on the other side of the ledger, what is the sort of the latest messaging on keeping versus monetizing the biking? Thank you.

17:26 Well, I think the simple answer is it's very competitive. I mean, look what we're doing with the asset as we've held this since 2018, worked it through a delineation phase and just really learning and developing what we call this ecosystem of developing an unconventional, improving the characterization, reducing capital costs, bringing the stakeholders along with us. building out the infrastructure position to be able to handle these growth targets that we're ultimately achieving. And now here we are excited to step into first year of full commercialization, hitting our production ramps a year and a half early, seeing the reduction in capital costs to $930 a foot. It's ultimately flowing right through to top line break even reductions.

18:12 I mean, to say it's not competitive with what I just rattled off, I would be remiss. It's It's extremely competitive. It's great land. We hold a great position and we're going to try for more of it. I think the message is sections, not townships from this point forward. It is largely held. On the Viking, it's a similar message. It's not core to the business. At the right time, we would look to try to potentially monetize the asset at the right time would be just how we think through the commodity cycle and acting contracyclically, which would point us into higher prices, ultimately triggering us into potentially looking at it. Nothing further other than that, though, Minnow.

19:02 Great. Thanks to you both. I'll turn it back. The next question comes from Greg Party with RBC Capital Markets. Please go ahead.

19:13 Yeah, thanks. Good morning. Thanks for the rundown. You've got a huge land position, a lot of legacy stuff, Peace River Arch, et cetera. Is there another Gemini in there somewhere?

19:27 We do have a large land position, 750,000 acres across basically the entirety of central to northern Alberta. I mean, what's in the plan and we revealed a little bit more in our IR pack is 1,100 of what we call risk locations. We've expanded that to now include the full inventory set of 2,300 unrisked locations. So those inventory wells are in the plan today. Second is we have the Gemini position, which sits on top of basically our northeast Alberta acreage that you touched on. Do we have further to go in terms of modular stag deep properties inside that 750,000 acres? Look, it's what we're doing. It's what our heavy teams are scouring every day is just looking for opportunities. Part of the exploration programs is not only de-risking and advancing that 1,100 risk well set to try and improve the 2,300 unrest, but it is looking for other opportunity within that set of lands

20:38 Chad, I don't think you want to answer my question.

20:42 Okay. Well, hey, I tried to answer it by saying we have lots of opportunity without being specific about that. Okay. Okay.

20:52 No, no, that sounds good.

20:55 And let me just expand on that. We are always working up new initiatives, and there are things we're working on today that beyond modular safety, beyond what we've outlined in detail, beyond these primary well sets that we're just not talking about. They're not ready to talk about for various reasons, not technically far enough along the pathway, could be competitive to Menno's question from a land sale perspective and tipping our hats further would put us in a compromised position strategically. So I hesitate to go further.

21:34 No, no, that's extremely good context. Okay, completely shifting gears then. Some of the recent Duvernay wells, I mean, you know, A, great rates, number one. Number two is the oil slash condi component, very high in those. When you achieve the 25,000 DOE a day in 2028, what is the modeled product split between oil versus gas versus NGLs. And then just related to your capital program, because the journey is a big piece, have you factored in inflation distance into that outlook? And that's it for me.

22:18 Okay. So when these wells come on, they have a higher liquids component. So 65% oil, 25% liquids, 10% gas would be a general rule of thumb. and actually if you look at paths that was released in Yobi in Q2 and then this one that we're talking about in Q3, I think they're 87, 88% liquids ultimately. So that's kind of where they come on. As we depressurize the reservoir, move through bubble point, we start to break out more gas in situ and so that gets us to ultimately where we take these out at a 40% oil, 40% liquids, 20% gas In 2028, we would be, as we model it out, basically right in the middle of that.

23:04 So it's the mix of base that's maybe drifting a little bit lower and these new wells that are coming online that just have a little bit more pressure bottom hole. With respect to inflation, we have built, I would say, lower single digits into the plan. That's to account for what we're seeing on things like steel, things like diesel fuel, So we have built some into the plan. We have offset it to some extent, though, by all of the efficiency gains that we're talking about. We profiled the duvernay efficiency gains. We've achieved some gains to our heavy oil program, most notably up in Peace River with motor size, hole size, style selection of how we're actually executing on the drills.

23:50 So we think we've struck the right balance of honoring what we're seeing and kind of Benching that against the efficiencies.

24:01 Very good. Very good. Thanks very much.

24:04 Thank you. The next question comes from Amir Arif with ATV Capital. Please go ahead.

24:11 Thanks. Good morning, guys. Congrats on a really good update here. A couple of quick questions for you. Just on the operating cost improvement, I'm surprised at how much you've been able to improve your operating cost structure. Is it more just driven by volume growth, or is there other factors behind pure operating cost improvement given the inflation that we're seeing in the industry?

24:35 No doubt volume growth is helping us as we put more barrels across fixed costs. We can amortize those fixed costs off of just a higher volume set. That is one of the benefits of growth in there. Second, though, and we would absolutely want to profile is just I would call it the proactive nature of our operating teams as they rethink and challenge each other operating in all of the different areas. So, for example, instead of taking a piece of equipment closer to failure or where it starts to break down at an increased frequency, We are really challenging, can we put incremental costs into that equipment ahead of time that ultimately nets improved run life, but then also lower operating costs ultimately through the entirety of the lifespan of that piece of equipment. So that's one, that proactive nature.

25:32 Two is just when we look at operating these wells, again, being proactive on how we're operating them. So just with respect to maybe some of the lower producers, as an example, where we would, in the past, pump them at a three or a four strokes per minute on a continual basis, we're electing to put them on a timer or even a poor boy timer where we shut them down for a week, turn them on for a day, produce the same amount of oil, but we greatly reduce the runtime on that equipment and prevent it from wearing out further. So I think We're ultimately seeing it flow through in a much bigger way through our repair and maintenance line item in the off-ex expense part of the ledger. Two-fold, pretty excited about what the teams are driving.

26:18 Got it. That's good color. And then just a second question. You've improved your corporate decline rate to about 50%, but under the three-year outlook, if you start growing organically around 9%, where does your corporate decline sort of get to by 2029? What are your modeling for your plans?

26:36 I think this is one of the strengths of the three-year plan. I'm glad you asked because it's a bit of a hidden gem. Traditionally, if you were to go and grow an existential position as we're talking about it, it does ultimately have a little bit higher decline than our corporate average. But when you balance it across the entirety of our portfolio, the heavy oil, biotech, and DuVernay, we actually see the decline moderate modestly. I'll say that we don't see the big improvements until we get into Fairwater water flood or if we do get into an FID on our modular SAGD for half 227, that would also materially improve base decline. The point is, though, it doesn't go up. It ticks down moderately through the plan.

27:20 Even without the water flood success?

27:23 Correct. So without the... Clearwater Water Flood Success. I would say, though, you do see in this plan that we are capitalizing more of our EOR projects throughout the Lloyd Minster region. In this particular instance, noted that we have 400 million barrels of oil in place resource and projects ahead of us to go after. So that will start to pay and improve the decline through the base plan. And we've been capitalizing. That's not new. We've been capitalizing these style projects for quite a while. I mean, we've got 10% of our heavy oil production that is under flood, influenced by flood. Most of that is polymer flood. This is a continuation of an investment in more of those great EOR projects in the portfolio.

28:10 Okay. I appreciate that. And then just one final question, just a clarification on the Gemini SAGD. You'll be in a position to potentially go to FID in second half of 2017? I'm assuming production wouldn't come on until 2010 under that time frame, but is the, if you do do an FID as the capital for that project included in the $800 million for 28-29?

28:32 So our target is, yeah, so our target is half QFID 2027. There are a couple more items that we're just trying to get our heads around to really come to that conclusion. So characterization, I think we've got a really good handle on it. Capital costs, we've come a long ways on. I think by the end of the year, you'll see us have a design selection, so size mostly of first phase that we would intend to execute on. We're still waiting on royalty framework notionally to be announced from the province. and then some of the auxiliary items that we need to ultimately make a facility of this size go.

29:17 So, water source, water disposal and then gas supply. So, we're working through all those measures. We have $10 million in the plan today for Gemini, budget $800 million total. That is for further delineation of what we would call phase three or pods three and four of the project. So 3D seismic over and then some stratigraphic test wells to just further define the steam chamber. If we do reach FID half through 2027, there's another 50 million roughly that we would look to and think about adding to the plan in the back end of 2027. and then obviously that would come with a step up on the capital expenditures through 2028 as we point to first oil in 2029.

30:05 Sounds good.

30:06 Thanks. The next question comes from Sam Burwell with Jefferies. Please go ahead.

30:17 Hey, guys. Good morning. This dovetails on the last one. Curious about how you think about CapEx, and free cash flow in late 27 and then 28, assuming an FID of Gemini. Do you guys really have enough flexibility just with regard to the net cash position and the free cash flow you should be generating? I'm just curious if there's flexibility in the plan to maybe scale down if commodity prices are lower or if WCS dips are wider or anything like that. I'm just curious how you're thinking about flexibility with Gemini potentially on the come.

30:55 I mean, we study this intensely as we think about capital allocation, as we think about a fortified balance sheet that continues through the three-year plan. As we sit today, we exit 2026. Again, we're in a bit of a choppy environment with respect to macro right now, to say the least. But we do expect to exit the year at close to $400 million of net cash. as we stress test the capital plan for 2027, $800 million with the commitment for $150 million to the buyback, it would still leave us ample capacity to handle capital expenditures on Gemini in the future and still leave us with that rock solid ironclad balance sheet.

31:46 Okay, awesome. And then just a little bit more of a housekeeping question, but the incremental 2027 CapEx versus the prior plan, how does that break down or bucket between the DuVernay heavy oil and then anything earmarked for EOR slash Gemini?

32:06 So here's how we think about that. If you take $625 million, and that's kind of where we were yesterday before we released this first release, I'll just build you up to $800 million from there. So there's an extra $90 million basically of DuVernay capital that's really stepping again into this first year, full commercialization, 21 wells on stream. It's basically an extra three drills and eight completions. The second is incremental heavy activity, so that's about $40 million. to jump to that 130-well heavy oil pace from call it 110, so an incremental 20 drills. Layer in $35 million of EOR, so that's the Lloyd Minster polymer project that we're excited about to the previous question, helping to reduce space decline and that longer-term sustainability.

33:01 And then last is $10 million going to Gemini by way of 3D seismic and stratigraphic test wells. So I think that gets you to $800 million. That drives an 8% to 10% enhanced growth rate on an annualized basis and really important to flag 15% on a Q4 on Q4 basis. That first year step into duvene commercialization, you see the barrels come, they come later in the year, is all, and that's what's driving that large Q4 on Q4 growth rate. So I guess we would look at it this way. We've got some shorter cycle capital, mid-cycle capital, so the ER projects, and some longer-term sustainability-style capital by way of Gemini.

33:44 All right. That math squares perfectly. Thank you, Chad. Thanks. This concludes the question-and-answer session from the phone lines. I'd like to turn the conference back over to Chris Lessoway for any questions received online.

34:00 Thanks, operator. A handful of questions submitted through the webcast, so I Question for Chad, Katie, to start. It's around shareholder returns. Maybe just reinforce our plans for 2027 in terms of the dividend and the share buyback and whether there's flexibility or plans to adjust those amounts.

34:23 Sure. Thanks, Chris. It's on the dividend to start. Plans remain the $0.99 per year dividend. Thank you for joining us. as it kind of outlined in the plans, we have an efficient capital program in hand for 2027. There are opportunities potentially within the plan to advance further projects that are very valuable to us, Peabody, Waterflood, Gemini, et cetera. So maintaining the flexibility around that buyback opportunity to adjust that should mark business opportunities.

35:15 give us that availability. So initial 150, we will assess that as we kind of go through the year. Kind of same conditions we always look at is kind of relative value, our intrinsic value, and where we sit in the karate cycle along with kind of capital opportunities available to us.

35:34 Great. Thanks, Chad. This one's for Chad L., See some news out there about the caribou land sale that's forthcoming. Maybe just comments on any opportunities that we may see there.

35:49 Potential opportunity, no different than all of the other non-caribou lands that we are actively pursuing, exploring, testing, and ultimately, if we like the thesis, are bidding on at-land sale. Caribou lands, I guess the only Differences, it could stand to be a larger land sale. We don't know yet. We'll see in November here what the postings look like. It could be a little bit larger and we're working up our plans to potentially be at the sale.

36:22 Thanks, Chad. Last question here for Chad K. around hedging. Maybe just describe our philosophy around hedging in general and then in terms of WCS for next year.

36:36 Thanks, Chris. So we always kind of anchor our hedging program to our balance sheet. We always have a fairly fortified balance sheet to live through the bonding cycles. So not looking to put on any WCI hedges. We do have WCS hedges here until the end of this year. Nothing on for 2027 at this point. You know, obviously in a pretty high differential environment today, not looking to add anything at these prices to, you know, things being tightened. There could be an opportunity there on the WCS side.

37:09 Great. Thanks, Chad. So that's all the questions we have. So thanks again to everybody who joined the call today. For those of you who submitted questions we didn't get to, please reach out and I will follow up directly. Thanks again for your time today and have a great day. This brings a close to today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.