Earthstone Energy, Inc.

Good morning and welcome to Earthstone Energy's conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. Joining us today from Earthstone are Robert Anderson, President and CEO, Mark Lumpkin, Executive Vice President and CFO, Steve Collins, Executive Vice President and COO, and Scott Thelander, Vice President of Finance. Mr. Thelander, you may begin.

Thank you and welcome to our second quarter 2022 conference call. Before we get started, I would like to remind you that today's call will contain forward-looking statements within the meaning of federal security laws. Although management believes these statements are based on reasonable expectations, they can give no assurance that they will prove to be correct. These statements are subject to certain risks, uncertainties, and assumptions as described in our annual report on Form 10-K for the year ended December 31st, 2021, the second quarter of 2022 earnings announcement, and in our Form 10-Q for the second quarter that we filed yesterday. These documents can be found in the investor section of our website, www.earthstoneenergy.com. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially. The conference call also includes references to certain non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable measure under GAAP are contained in our earnings announcement issued yesterday. Also, please note, information recorded on this call speaks only as of today, August 5th, 2022. Therefore, anytime sensitive information may no longer be accurate at the time of any replay listening or transcript reading. Today's call will begin with comments from Robert Anderson, our President and CEO, followed by remarks from Steve Collins, our COO, and Mark Lumpkin, our CFO, and then we'll have some closing comments from Robert. I'll now turn the call over to Robert.

Hey, thanks, Scott, and good morning, everyone. Thank you for taking the time to join us this morning and for those on the call as well as to those listening in on the webcast. Our strong second quarter results reflect the meaningful contributions of our acquisitions to date. which have considerably boosted our production and substantially increased our free cash flow generation, both to company record levels. In late June, we announced the Titus acquisition, which we expect to close this month, and which adds to our growing position in the Northern Delaware Basin. This acquisition is expected to increase our total daily production to a level approaching 100,000 BOE per day and will add to our high margin drilling inventory. We are acquiring a high return de-risk drilling inventory with 114 gross, 86 net operated locations, with 75% of these net locations along the state line trend area of New Mexico and Texas, which is considered by most in the industry as some of the best inventory in the country. As a quick reminder, with Titus, we will close on seven acquisitions, six of them being in the Permian since the beginning of 2021. Recall at that time we were producing somewhere around 15,000 BOE per day. We have spent $2.5 billion with consideration consisting of about 70% cash and 30% equity, while the proved developed value of those assets have a PV10 of $2.7 billion at the time of acquisition. So we gained more proved developed value than the combined consideration. Not only did we get to about 100,000 BOE per day with these acquisitions, the combination of all these acquisitions has provided us with close to 700 locations for free. With our largest two acquisitions closing in February and April of this year, we have had very substantial integration work in the first half of the year by all of our teams. On our most recent acquisition, which was the Bighorn Assets in the Midland Basin, we're pleased with opportunities operational transition and our efforts to optimize production and to reduce operating costs. The close proximity of this asset to our existing assets has allowed for synergies that we expect will be evident in operating cost efficiencies in the future. We also entered the Delaware basin with our acquisition that closed in February and have now been running a two rig drilling program for about five months and are seeing strong well results. Additionally, we've been able to improve on drilling and completion efficiency since taking over these operations. As a result of our operating procedures, we have cut a few days off of our drilling times and now expect to spud a few more wells in 2022 on these legacy Delaware Basin assets. This offsets some of the inflationary pressures we are facing, but also allows us to moderately accelerate our development pace in the Delaware Basin. Steve will provide some additional comments shortly. We anticipate picking up a fifth rig late in the third quarter as it is released from another operator, which will be used in the Delaware Basin. So for the fourth quarter, we expect to have three rigs in the Delaware while we continue to have two rigs in the Midland. This will add about $40 million to our capital expenditure guidance, which we have updated with our earnings release. And Mark will provide some more information. For the second half of the year, we expect to spend between $300 and $325 million which includes the additional rig, a few more legacy Delaware Basin wells getting spud, and incorporates inflationary impacts seen to date and expected for the balance of the year. As I mentioned last quarter, our near-term cash flow, free cash flow, will be allocated to paying down the outstanding debt under our credit facility. And we do expect to be well under our targeted one-time debt to last quarter annualized adjusted EBITDAX ratio by year end, including the impact of Titus. Now I'll turn the call over to Steve to provide an update on operations.

Thanks, Robert. Good morning, everyone. We continue to operate two drilling rigs in each of the Midland and Northern Delaware basins during the second quarter. As Robert mentioned, we have plans to add an additional Delaware rig later in the third quarter. Besides the drilling operations, we also have track operations underway in both the Midland and Delaware basins. Our well results and total production data are outperforming expectations. One example that we highlighted in our earnings release is the completion of our Bel Air 5-8 pad in Lee County, New Mexico. This two-well pad was one of our initial projects since acquiring the assets in the Northern Delaware Basin. We began producing this two-well pad in late June, and after flowing for a couple of weeks, we installed electric submersible pumps. That pad is now producing 1,085 BOE per day per well with 92% oil and still in the process of cleaning up. We did experience several midstream issues and third-party saltwater disposal capacity problems, which resulted in some production downtime in the quarter. Those issues are largely resolved. The integration of Bighorn and Chisholm assets continues, and we are pleased with how it's progressing. We have focused on returning wells to production that went offline in the marketing timeframe, installing artificial lift when necessary, changing artificial lift methods as needed, and implementing frac prep strategies to avoid future workovers. These efforts have increased production by well over 3,000 BOE per day in the Chisholm properties and 470 BOE per day in the Bighorn properties. We will apply the same evaluation process to the Titus acquisition. With the closing of the Titus acquisition and the associated expected addition of the fifth drilling rig, We expect to spend around $40 million on incremental drilling and completion activity. This includes completing six wells drilled by Titus prior to closing and the drilling of an additional four wells. With our anticipated five-rig drilling program, three rigs in the Delaware Basin and two in the Midland Basin, we expect to bring online a total of 61 gross, 50 operated wells for the full year of 2022, while spreading a total of 66 gross, 53 net operated wells. Now to address cost pressures. We aren't immune to the effects of inflation, but we're doing everything we can to mitigate the impacts. While inflation was only moderately impactful in the first half of the year, we are now seeing more significant impacts of increased prices of services and raw materials. From capital expenditure standpoint, we have increased our guidance to account for the cost pressures we have seen and are further forecasting that for the balance of the year. On the LOE side, while we have seen some inflationary pressures, We've been able to mitigate this by realizing efficiencies on our newly acquired assets. We were pleased with how we were able to manage LOE in the second quarter. While we hoped we would be able to achieve some efficiencies on both the newly acquired Delaware Basin and Midland Basin assets, both of which have historically had significantly higher operating costs than Earthstone's legacy assets, we really outperformed on managing LOE downward versus historical costs despite inflationary pressures. Just to give you a sense of the magnitude of what we've been able to do in managing LOE down after we make acquisitions, looking at the two southern middle and basin acquisitions that we closed in the second half of last year, our second quarter LOE per BOE was down 24% and 51% compared to LOE per BOE costs at acquisition. We have seen over a 10% reduction in LOE per BOE on the Chisholm assets in that short period of time that we've been operating that asset. And we are heading that way in the Bighorn assets as well, all despite the rising cost environment we're in. Posing with a few highlights of our environmental stewardship, we maintain a very thoughtful and disciplined approach to doing the right thing operationally and seeking always to improve. With our earnings, we have released some updated environmental data that demonstrates results of our efforts in this area. In 2021, we reduced our greenhouse gas emissions intensity by 36% year over year. On the flaring intensity side, we reduced flaring intensity by 68%, with flaring down to 0.7% of produced gas in 2021. With the additional acquisitions we have made in 2022, we will apply the Earthstone operational and environmental impact standards to the acquired assets, all of which have opportunities for improvement. With that, I'll turn it over to Mark.

Thank you, Steve. As usual, I'm going to take this time to provide additional details and some meaningful metrics and provide a few key highlights for the quarter. As you know, you can find a detailed breakdown of our results in our earnings release and in our 10-Q, both of which were filed yesterday. So let me begin with some details surrounding our balance sheet and the impact of our ongoing M&A activity on our balance sheet. As of the end of the quarter, we had $395 million of debt outstanding on our credit facility, with a total of $800 million of elected commitments. We extended the maturity of the credit facility to five years during the second quarter, and the borrowing base was increased to $1.4 billion in that process. Our total debt at quarter end, when including the senior unsecured notes that we also issued during the second quarter, came out to $933 million. During the month of July, we paid down an additional $145 million on the credit facility, which brought the credit facility balance down to $250 million as of July 31st. and brought total debt down to approximately $790 million. In conjunction with signing the Titus Acquisition Agreement, which we expect to close on next week, we obtained $400 million of incremental commitments from our existing lenders, which will increase the electric commitments on our credit facility from the current $800 million to $1.2 billion upon closing of the Titus Acquisition. We expect to pay around $535 million of cash at closing on Titus, which we intend to draw onto the credit facility which will bring the balance on our credit facility to around $770 million based on our current funding and bring total debt to around $1.3 billion as of July 31st adjusted for Titus. Our second quarter EBITX of $301 million was a 144% increase quarter over quarter and was driven by the incremental production from both the full quarter of the Chisholm assets and close to full quarter of the Bighorn assets, plus what were obviously very strong commodity prices during the quarter. Free cash flow for the second quarter was approximately $165 million, which represents a 362% increase compared to the first quarter. We continue to earmark near-term free cash flow for repayment of credit facility debt. For the second quarter, our debt to annualized EBITX was 0.8 times, and we still expect to remain below that, 1.0 times debt to EBITX target at year-end including the impact of the acquisition of the Titus assets. From a production standpoint, we outperformed our second quarter guidance with 77,125 barrels of oil equivalent per day, which is about 7% above the moon point of our guidance. This was comprised of 37% oil, 34% natural gas, and 29% natural gas liquids. While production came in above guidance, it was also a bit less oily than we anticipate, owing in part to gas and NGL volumes exceeding our forecast, but also to higher than expected downtime related to frack activity and midstream activity and midstream downtime, which disproportionately impacted our oil volumes relative to gas and NGLs. We have provided updated production guidance for the remainder of 2022 by quarter with our earnings release, which incorporates the expected near-term closing of Titus. By year end, we expect to be pushing close to 100,000 BOE per day with about 44% being oil. Total cash G&A for the quarter was $8.1 million compared to $6.5 million in the first quarter as we added staff related to acquisitions of both Chisholm and Bitcoin. On a net basis, given much greater production volumes, cash G&A on a per BOE basis decreased by 43% to a company low $1.00 $1.16 per BOE in the second quarter, which was compared to $2.03 per BOE in the first quarter. This G&A metric alone highlights the significant benefit of scale, as we are now less than half of our 2021 average on a per BOE basis. On the LOE front, we recorded LOE per BOE of $7.20 in the quarter, which, as Steve mentioned, was a really great result and was below the bottom end of our full-year guide range, and candidly was about 10% below how we had modeled it. We're moderately increasing our cash G&A guidance for the year to account for Titus and also moderately increasing our LOE guidance for the year, but we will still be working to beat on both of those. Turning to the capital expenditure side, we spent $119.5 million in the second quarter. We had some relatively lower levels of inflationary impact in the second quarter, but are seeing greater impacts currently in forecasting continued cost pressures throughout the year. With our earnings release, we provided updated guidance for the balance of the year, which accounts for the incremental activity on our base drilling program, as we're drilling a little faster than expected on the Delaware side, but also to account for the expected closing of Titus and the addition of the fifth rig, and also to account for some inflationary pressures. We are guiding towards $300 to $325 million of CapEx in the second half, which would bring total CapEx for the year to $502 to $527 million. This represents an increase at the midpoint of a little under $90 million. Of this near $90 million, about $40 million is related to incremental drilling and completion activity from picking up a fifth rig, and including the tightest acquisition and completions. About $20 million of which is related to increment activity in our base drilling program, and about $30 million of which is really related to inflationary impacts. So if you want to dissect a little bit what the cause of the increase is or what the driver of the increase is, The 21% of that 21%, 14% is driven by incremental activity and 7% is really to account for inflation. On the hedging front, we added hedges on about 50% of both oil and gas PDP from the Titus assets the day after we signed the Titus acquisition agreement in June. And that maintains our approximate hedge levels for the remainder of the year at around 50% for each of oil and gas and around 30% in 2023. With that, I'll turn it back over to Robert for closing comments.

Thanks, Mark. As you all can see, with results from the quarter, both operationally and financially, we have transformed the company quite dramatically over the past 18 months. And the transformation of Earthstone continues with the anticipated closing of the Titus acquisition. On a combined basis, this latest acquisition will bring our total proved developed PV10 to over $4.9 billion, based on a recent strip price, which is right around 50% larger than our current pro forma enterprise values. Our goal has always been to add accretive scale and high quality production and inventory without sacrificing our balance sheet. And we continue to get that done. As of today, I would characterize Earthstone as being in a better position to optimize our operations and generate substantial free cash flow than ever before. And we believe it will only continue to get better. With our ability to identify operational synergies and larger size, which we believe will enable us to better leverage purchasing power going forward, We believe there is a significant upside potential for continuous improvement of economic efficiencies in the future given our increased scale. It's certainly been a busy and exciting past couple of years with the level of M&A that we've been able to complete, and our management team continues to do an excellent job evaluating potential opportunities. And we have really established a core competency at integrating these acquisitions. But I think it's important to note that the rate at which we've been completing acquisitions does not make us any less thorough. We continue our disciplined approach and put all potential acquisitions under the same technical and financial microscope. And above all else, we prioritize shareholder value. We will continue to consider complementary assets that fit our stringent criteria and allow us to maintain the strength of our balance sheet. We are still in the early stages of evaluating a shareholder return program and expect that a possible shareholder return could be a 2023 event. However, our near-term priorities will be reducing debt, integrating the Titus assets, and executing on our expanded drilling program. So once we have the integration of Titus under our belts, have a couple of quarters of operational and financial results behind us, and have paid down a meaningful portion of our revolver debt, we will be in a better position to consider commencing a shareholder return program. We continue our focus on creating shareholder value through accretive acquisitions, organically growing through our drilling program, maintaining a healthy balance sheet, and delivering strong financial results. Now, operator, with all that, we're glad to take a few questions.

Thank you. And at this time, we'll conduct our question and answer session. To ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press the star key followed by the number 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Neil Dingman with Truist Securities. Please state your question.

Morning, Robert and team. My first question this morning is on shareholder returns versus growth. Specifically, now that you look at it, you guys have done a fantastic job growing scale without adding too much leverage, and so I'm just wondering, at this point, how do you all view sort of upcoming free cash allocation between further building scale and shareholder return, and if the latter is Could you talk maybe about, if I can get a twofer on this one, would you think about buying shares back if Warburg and those guys decide to sell anytime soon? Thank you.

Yeah, thanks, Neil. I think we have laid it out consistently over the past few quarters as we've continued to gain scale. We'll work on reducing debt first. We'll look for other opportunities to grow the business through acquisitions or, in this case, as we've identified this morning, expanding our drilling platform. program by adding another rig now that we've increased our acreage position in the Delaware Basin. And then as the M&A opportunities either diminish or we can't get something done, then we consider shareholder return. We're still going through the different evaluation and options that are facing us. We created quite a bit of good liquidity and trading volume here over the last 18 months with all these deals And, you know, buying back our shares is an alternative, but probably look at some other options first. So that's kind of where we've ranked everything and still working on it. Give us a couple quarters. Let us execute on the tightest deal. Let us pay down some more debt. And we'll come back to you hopefully in 2023 with something that makes sense.

No, that could be the Space Force itself. And then my second question. Robert is just on sort of what I would call regional returns. Specifically, I know you mentioned release just a second ago about running three rigs in the Dell and two in the Midland. I'm just wondering, are you running or plan to run a bit hotter in the Dell because of higher well returns there? Or are there other drivers such as lease expirations? Or maybe just easier to ask another way, if you kind of would rank them or whatever, where do you all see kind of now post-TITUS Where do you see your highest growth returns? Thank you.

Yeah, there's no doubt that the Delaware Basin has great returns. And that's why we're increasing our capital expenditures in there and running three rigs there. We still like our Midland Basin. We'll continue to develop it. Obviously, with running two rigs, we're still spending a big chunk of our capital program there. But the returns and the acreage position just make it beneficial for us to spend more capital in the Delaware Basin. We do not have any HBP or expiring lease issues. We've got the permits. It's not an issue of we're afraid of what's going to happen down the road. We're just going to execute on and continue to execute on plans that other operators, where the assets we've acquired, we're just going to continue those operations and grow our opportunity set in both of those places, but the Delaware has better returns.

Hey, Neil, this is Mark here. I would just chime in here. If you look on page seven of our investor deck, it's the updated location count. You can also sort of see just looking at what's in Lee, Eddie, and then Titus. That is the majority of our locations now. So the three rigs in the Delaware and two rigs in the Midland is actually pretty proportionate to our location future inventory as well.

Thanks for the ad. Thank you, Mark. Thanks, Robert.

Our next question comes from Austin Alcoyne with Johnson Rice. Please state your question.

Good morning, Robert, Mark, Steve, and Scott. Nice execution this quarter as the Chisholm and Bighorn integrations seem to be going well. Yeah, thanks, Austin. My first question, it has to go with the fifth rig going to work later this quarter, which will be the third rig working in Delaware. Is this one of the rigs that came over from Titus? And then also, is this rig going to work on Titus assets, Chisholm assets, or is it a mix of both?

Yeah, Titus had three rigs running, and those have all left the New Mexico portion of the assets. Don't know exactly where they all are. We just know that one is coming back. It may be from the bullpen that Titus had running. It may come from somewhere else. At this point, I'm just going to be silent on that. Secondarily... We're going to just spread those three rigs out across all of our New Mexico assets. And as we develop our 23 plan, you know, we may stack up more rigs in one area than another just to shorten cycle times. But right now, it's going to be a combination.

I appreciate the color. And as a follow-up, on the Titus inventory, how many locations slot into the top quartile for Earthstone?

I'd say more than half of them, probably. I mean, the Delaware just in general has higher economic returns. Part of it is the net revenue interest, you know, dealing with federal acreage, less royalty burdens. And then, you know, the tightest acreage right along the state line is Premier, there's no doubt about it, Great Rock. So it's very attractive, and that's why, you know, we wanted to expand our program as fast as we could.

I appreciate it. That's all from me.

Thanks a lot, Austin. Our next question comes from Jeffrey Campbell with Alliance Global Partners. Please state your question.

Good morning. First of all, congratulations on the Titus acquisition. I wondered if you could compare and contrast the Chisholm-Lee County that agrees with Titus. I'm just trying to get a feel for the relative productivity, DNC time cost, you know, if they're relatively similar or if there's any noteworthy differences, whatever you can provide at this time.

Sure. Jeffrey, it's a great question. You know, most of the Titus acreage and value and upside is along that state line trend, which is almost the center of the basin. So it's a little deeper. So it will cost a little bit more to drill. But higher returns there, just the rock quality is premier. And maybe a couple more benches there than what you see in most of the Chisholm acreage that we have, our footprints to the north side of the Lee County. And again, a little bit shallower up there. But still competitive economically, and money's gonna go to both places.

Okay, great, that's helpful.

Just to kind of add a blotter,

And I'm not asking about return of capital to shareholders.

You've noted that you now have a large locations portfolio. Production is going to reach or get close to 100,000 barrels a day after Titus. It just doesn't seem like you have too many holes left to fill. So I'm just wondering what are your aspirations for the company over the next 12 to 18 months from a structural point of view?

Yeah, great question. And we get asked this quite frequently, what's the target? You want to get to 120,000 or 150,000 BOE a day? You want to have 400,000 acres? You want to have some metric of market cap or enterprise value? All those are great numbers, but they don't drive necessarily shareholder value. So we're going to continue what we do and develop our asset base and continue to look for opportunities to increase scale. Even though it's a rough M&A market at the moment, there's still a lot of opportunities that will come to fruition over time, and it'll be a busy back end year and going into 2023 with M&A, so we'll continue to participate in those processes. We may not be lucky or fortunate or be able to buy anything, But our ability to take our asset base that we have today and just continue to execute on it and drive down costs like we've been able to is what we're focused on doing, and then we'll continue to grow as the opportunities come around. If it ain't broke, don't fix it. Got it. Okay, thank you. The playbook has worked pretty well so far. Yeah, thanks, Jeffrey.

Our next question comes from Davis Petros with RBC Capital Markets. Please go ahead.

Morning, y'all. Thanks for the time. My first question, and kind of recognizing y'all don't have 23 guidance out there at this point, but picking up that third ridden, the Delaware, what do you think kind of is the optimal activity pace for a company of your own size today? Is that keeping those five rigs running through next year or kind of any color you have on that?

Yeah, I think five rigs running through next year, the capital will be a little bit higher, obviously, because full-time five rig lines is more than what we've guided to for this year. But it'll be higher, and that'll keep production relatively flat to growing a little bit. It just depends where we drill and spend the money and ownership and things like that in the wells we drill. But it's a good size for us. We'll Try this out for a while and make sure that we can execute, you know, almost as well as we have executed up to this point or better than we've executed up to this point. But we'll try that. And as we see opportunities to expand, you know, it's hard to pick up services. But as we see opportunities to expand, maybe we could add another rig. I think this is a pretty good spot for us to have a maintenance sort of capital plan. And that's probably what we're going to plan on for 2023 in the interim anyway.

Got it. And I guess just a quick follow up on that and kind of building on some of your prepared remarks, but this third rig, am I correct that you're picking it up from another operator and you'll have to give it back? Or is this something you theoretically could hold through next year? Will you have to go to the market to find another rig?

No, we don't have to give it back. If we get this third rig for the Delaware, so as we pick up this fifth rig and get it, it'll be ours and we'll be able to keep it as long as it performs.

Got it. Good to hear. And if I can sneak in one last one, the operating cost guidance crept up a little bit in the back half, I guess, is that largely kind of work over related or kind of any moving factors there that you can provide some color on would be great.

Yeah, we did a great job in the second quarter reducing LOE below guidance and Steve and the operations guys did a fantastic job maintaining, but you know, there's still some inflationary pressure. There's no doubt that the workovers that we've done today and those that we have scheduled, you know, add a little bit to that. And then the Titus acquisition as well. Every time we do an acquisition, Steve's starting in the hole, and he's got to climb out of that hole by dropping LOE. So we've incorporated that for the back half of the year.

Got it. Makes sense. Appreciate the time.

Thanks, Dave. Thanks. Just a reminder to ask a question, press star 1. Our next question comes from Jeff J. with Daniel Energy Partners. Please go ahead.

Hey, guys. I was just kind of curious with the additional rig. Is there any additional frac capacity required with that addition?

You know, we've got three rigs, and that's about what it takes to engage a frac crew full time. And so we see some opportunity to, you know, with Titus going away, they were using some frack crews, a couple different ones. With them going away, we see some opportunity maybe to slide some of that work for us in the future. So it doesn't seem like there's a lag there that will cost us a whole lot of time.

Oh, excellent. And then just quickly, I know, again, 2023, you know, nothing formal, but We've heard a lot of comments from other EMPs about their efforts to sort of start locking up capacity or at least keep the crews that they like. Can you give us a little outline on what your efforts are there and how that's progressing for you?

Sure. I'll take a stab and then Steve can chime in here. We've renegotiated or are in the process of renegotiating rig contracts, so we've got those guys locked up. They've obviously done a great job for us. and the cost has creeped up a little bit as everybody expects, but that's manageable. We've got SAN and FRAC companies lined up for next year already. The SAN's sort of committed, contracted, and the FRAC company, we've been using Python in the Midland side for five plus years now, and they've done a great job, and it's a partnership. It's not a typical vendor relationship, it's worked very well for us. We feel pretty good about, and then we've got casing, ordered well in advance, and knock on wood, we have continued to keep our practices from the past of ordering casing well in advance, and that's served us well this year.

Excellent. That's all for me. Thanks, guys. Thanks, Jeff.

Thank you, and there are no further questions at this time. I'll hand the floor back to Robert Anderson for closing remarks.

Yeah, thanks, everybody. We appreciate your time, and we'll talk to you next quarter or in the interim. If you have questions, give us a call. Thanks.

This concludes today's conference. All parties may disconnect. Have a great day.