ARC Resources Ltd

TSX:ARX

Earnings Call Analysis

ARC Resources positions for growth with reduced capital expenditures and increased shareholder returns

In its latest earnings call, ARC Resources reported average production of 327,000 BOE per day, exceeding analyst expectations. The company achieved significant growth in light oil and condensate production, up 20% quarter-over-quarter. A 12% dividend increase reflects confidence in future cash flows due to the Attachie project's successful first phase. For 2025, ARC aims for 10% production growth, projecting $3.2 billion in cash flow and around $1.5 billion in free cash flow. Through disciplined capital management, they plan to return all free cash flow to shareholders and are targeting to triple free cash flow per share by 2028, bolstered by continued operational efficiencies.

A Successful Quarter with Strategic Growth

In the third quarter of 2024, ARC Resources demonstrated impressive operational performance, reaching an average production of 327,000 barrels of oil equivalent (BOE) per day. This includes a noteworthy 89,000 barrels per day of light oil and condensate, marking a substantial 20% quarter-over-quarter growth. This surge in production is attributed to the strong performance at Kakwa and a disciplined management strategy, particularly with natural gas production from the Sunrise asset. Notably, ARC effectively curbed its natural gas output in response to weak market prices, which allowed them to preserve resources for future profitability.

Financial Solidarity Amid Market Pressures

Despite a tough environment for natural gas prices—where ARC realized CAD 1.78 per Mcf, which was double the local AECO price—they continued to showcase robust free cash flow generation, amounting to $135 million in the quarter. The strategic decision to curtail production at lower prices surpassed the immediate financial hit, leading to deferred capital expenditures of $20-30 million and a better margin realization. This proactive approach reflects ARC’s commitment to prioritizing profitability over sheer volume.

Ambitious 2025 Outlook and Budget

Looking ahead to 2025, ARC has set remarkable production targets. The budget ranges from $1.6 billion to $1.7 billion and aims for a record production of 380,000 to 395,000 BOE per day, translating to a 10% increase in output compared to 2024. The company anticipates generating approximately $3.2 billion in cash flow and $1.5 billion in free cash flow, emphasizing a dedication to reinvesting about 50% of cash flow back into operations. Furthermore, this budget reflects a decrease in capital expenditures by about $200 million year-over-year, promoting operational efficiencies.

Shareholder Returns Take Center Stage

ARC remains committed to rewarding shareholders, with a declared 12% increase in dividends and a strategy to return nearly all free cash flow to shareholders for the third consecutive year. The guidance suggests approximately $400 million in dividends with a yield of about 3%. This plan could allow for share repurchases equating to about 8% of outstanding shares based on recent stock prices. This underscores the company’s focus on maintaining a strong balance sheet while maximizing shareholder value.

Phase 1 Completion and Future Projects

The successful kickoff of Phase 1 at the Attachie project represents a significant milestone, with current production reaching 20,000 BOE per day and expectations to ramp up to 40,000 BOE per day by year-end. This project is poised to enhance free cash flow from asset-level contributions of roughly $500 million annually. Looking further ahead, differing from immediate expenditures, details regarding Phase 2 are promising, with expectations of expansion planned as part of the long-term growth trajectory.

Robust Demand Meets Strategic Preparedness

ARC’s production strategy aligns well with forecasts of increasing demands for LNG and power generation in North America, predicted to enhance market pricing structures. The company’s focus on rigorous financial discipline and strategic capital allocation for its assets fits well into future market environments. The expected start of LNG contracts in 2026 with Cheniere will additionally diversify their market reach, positioning ARC favorably against a backdrop of evolving supply and demand.

Conclusion: A Positive Investment Case

Overall, ARC Resources presents a compelling investment narrative characterized by strong operational metrics, disciplined financial strategies, and planned shareholder returns. The commitment to operational efficiency and the proactive management of asset performance during fluctuating commodity prices establishes a foundation for stability and growth, positioning ARC well for the anticipated energy market transformations ahead.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning. My name is Eva, and I will be your conference operator today. At this time, I would like to welcome everyone to the ARC Resources Third Quarter 2024 Earnings Conference Call. [Operator Instructions]

Thank you. Mr. Lewko, you may begin your conference.

[Dale Lewko, executive]

Thank you, operator. Good morning, everyone, and thank you for joining us for our third quarter earnings conference call. Joining me today are Terry Anderson, President and Chief Executive Officer; Kris Bibby, Chief Financial Officer; Armin Jahangiri, Chief Operating Officer; Lara Conrad, Chief Development Officer; and Ryan Berrett, Senior Vice President, Marketing.

Before I turn it over to Kris and Terry to talk you through our third quarter results and 2025 budget, I'll remind everyone that this conference call includes forward-looking statements and non-GAAP and other financial measures with the associated risks outlined in the earnings release and our MD&A. All dollar amounts discussed today are in Canadian dollars unless otherwise stated.

Finally, the press release, financial statements and MD&A are all available on our website as well as SEDAR. Following our prepared remarks, we'll open the line to questions.

With that, I'll turn it over to our President and CEO, Terry Anderson. Terry, please go ahead.

[Terry Anderson, executive]

Thanks, Dale, and good morning, everyone. I want to begin by stating that ARC's long-standing principles of safety, capital discipline and operational excellence are embedded in our culture and were once again evident in the quarter. We delivered strong operational results. And in October, we successfully commissioned the first phase at Attachie, which is our eighth major Montney development project.

In addition, we continue to deliver on our commitment to shareholder returns, announcing a 12% dividend increase while continuing to buy back shares, both proof points that reaffirm our conviction in our business.

Looking ahead, our asset base are performing very well. With Attachie on-stream, ARC is positioned to deliver a significant step change in free cash flow per share growth in 2025.

To expand on the quarter, we delivered average production of 327,000 BOE per day. This included 89,000 barrels per day of light oil and condensate, representing 20% growth quarter-over-quarter. This increase in condensate contributed to high margins and strong free cash flow generation, offsetting weak Western Canadian natural gas prices.

We also maintained 2024 guidance as high deliverability at Kakwa helped offset voluntary natural gas curtailments at our Sunrise asset. The strong capital performance was partly the result of frac design changes the team implemented earlier this year. Production at Kakwa averaged 180,000 BOE per day, and at times was producing in excess of 200,000 BOE per day. This is a great example of the technical strength of our people and our commitment to continuous improvement.

While Sunrise is one of the lowest cost dry gas assets in North America, the decision to curtail production showed our disciplined approach to profitability. As Western Canadian natural gas prices stayed low, we elected to shut-in approximately 250 million cubic feet per day to preserve resource for a period of higher pricing. And currently, we are able to leverage our dual-connected infrastructure and redirect gas to more attractively priced markets in the U.S. This resulted in higher realized pricing and better margins.

An additional benefit of curtailing Sunrise production is we can defer $20 million to $30 million of capital next year that we would have spent maintaining production. In mid-October, we restored some volumes at Sunrise when natural gas prices recovered above levels required to exceed our hurdle rates. We have said this before, but it's worth mentioning again, ARC will always operate with a profitability over BOE mindset, and our operational decisions at Sunrise are a proof point of this.

Moving on to Attachie. Back in May of 2023, when we announced we are proceeding with Phase 1, we committed to an 18-month construction time frame. Today, 18 months later, I'm pleased to announce we've delivered on this promise and have commissioned Phase 1 on time, on budget, and most importantly, safely. The achievement is the culmination of years of development planning, stakeholder and indigenous engagement and detailed technical work. Project management is what we do well.

In total, this project involved more than 3 million combined work hours for construction and commissioning with our service providers, and I'm proud of the way our team has executed this project, demonstrating once again that operational excellence and safety are core to how ARC operates.

Today, Attachie is producing about 20,000 BOE a day, of which 11,000 barrels per day is condensate. With our start-up drilling and completion activities nearing completion, we are right on track to ramp up to our productive capacity of 40,000 BOE per day by year-end.

Attachie is a critical part of achieving the profitable growth embedded in our long-term plan, so to see it come together is very exciting. Thank you to the whole team at ARC for successfully executing this project and for your continued focus on safe and efficient operations across our company.

Moving on to the budget. Next year, we have all the pieces in place to deliver a meaningful increase in free cash flow per share. Our capital budget of $1.6 billion to $1.7 billion is expected to deliver record average production of 380,000 to 395,000 BOE per day, representing 10% production growth, 20% growth in condensate production and a concurrent 10% reduction in capital expenditures compared to 2024. We expect this program to more than double free cash flow to about $1.5 billion at strip pricing, which we plan to return to shareholders through a growing base dividend and share repurchases.

Attachie is set to deliver approximately $500 million in asset-level cash flow on an annual basis. It will also increase margins by adding high-value condensate while cash cost per BOE remain flat. The result is a combination of production growth and margin expansion as we grow Attachie.

The improvement in the implied capital efficiencies compared to 2024 is driven by 3 main factors. First, we get the benefits of a full year of production from Attachie Phase 1. Second, with the infrastructure investments at Attachie complete, 90% of the capital is directed towards well-related activities, which drive a strong return on invested capital. And lastly, we are benefiting from better capital efficiencies at some of our core Montney assets, like Kakwa and Sunrise.

Before I turn it over to Kris, I'd like to touch on Attachie Phase 2. As a reminder, Phase 2 is a near replica of Phase 1, a 40,000 BOE per day facility that is comprised of approximately 60% of liquids, of which the majority is condensate. We are ready to advance Phase 2 as part of our long-term plan. We expect to include the capital investments with the 2026 budget with an on-stream date of 2028.

To date, we have taken steps to gain further confidence in the regulatory environment. We maintained positive relationships with the First Nations with whom we operate and the returns are well above our hurdle rates under low commodity price scenarios. Phase 2 lies in the heart of the condensate-rich areas of the Montney. As a result, we expect growth and margin expansion to continue as we introduce higher margin Attachie barrels into our base production.

In summary, our conviction in Phase 2 remains strong and we look forward to sharing more as we continue to advance this project.

With that, I'll turn it over to Kris.

[Kristen Bibby, executive]

Thanks, Terry, and good morning, everyone. First, I'll touch on the quarter. We delivered average production of 327,000 BOEs per day, generated funds from operations of $592 million. Production was 2% above analyst expectations, while cash flow was 12% higher than analyst forecast.

Third quarter production was at the upper end of our previously guided range of 315,000 to 330,000 BOEs per day. The increase relative to our expectation was driven by strong well productivity at Kakwa. This contributed to light oil and condensate production, which averaged 89,000 barrels per day in the quarter, representing a 20% growth on a quarter-over-quarter basis and 4% year-over-year.

Over the past several months, ARC has consistently been recognized in several top well reports across a few of our assets. The most recent is [ screening ] with 9 of the top 10 oil and liquids wells in Alberta in September.

Despite the recent volatility in WTI, condensate demand remains robust and is notable by the tight differentials, with condensate currently trading at a premium to WTI. We continue to manage risk and exercise discipline across our business.

This quarter, we elected to curtail a portion of our natural gas production at Sunrise to limit our exposure to weak Western Canadian-based natural gas pricing where prices were especially weak. As a result, we realized a natural gas price of CAD 1.78 per Mcf in the quarter, which was effectively double the local AECO market.

Looking back, the decision to shut-in gas realized -- resulted in a realized natural gas price that was $0.20 greater at a corporate level than if we elected to produce the gas. By doing this, we preserved the resource for a period when prices are higher, realized higher margins and are able to defer $20 million to $30 million of capital expenditures previously earmarked to sustain production in 2025. In our view, this was a simple decision and something we will continue to consider as we think about optimizing our assets to create value.

To this end, while natural gas prices are at low levels today, demand in North America for LNG and power generation is set to grow at an accelerated pace in 2025, which we believe will drive a positive fundamental shift in supply/demand.

For ARC, we have amassed a deep inventory in the Montney, which sits well below the marginal cost needed to supply this demand growth. We have a transportation portfolio underpinning that resource that allows us to deliver our natural gas to key demand markets in North America. Our natural gas diversification will extend internationally beginning in 2026 when our first LNG contract with Cheniere takes effect.

Moving on to capital. We invested approximately $460 million in the quarter, including roughly $200 million to complete our first phase at Attachie. After investment, our business yielded $135 million of free cash flow in the quarter.

In terms of capital returns, we distributed $220 million to our shareholders this quarter through a combination of dividends and share buybacks. This included the $135 million of free cash flow in the quarter as well as $80 million of proceeds from a noncore asset disposition.

Looking ahead with Attachie Phase 1 on-stream and production at Sunrise partially restored, we are anticipating a record production -- record quarter production in the fourth quarter, with average production between 380,000 and 385,000 BOEs per day. This will result in the full year production at the low end of our 2024 production guidance range despite the natural gas curtailments, which reduced our full year average production by approximately 10,000 BOEs per day. Put differently, if we did not curtail any natural gas production, we would expect it to reach the top end of our production guidance for 2024.

Finally, to round out the quarter, we exited with $1.6 billion of net debt and $1.4 billion of long-term debt. This is a comfortable level of debt given the asset quality and inventory depth that underpins our business and implies a net debt to cash flow ratio of roughly 0.6x.

Turning to the 2025 budget. We put forth the capital program that emphasizes profitability and balances organic growth with a meaningful capital return. The $1.6 billion to $1.7 billion budget results in 10% production growth or reinvesting approximately 50% of cash flow at strip pricing of USD 60 WTI and CAD 2.40 AECO. We estimate our program to generate about $3.2 billion of cash flow and approximately $1.5 billion of free cash flow. For the third straight year, we intend to return essentially all free cash flow to shareholders.

Based on our guidance, the budget represents a record year in terms of natural gas and condensate production, with average production of 380,000 to 395,000 BOEs per day, including approximately 105,000 barrels per day of light oil and condensate. This reflects stable production at ARC's base assets of 350,000 BOEs per day and a full year of production at Attachie of between 35,000 and 40,000 BOEs per day.

Capital expenditures represent a roughly $200 million decrease year-over-year as we conclude the infrastructure investments in Attachie Phase 1 and incorporate some of the capital efficiency gains we have observed at Kakwa and Sunrise.

Margin expansion in 2025 reflects a higher condensate weighted production mix along with all-in cash costs on a dollars per BOE basis that are expected to be flat to slightly down year-over-year. Based on dividends of approximately $400 million or a 3% yield, the budget implies $1.1 billion of free funds flow after dividends, which could be used to repurchase roughly 8% of our shares outstanding based on the share price yesterday. This aligns directly with our long-term plan to profitably grow on a per share basis while continuing to return capital to shareholders.

Maintaining a strong balance sheet and a resilient business are core to ARC. Net debt to cash flow was approximately 0.6x and less than 1x at USD 50 WTI and USD 2.50 Henry Hub. Capital program and dividend are fully funded by cash flow at below USD 50 WTI and USD 2.50 Henry Hub, a result of our low cost structure, balanced commodity mix and owned and operated infrastructure.

With that, I'll give it back to Terry for some closing remarks.

[Terry Anderson, executive]

Thanks, Kris. To close, we are on track to achieve the goals introduced with our long-term plan 1.5 years ago. We have achieved the first milestone in bringing Attachie on-stream, and this sets the stage to triple free cash flow per share to greater than $4 by 2028.

Finally, I want to again thank all of our staff for their continued focus, discipline and hard work in delivering exceptional results across all aspects of our business. I also want to thank our investors that joined us on the Attachie tour. This is a great opportunity to showcase what we have collectively worked so hard to achieve over the past few years. We appreciate your continued support. Thank you. With that, we can open the line up for questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Michael Harvey of RBC Company.

[Michael Harvey, analyst]

Just a couple for me. I guess the first one maybe for Lara or Armin. I mean just wondering if you could give us some early color on the well performance at Attachie. I know we're kind of early days here, but just anything like number of wells currently producing to hit that 20,000 initial IPs, condensate ratios, that kind of stuff would be helpful to the extent you can provide any high-level detail.

And then the second one, maybe for Ryan or others. Has LNG Canada given you any indication of when they might start taking your Sunrise gas into Phase 1? And maybe just remind us what kind of effect that will have on your pricing realizations at the point that, that does happen. That's it for me.

[Larissa Conrad, executive]

Thanks, Mike. Lara here. Yes, thanks for the question. As far as initial rates, everything we see out of Attachie is coming on as we expected. Just like you don't see us release rates when we first bring on a well, I don't want to get into specifics because we've got a lot of water coming back. The wells are still cleaning up. But really happy to see gas and strong condensate volumes from these early wells and look forward to talking about it more as we get into a more stabilized production from Attachie.

[Ryan Berrett, executive]

Mike, it's Ryan. Just on your question on LNG Canada. We are expecting our volumes to start flowing sometime in the first half of 2025. We haven't been given any further notification than that. As you know, the pricing on that deal with Shell is a modest premium to AECO. So we wouldn't expect material changes to our gas price realizations.

[Operator]

Your next question comes from the line of Kalei Akamine from Bank of America.

[Kaleinoheaokealaula Akamine, analyst]

For my first question, I want to address the soft gas market in AECO. Can you talk a little bit more about your plan to manage this winter? Why not just keep Sunrise off for an extended period, perhaps until Canada LNG helps shift the market into a new balance?

[Kristen Bibby, executive]

You bet. Kalei, It's Kris here. What we outlined with our second quarter release when we initially guided the market that we were going to bring some production off at Sunrise, we talked about a couple of different price points. The most important one price point for us, and Terry has mentioned it quite a few times, is our full cycle breakeven. We don't want to produce the resource below what is required to achieve our targeted return rates. And for an asset like Sunrise, that number is somewhere in the $1 to $1.30 range. So as we saw AECO coming back above those amounts and we can make our hurdle rates, it makes sense to bring that asset back on. We are not constrained by inventory in any way, shape or form at our assets. So if we can make our hurdle rates and run a profitable asset, we think it makes sense to do so.

If somebody was short a little inventory, that decision might get changed and you might want to save all of it for a different day. But given our inventory length, it makes sense and it increases the profitability of the overall organization to continue to run it. You have seen us, we use the word, partially restored production at Sunrise. And really, what we are doing there is limiting our exposure to Station 2, which is another local market here in Western Canada as pricing has not yet achieved our hurdle rate. So we'll wait until that does happen before we bring that production back on.

[Kaleinoheaokealaula Akamine, analyst]

Kris, I appreciate that. I guess the rub here is that condensate players like you don't need a high gas price to get your economics to work. But gas is still going for a pretty cheap price. So kind of thinking about your business commercially, what options do you have to get more gas out of basin? This quarter, one of your U.S. peers announced a new LNG agreement on an existing facility as somebody seemingly gave up their space. Wondering if you're seeing similar opportunities on the market? And if you were, would you lean into it?

[Ryan Berrett, executive]

Yes, it's a good question. As you know, we moved about 50% of our gas already into the U.S. It's something that we're continuously watching for capacity, as you say, that comes up on export pipelines. The export pipelines in Canada are fully subscribed and fully flowing. So it's not opportunities that come up every day, but we're definitely watching it.

As you know, we do have our LNG contracts starting in 2026. So this is a bit of a longer-term view for us. And as you look at our exposures to Western Canadian gas prices next year, they're roughly 30% of our gas production. So it is very minimal for us, our exposure to Western Canada.

[Operator]

Your next question comes from the line of Josh Silverstein of UBS.

[Joshua Silverstein, analyst]

It's Josh Silverstein at UBS. Great to see the start-up at Phase 1 at Attachie. On the site and some of the comments today, you talked about the next focus, which would be on Phase 2. Lessons learned from Phase 1, might you be able to apply to Phase 2 for either faster development or the ability to leverage the existing infrastructure that's there for lower costs?

[Armin Jahangiri, executive]

Yes. Thanks for the question. This is Armin. So Phase 2, as Terry mentioned, is going to be almost an exact replica as Phase 1 in terms of the facility design. It definitely benefits from some of the infrastructure we've already invested and built in the area. So that is definitely a savings, an opportunity for more efficient execution of the project as we move to Phase 2.

In terms of cost, the team has looked into the design of the facility to find and identify opportunities to make it more efficient and make the process a lot streamlined for the purpose of construction as well as the operation of the facility. So in all likelihood, I guess, the sheer fact that we are just basically repeating what we've done and all the investment we have done in the area already is going to make us a lot more efficient as it comes to Phase 2.

[Joshua Silverstein, analyst]

Got it. That's helpful. And then just on the Kakwa productivity uplift. This is a big asset. I'm curious if the uplift you're seeing or the improvements you're seeing are concentrated in one area? Is it across the basin? And how you're thinking of maybe shifting your program this year relative to 2024 -- or sorry, next year relative to 2024 to take advantage of some of the productivity?

[Larissa Conrad, executive]

Thanks, Josh, for the question. Lara here. Yes. So when you're designing your wells, you really want to make sure you maximize your connectivity to the reservoir. The completion design shift that we've done is really targeted at that. So it would apply across the entire field. It's not really limited to one area. When we're drilling at Kakwa, we're managing our superpad capacities as well. So as you mentioned, it's a big asset, 180,000 BOEs a day. So we do have activity throughout the asset, and we've made that same design shift across all of our operations.

[Operator]

[Operator Instructions] Your next question comes from the line of Travis Wood of National Bank Financial.

[Travis Wood, analyst]

Yes. My question was asked, but it sets up well with the last question, just as a follow-up. Armin, you kind of talked about the infrastructure spend, the strategic planning around Phase 1 and Phase 2. But can you help us quantify what that would mean on an efficiency capture? So obviously, the adds at Attachie are highly efficient on a capital efficiency measure for 2025. What kind of compression could that look like with the cost savings on the infrastructure spend from Phase 1 and Phase 2 for the future volumes as a percentage or if you think there's a better way to think about that? Just trying to figure out the efficiency gain on that production add for the Phase 2 volumes.

[Armin Jahangiri, executive]

So just to be clear, in 2025, we are not spending any money on Phase 2. So basically, our budget for Phase 2 is less than $10 million. When it comes to actual execution of Phase 2, that is currently scheduled for '26 and it's going to be spent over '26 and '27 time -- years for the 2028 on-stream timeline.

I think we've quantified that in the past that we estimate about $70 million of savings associated with the joint infrastructure. This is some of the stuff that we've already done to rightsize the pipes and have the water infrastructure and some of the equipment already set up in a way that can handle the extra 40,000 BOE of production coming through on the condensate terminal that we have at [indiscernible]. So some of those stuff has already been put in place. And I think the way we quantify -- we have quantified that is about $70 million of savings associated with Phase 2.

Having said that, from Phase 1 to Phase 2, we are realizing some inflationary pressure. I mean the time that we sanctioned the project and purchased the equipment for Phase 1, we were in a different environment. Our expectation for Phase 2, despite all of that, is to be able to keep the cost flat at roughly $800 million to basically build the infrastructure and all the associated wells to fill up that facility.

The other thing that I can add is that we have also realized some efficiency gains through the drilling and completions activity as we've resumed the operation in Attachie. That is something that Phase 1 and Phase 2 are going to benefit from as we develop the new property, obviously, as well as continue to drill for Phase 1 to keep the facility full.

[Operator]

Your next question comes from the line of Patrick O'Rourke from ATB Capital Markets.

[Patrick O'Rourke, analyst]

Thanks for the comprehensive rundown. I think you've touched on a lot of the operational and reservoir related questions. I guess this would be a little bit more on the strategic side in terms of return of capital plan. Obviously, you've raised the dividend here. I think you spoke to an estimation of about 8% of the flow being bought back in 2025 under the context of the current share price and free cash flow yield that you have there.

But I'm just wondering if maybe you could give us some view into the -- when you say balanced return of capital between the dividend and buybacks, how do you define the parameters in terms of that balance? What's the rate amount of the dividend versus the share buybacks? Is it based on breakeven, which I think you alluded to being about $50 to fund the CapEx and the dividend? Or is there some sort of other formula that helps you define that kind of divide between the 2 mechanisms?

[Kristen Bibby, executive]

Patrick, thanks for the question. It's Kris here. I'll start and Terry might jump in at the end as well. When we talked about a balanced capital allocation, really, what we're talking about is our 3 main buckets, and that's where we talk about trying to have roughly 50% of our cash flow going back into the assets of the organization, both to fund sustaining capital as well as growth capital. And then that obviously leaves us the remaining 50%, 15% of that, we believe, is a very defensible and sustainable dividend policy when you see us bump the dividend here this quarter. On strip will be a little lower than that next year so we just want to make sure we're being very prudent on that. And then that leaves roughly 35% of that cash flow amount that we've currently allocated to share buybacks. And that results in the roughly 8% potential stock retirement here over the next 12 months.

So when we talk about the balance, it's about those 3 main buckets. We don't have a specific rule as in terms of dollar amounts that need to go into buybacks versus dividends. But as it -- if you look over the last 12 months, dividends is taking more of the free cash flow than buybacks has. But you would think in the next 12 months, it's going to reverse with probably some significant dollars going to the buyback side of the equation.

[Operator]

We do not have any further questions at this time. Presenters, please continue.

[Dale Lewko, executive]

Right. Thanks, everyone, for joining today. That concludes the call. Thank you.

[Operator]

This concludes today's conference call. Thank you for your participation, and you may now disconnect.