GreenHunter Resources’ (GRH) CEO Gary Evans on Q2 2015 Results – Earnings Call Transcript
GreenHunter Resources, Inc. (NYSEMKT: GRH ) Q2 2015 Earnings Conference Call August 14, 2015 10:00 AM ET Executives Gary Evans – Chairman and CEO Serene Prat – Head of IR Kirk Trosclair – EVP and COO Ronald McClung – CFO Analysts Operator Good morning. My name is Kamey and I will be your conference operator today. At this time, I would like to welcome everyone to the GreenHunter Resources Second Quarter 2015 Financial and Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. Mr. Gary Evans, you may begin your conference. Gary Evans Thank you, operator and thank all of you for dialing in today. My name is Gary Evans, I’m Chairman and CEO of GreenHunter Resources and Magnum Hunter and again with me here, Kirk Trosclair our Executive Vice President and Chief Operating Officer as well as Ron McClung, our Chief Financial Officer. And before we get into the meat of the discussion today to talk about our second quarter and six months ended June 30, 2015 financial operating results, we need to let our listeners have a little forward-looking statement. So Serene Prat our Head of Investor Relations, is going to read that for us. Serene? Serene Prat Thank you. Before we begin with the content of today’s call, I’d like to advice you that Safe Harbor include forward-looking statements within the meanings of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The following discussion provides information, which management believes is relevant to an assessment and understanding of our financial condition and results of operations. The discussion contains forward-looking statements that involve risk and uncertainties that may include statements regarding our expectation, beliefs and intentions, or strategies regarding the future. Actual events or results may differ materially from those indicated in such forward-looking statements. This discussion should be understood in conjunction with the financial statements accompanying notes and risk factors included in our SEC filings. The discussion should not be construed to imply that results contained herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment by our management. Actual events or results may differ materially from those indicated in such forward-looking statements. This disclaimer is an effect for the duration of this conference call. Gary Evans Thank you — that was outstanding. Let’s now get started with respect to the call today. We filed our quarterly financial statement press release earlier this morning. So, hopefully, you received that. And I thought before we got into the specifics about the company and its operations for the quarter, I might talk a little bit about the macro picture that we’re all experiencing in the energy industry today and how it affects or doesn’t affect GreenHunter. So, as many of you know that are involved in energy arena, we had a change with respect to OPEC’s decision to basically flood the world market with oil beginning around Thanksgiving and that we’ve experienced a precipitous decline in crude oil prices worldwide from around $100, $105 a barrel down to in the $42 a barrel day range today. The purpose of doing this is to regain market share that OPEC lost due to the significant success that independent oil and gas companies have had in the shale plays here in the United States over the last five years. And so, it’s had a dramatic effect in the entire energy industry has called the rig count to the cut significantly down to historically low levels and is creating a huge amount of layoffs and just basically a much reduced capital spending level by all energy independence. People are in a preservation of capital mode not knowing how long these lower prices will persist. It’s also had an affect with respect to natural gas prices which is really, we’re more involved with respect to the Marcellus and Utica plays that we typically handle most of our water with up in the Appalachian Basin. The gas prices are down about $1 to $1.50 from where they were a year ago and that has also created a slowdown in drilling activity in our region not as much as other parts of the country but it’s definitely impacted it. So, we continue to stay busy but not as busy as we want to be, that’s causes to have to work a who lot harder get new accounts, we feel real good about some new prospects that we’re working on and our ability to continue to keep our wells full and we believe that this part of the country being the Marcellus and Utica in the south, West Virginia, Southeast Ohio will continue to garner a significant amount of capital. So, there is any place in the country I would rather be its this area, there is no other play I want to be active in. We continue to have the best margins, we continue to have the lion’s share of the business. And we continue to add capacity to allow us to gather and inject greater volumes of water going forward. So we’re going giving you a lot more detail as to some of this today. One thing that’s very important for you to understand Magnum Hunter has announced as of about a week ago that we have entered into a letter of intent for $430 million drilling program over in Ohio which encompasses about 50 Utica wells, that program will began in October. And GreenHunter will have a 100% of the water business there. So, while we’re having a little slack here over the next last few months and we’re continuing to fill our wells, there’s going to be a whole slug of new activity and that activity will continue for about two years. So, because of the [sister] relationship between Magnum and Green that’s going to definitely benefit GreenHunter going forward and there is more details on that if you want to look at the filings that Magnum has made publically over the past week and many analyst research reports have been written about that as well. So, with that I’m going to turn the call over to Kirk — give you specific details of our activities during the second quarter and update you on what we are working on. Kirk? Kirk Trosclair Thanks, Gary. Before we going to the specifics, I do want to add a couple of comments on the numbers in Appalachian as it relates to volumes and trucking hours and things like that across our portfolio. First the rig count decline since 2014 in Appalachia has decreased 42% in Utica and 21% in the Marcellus. The keyword across all the presentations that we’re listening to from all the E&P companies is efficiencies and efficiencies translate to price reductions across the entire service industry as it relates to service providers in the oil and gas business. The effective lower total rig count, basically equals significant reductions in flow back volumes and a slightly less, lower production volumes across the board with the most being significant reductions from flow back. Secondly the E&P capital expenditures that Gary mentioned earlier were lowered again in the second quarter and companies were voluntarily asking service companies to help by reducing rates to match the falling commodity prices. We feel that these have now hit the bottom across our industry in the Appalachia region and we should be able to maintain from here on out. On appositive side, as he mention with the Magnum Hunter JV, GreenHunter has strategic alliances with certain operators in the Appalachian Basin that will help curtail some of the overall effects of the downturn in the industry and the increased flow back volumes just from that JV and the production volumes that will come from it will help the company tremendously going forward. We probably won’t realize those affect into the GreenHunter side from flow backs to the latter part of fourth quarter of this year but we’ll see significant increases starting in the first quarter of 2016. So, what does it mean for GreenHunter for the remainder 2015, we’ll continue to fight the fight, manage our expenses and start to gain additional market share, something we haven’t — have not had to do in the past. We’re having to go out and grab new market share, enhance some operating efficiencies and be the best service provider of Oilfield Fluid Management Solutions in the industry. Our team in Appalachia has done a great job through this downturn and they are to be commended for it. So to get you to the specifics of the second quarter, on July 27, you guys remember we sent out a press release and we turned on two new disposal wells at our Mills Hunter facility located in Southeastern Ohio. These wells were — we were pleasantly surprised at some of the increased rates we had once we turned the wells on, our initial injection rates told us we were going to 3,000 to 4,000 barrels per day and with the combined two wells, we think we can push the 8,000 barrels per day limit on these two wells. The increased injection capacity basically takes our overall capacity of the company and increase it by 50% and takes us to 21,000 barrel, so permitted injection capacity. Just recently, we added some additional trucks in the latter part of July, I think it was like the last day of July our self, we took the delivery of two new Peterbilts, we sent those to the shop in West Virginia to have the 407 tanks put on the trucks and we just recently as of two days ago received four additional trucks at the shop and those are being outfitted to haul condensate and water by having those sets to DOT 407 related trucks. We plan to have the two that were in the shop first out to the out on the street and actually hauling in the next couple of weeks and then the other four will probably be two to four weeks behind as they continue to come out the shop and then that will leave us with two remaining trucks from the user proceeds from our senior lenders. And those will hit sometime in October. Some of the things to point out that we continue to improve our operating margins on quarter by quarter basis, we’re getting a lot better at doing our business in the Appalachia region and we’ve increased those from 38% in the second quarter 2014 to 49% in the second quarter of 2015. The other thing that we need to point out and it’s really is our internal trucking, we mentioned this in our first quarter call, we learned a lot by hiring third party transporters and trying to grab volumes from additional trucking companies and running it through our own services but that was not beneficial to the company and we’ve learned to utilize our own internal trucking and those numbers have jumped dramatically from 18% of second quarter of last year to 40% in second quarter of this year. Now, of course some of that has to do with fuel pricing and things like that but our overall expenses in-house for the operations for these units has gone down. Also, at the unit in these times of tough commodity prices we’re cutting back, we’re running a lean shop here and we’ve decreased that by 1.6 million and total decrease of 21% and something that we’re very proud of, we’ve produced positive adjusted EBITDA for the first and the second quarter of 2015 and the second quarter at 316,000 of the positive EBITDA here in house. So, those are some of like the key highlights of what happened in the second quarter, obviously we have a lot of things that came out and we’ve been working on in the third quarter, we were delayed on a lot of this construction efforts for some new wells, you can see in the press release, we spoke about what contributed to those, some of it was the funding delay initially, then it was permitting and new processes and things like that that’s going on with the Ohio department of natural resources and on the West Virginia side with the [environmental] protection. It’s a new ballgame out there, which is not a bad thing for us, we’re complying with all the rules and rigs which we always have and we’re going to be a leader in that industry and learn from the past in how things transition to new rigs and responsibilities and we’ll get more efficient at that. The last couple of years — permitting of a new well would take us 45 to 50 days, now that’s gone up to about six months, we think we can get that timeframe down in the four to five month range but that will be the new norm from here going forward. So, that was some of the delays that we had at the mills Hunter facility, we’re nearing completion of that, we should have the third of the four wells additionally that we’re tuning on at mills here in next 30 to 45 days, we should begin injection into that well and then the final well which is the furthest well away from the pumping facility, will probably come online sometime in late October. I know you guys mentioned the Ritchie Hunter 2 which is the West Virginia well that we have ready to go. The well itself, the facility, the flow line everything is completed, we’re just waiting the final approval from the West Virginia Department of Environmental Protection and that’s impressive, we met with those guys at their office in Charleston two weeks ago and we should receive that final permit here in the next 30 to 45 days. So, that’s kind of the operational highlights of what’s been going in Appalachia, with that I’ll turn over to more details through Ron McClung on the financials. Ronald McClung Well, as both Gary and Kirk have said, it’s been a tough environment in the second quarter in terms of people have stopped drilling as much, flow back and so forth so, we’ve had a corresponding decrease in the revenues, a year ago our revenue in total was 6.8 million or second quarter in this year was 4.6 million. Our two main sources of revenue, water disposal revenue was down $434,000 and our trucking revenue was down $384,000, water disposal was down 13% in revenue and trucking was down 20% revenue, but also as Kirk said, we had not only corresponding decreases in our expenses for those two main lines of business but additional percentages of decrease in our expenses, so for example, where our water revenue was down 13%, our disposal expense for that related revenue was down 33%. So was that 20% more than revenue was and we so the same thing on the trucking side, where trucking was down 20% in revenue, we had a 41% decrease in trucking expense. And as Kirk said some of that was due to fuel cost being less than they were last year, but it’s also a consolidated effort on behalf of management to decrease cost and then we saw additionally as he pointed already a 20% decrease from last year in SG&A. Now what all that means to us is that we think we have a structure in place to — that’s ready for the growth that we think we’re about to experience and don’t expect any significant increases in those cost, of course there’ll be some, but we think we are setup to experience good margins on there as we’re able to put these new wells and trucks in service and not only that but because of the fact that our wells are 100% joined to current offload facilities, the incremental expense related to those will be minimal and so we expect to benefit from the savings that we’ve experienced from our cost cutting activities and benefit greatly from that as we put these new assets on loan. You’ll also note that for in the press release that our net loss per share from continuing operations was $0.08 this year compared to $0.13 last year and so we’re looking forward to seeing that even cut further and moving toward profitability because these new assets come online in the coming months. Kirk? Kirk Trosclair Thanks, Ron. So, I think we want to talk a few more about the things that we have coming and then I’ll turn the call back over to Gary and then I think we’ll take some questions. But as far as the project is concerned down at Mills, we only have two wells left to turn on there. We have the one well in West Virginia that we are just awaiting the final approval to turn on at this point. So, those are some things we can look forward to happening in the remainder of 2015, the third and fourth quarter. We received the additional trucks that are scheduled to come in, the last few in October and we’ll see those hitting the roads as well. The other thing I wanted to touch on I guess would be, we’ll have some questions later. We are making some progress with the Coast Guard efforts on the barging situation. We have not started construction of any of the docks at this point but we have had several meetings with the Coast Guard, the meetings are going very well, nothing is set in stone at this point, they haven’t approved anything, most things are still in the same status as far as the regulations go but we have made significant progress with their team on coming up to a common solution to let this happen sometime in the near future. With that I’ll turn the call back over to Gary. Gary Evans I just want to emphasize a few things that were mentioned to which I think are really, really important. Many of us here have been in this business a long time, I’ve been in it for over 30 years and we’ve recognized a downturn was coming early on back in January and so, your management here began taking the efforts to reduce our cost. We knew that to be able to survive through a down turn you got to have lower cost. So, those are reflected in the numbers that we reported today and so as we continue to add volumes which we’re doing on a weekly basis that’s going to really drive our EBITDA and while we all look for better times in the energy industry we’re counting on year, year and half down turn. So, we’re not building the business with the anticipation that all of the great things that were happening in the prior three years are going to happen now. So, by being a leaner meaner machine we will become much more competitive with our existing competition in the region. We will continue to add capacity because we know its coming and then we got these joint ventures with a number of companies that are going to continue to add new volume. So, I’m actually quite excited about our future and I’m very excited that the wells that we put on at the Mills Hunter facility have taken so much water and so that in itself drives margin because we don’t have to put as many wells on because the volume take away capacity is much greater. We do believe we’re getting close as Kirk mentioned on the Coast Guard resolution. We continue to have a number of meetings with the Coast Guard, just to get dialogue and we believe we have some actions that we can take in the near future to begin barging and we’re keeping those close to our best for competitive reasons but when we do begin barging you will hear about it. So, with that let’s turn over the call to our listeners and operator and we’ll take our first question. Question-and-Answer Session Operator Thank you. [Operator Instructions] Your first question is come from [Dan Murphy] with Shareholders. Unidentified Analyst Good morning, gentlemen. Question on your preferred stock, noticed you didn’t pay dividend in July, there was nothing in the press release. Can you update us on the status of when you plan to pay or what’s going on with the preferred shares? Gary Evans Yes. The management board decided to because this is accumulative preferred to delay dividends at this time and so, we do not have an answer for you as to when we will begin paying dividends obviously something that we’re going to address but at this point in time the dividends will accumulate and we do not plan on paying in for at least a month or two. Operator Your next question comes from [indiscernible] Securities. Unidentified Analyst Yes, Gary, what concerned me more about the suspension of the dividend is that you didn’t see fits [indiscernible] signing the dividend. I mean, that’s [our pay], why didn’t you do that? Gary Evans Send the letter? Unidentified Analyst You didn’t send the letter; we’ve called the Investor Relations, nothing. Gary Evans Well, there is a real big reason for that. We were in negotiations with our lender; we did not know what the outcome of those negotiations were going to be and those negotiations did not conclude till about 30 minutes ago, so that’s the reason. I can’t tell you something that I don’t know about. Unidentified Analyst Yes, but, so in other words, your lenders are preventing you from making the dividend payments? Gary Evans That is correct. Unidentified Analyst Okay, now as follows the [code’s part of] concern, I’ve been following you, I’ve been a shareholder from several years now, and it’s like the same story with the [cold start], encouraging next month, next week, next year and it keeps going on and on, what is the problem? Gary Evans Hey, there’s a lot of problems with it, we’re dealing with a governmental agency, things take time and it’s not just a straight forward process. Unidentified Analyst But did they give you a reason why or they just say we’re not ready to talk about it? Gary Evans We have several reason why and we’re working with the Coast Guard to establish a policy that will be regulated by the Coast Guard and that we will adhere to. The basic answer to your question is that the reason we are not barging water today like we thought we’d be doing two years ago is bureaucratic backlog and we’ve had many meetings, we’ve had U.S. senators, U.S. congressmen involved, we’ve gone to Washington, we had many-many meetings and if you want to blame anybody, you blame this administration, they’ve tried to everything they could do to interfere in our business. So, we’re taking all measures possible to resolve the situation, we think we have a path that will resolve it. The Coast Guard I believe realizes there are issues here and for competitive reasons we don’t believe it’s an appropriate for us to disclose this or other companies would like to be doing what we’re hopefully going to be doing soon, but it is a bureaucratic mess and we have been trying to clean up the mess for two years and we have spent an ordinate amount of time in resources, in capital and trying to fix it so, if you want to pick up the phone and call the U.S. Coast Guard or call your Congressmen, I welcome it. Unidentified Analyst Now, that’s a possible thought and a final question is just short time ago, you were announcing that you had more business than you could handle, I mean you didn’t have enough capacity of salt water disposal to get all the water into the ground, has the drought been that severe in the past month? Gary Evans It is, it’s actually been that severe in the past two months, yes, a lot of our business is handling flow back water and when there’s a lack of drilling there’s a lack of water, now we do as I said believe we can fill these wells up and we’re in the process of doing that, we have many contracts and negotiations to fill these wells up, so we believe this is a short term operation but at the same time that we turned on our new wells, the same time the business dropped. Unidentified Analyst And the final question is, in the last conference call you stated that the actual flow down was actually a benefit to your company and I don’t remember exactly why but you said because the company’s behalf it was differently, they would be doing things with the water and like I said I don’t recall exactly why, but you said, we’d be actually be getting better margins, what happened to that? Gary Evans So, let’s talk about that, when drilling stops, the water that’s reused, in other words, it might go into pit, it might go in to tanks, it’s being reused for additional fracking, that can only sit there for so long and then that water has to eventually be disposed of and so, we’re beginning to see that right now, that’s just beginning to happen is that this water is stored down these areas the local state governments, the DEP, the EPA, they’re not going to allow the companies to let that water sit there, so, they have to go dispose of it, because they are not reusing it for refrack, so that’s what we’re referring to and companies have been sitting on that water a lot longer than we anticipated but we do see a whole swell of that business coming. Operator Your next question comes from Kevin [Rineheart] with [Derivates] Capital. Unidentified Analyst I’m wondering at what point is this company sustainably profitable? Gary Evans As we get these wells filled up, I mean these existing disposal wells filled up, I don’t think you saw the EBITDA reported this quarter but we reported good positive EBITDA so we’re getting there, if you look at cutting the cost that we’ve done and now if we get the water we need, we’re getting very close so, closer than we’ve been in a long-long time, is that right Kirk? Kirk Trosclair That’s absolutely right, we’re positioning ourselves for when the market does take a turn to the north to have really tremendous results, especially as it relates to EBITDA. Gary Evans I can see it’s been profitable next year just in relation to the 430 million Magnum Hunter drilling program in Ohio, I mean it’s going to keep GreenHunter extremely busy. Unidentified Analyst Another couple of questions, what is the current plan on retaining $13 million debt and the possible uses of the $3 million credit facilities still available. Gary Evans Well the $13 million debt has its own amortization schedule, so that’s how the plan is that’s outlined in the 10-Q. Additional $3 million is for predominantly the terminals that we need with respect to the barging. So, Kirk, Kirk Trosclair I mean that’s inside the $13 million that we’ve already taken in but the additional $3 million is for future projects that we have a six month window that we can go to the lender and if approved by them we can move forward with those projects. We have a list of probably $10 million to $12 million worth of projects that we have on a wish list. So we’re preparing that now, we’re prioritizing it and we’ll present that to them prior to the deadline and determine at that point if it makes sense as a management team to move forward and take the additional $3 million or to suspend that and move away from it. Operator Your next question comes from [Michael Huntsman] with [indiscernible] Unidentified Analyst Hi, Gary and Kirk. Just clarify a couple of items. There is a fair amount of production still happening in Utica, Marcellus, and it’s a pretty high water cut. So, is that the share you’re going after is to capture more produced water in the absence of the drilling activities through the first half and second half of this year, ex what Magnum Hunter is talking about doing? Gary Evans Michael this is Gary. We’ll take any order, reduced water, pull back order, whatever it is, we’re not that choosy right now but the one thing that’s kind of hurt our area is that with oil prices down that’s caused NGL and condensate prices to be down. So, Marcellus wells which were very, very active in our neck of the woods are not being drilled today and that’s because the cost of processing that condensated NGLs is today it’s a cost rather than it benefit, we used to get a $1.50 in McF uplift for McF on gas because of the rich liquids that associated with the Marcellus. Today, because of those low prices it cost money, a producer has to pay the cryogenic processing plant to process those liquids. So, that is really hurt the economics of Marcellus wells and so that’s been a huge drop in the drilling activity. On the flip side, the Utica wells, the dry Utica wells which is what Magnum just announced they’re going to be doing are very profitable, at $3 gas with no processing, with the takeaway capacities we have today, rates of return in the 40% to 50% range. So, you’re seeing a whole swell of switching from Marcellus and Utica and that’s all happening now and so you’re going to see this drilling activity pick up towards the latter part of the year with a number, there is new permits, Ontario which is one of our largest customers just permitted three new wells, two in [indiscernible] county, one in Dodgers county. So, we’re beginning to see that switch over occur and we think, that activity will definitely help us, because we have always been so full, it’s been so easy for us from the standpoint to get business as we have people waiting in line. Now we’re actually having to go out and get the business and we’re taking business from others and that’s what’s occurring, now we have two sales people, working full time in conjunction with Kirk and his team and he’s negotiating contracts every day. So, we see this as a very short-term aberration of we’ve turned on two significant wells that are doing much better we thought and guess what? The volumes weren’t there but they’re coming and you might just elaborate a little bit on that Kirk. Kirk Trosclair Yes, I don’t want to mention any specific names of the operators we’re working with Michael but we have new contracted take or pay capacity agreements out to three major E&P companies in that area, which total excess of 12,000 barrels per day, a take-or-pay capacity and one of those looks like it will probably be signed here by September 1 and the other one should be shortly after. The negotiations have been going on for a couple of weeks. It’s really tough to go out and sell something, when you don’t actually have the product in inventory. So, injection volumes was our inventory until we actually had the wells on, once we turned the wells on then we can actually hit the streets, people won’t talk to you until you actually have the volumes because it’s a one of those things where what do you have for me today. Gary Evans Yes, decisions are made today no, okay, well you have volumes on month well [indiscernible] now we got the volumes they just been turned on, we’re able to go get the new business Unidentified Analyst Okay. And I’m not trying to ask this, where I stand critical, but I’m catching the sense that the change in drilling happened so fast that, you were full for so long and not really worrying about sourcing, that when it changed so fast, your reaction time to fill it, the combination means that’s why we got this gap until — Kirk Trosclair It is somewhat of the gap Michael and one of the things that is probably to our determent at some points, but it’s also is going to a help us in the long-term, is all of that flow-back volume 75% or so of our fluids are traditionally production volumes. The 25%, or so has been flow backs and the majority of that flow back was coming from Triad. So we were saving space for Triad because of the agreements we have with them in place and then once those volumes dropped off, they dropped off the face of the earth, I mean really, really quick, we saw it coming, but yet we were still trying to chase some additional flow backs from different customers but that also dried up at the same time and then we turned on to new wells with increased capacity, so that’s why you see the utilization numbers down because of the increased capacity and we think that’s going to be short lived, we’re trying to grab additional production volumes right now, but we also have to be cognizant of the fact that this new JV program with Triad will be sending a tremendous amount of flow back volumes starting at the latter part of this year. Unidentified Analyst And then, one other things you’ve believed in the past Gary about the river of transport barging, was that — you could in fact do this despite the Coast Guard, what’s changed in that regard? Kirk Trosclair There’s a regulation out there, on the [indiscernible] 787, it’s an older regulation that was an addition to the existing rig and we had an avenue that we thought we could use and we still remain confident that we could have done that. Now would that have been the best thing to do, probably not, that’s why we kind off pulled back our horses, hey let’s all get at the same table and come to a common agreement. And we started working more diligently with the Coast Guard, being involved in meetings with those guys in DC and formulating a new angle to see this thing finally come to fruition. The rate itself that they proposed were going to see some changes to the rate that they had sent out in the latter part of 2013, and so we’re privy to some of that information , we’re not going to let it out at this point, we are doing some sampling this week for those guys of some [indiscernible] fluids and we’ll see what those results comeback and it really looks good and promising for us. I can’t tell you the timeline because obviously we don’t know that with the government, but this will happen eventually. Gary Evans I think maybe to summarize this, we had kind of gotten in because we were so frustrated into a bit of an adversarial position with the Coast Guard on this and started butting heads pretty bad and then we got some congressmen involved and things started changing so, we have a local congressmen in the West Virginia Ohio area that are having calls with the Coast Guard to try to understand why this has become such a logjam and a big issue and I think it’s a combination of some poor regulations that were written initially that were not understood and of course the Coast Guard had to sent this to the OMB, now OMB looks at it, they do their mental review and it goes back to the Coast Guard so, when I say that we’ve been tied up into a regulatory logjam, that’s a mild understatement and we have kept the pressure on and we have been using congressmen to do that and we’ve been having much more fruitful meetings off lately then we’ve had in the past. And that we think we’ve got the right people involved now, they understand the issues and it’s being addressed so, we do have some ways that we could begin barging pretty quickly that we’re working with the Coast Guard on, we’re not disclosing that for competitive reasons but we think all this talk about the Coast Guard can be put to bed for too long. Unidentified Analyst Can we talk about the price per barrel of disposal trends at the well-head and then transportation pricing as well? Kirk Trosclair Yes, sure, in the immediate onset of the downturn, everything was pretty steady and then going into the second quarter we started feeling quite a bit of a pricing pressure on transportation, that’s always the first thing that hits Michael, across the board out of any [all field] service company is on the transportation side. We’ve seen rates decline in transportation from probably $10 per hour, some places in excess of $15 per hour depending pretty much steady across the board from depending on which type of the truck it is, those have been the rate reductions that we’ve seen. Those are holding pretty steady, I think we’ve finally pretty close to the bottom on that, I don’t know if anyone can really go much further. Gary Evans There’s been some trucking companies going out of business. Kirk Trosclair The number of units out on the road have gone down, the disposal pressure really didn’t show it’s faith, so we actually opened our own wells and all this flow back material went by the wayside and we’re out their chasing production volumes, you have to make some modifications but what we’ve done to combat that is to go to the large E&P companies and even the smaller guard and offer longer term contracts for reduction in rate. So, with that being said, we’ve kind off offset those declines in pricing pressure with longer term contracts which are much beneficial to us. We’ve been offering some discounts from month or two to get them in the door and that’s worked up pretty well. Right now, with again no drilling going on of any significance. There is some pressure. We see that change, there is a dramatic shift going to this dry Utica can emphasize that enough and we think this is a very short list situation. Unidentified Analyst So, we still over $3 a barrel? Gary Evans Yes Kirk Trosclair [Indiscernible] number right here to be — but if you look in the — we were actually $3.39 a barrel for average compared to $3.14 last year. That’s probably peaked, but we raised rates just on the count spot rate to $3.75 last fall and we’re still benefiting from that. Unidentified Company Representative So, you got to see things remain pretty close to around $3 range Gary Evans We’re not talking dramatic, Michael. Unidentified Analyst Okay, alright. And then I suspect that the lender for the $13 million is — you are not paying any cash out so I make sure you’re paying me, do you have to get back to that $1 million of EBITDA, before on a LTM basis, before they would let you do this seriously? Gary Evans No, we have an amendment that’s been executed this morning that gives us flexibility and yours truly will probably be the one putting some more capital in to get back to paying the dividend. So, our goal is to get back to paying those dividends sometime before the end of the year. Unidentified Analyst Okay. And how quickly can you catch up on the accumulated part? Gary Evans We can do it tomorrow, if we wanted to. Unidentified Analyst Okay. Gary Evans There is no — we make sure that the amendment that we just executed gave us lots of flexibility and we have that. Operator Your next question comes from the line of Gene [indiscernible]. Unidentified Analyst Just a couple of questions, I think we haven’t talked about for a while. First is the MLP, is that just the financing that you’ve gotten from your senior lender take that out of the question and what is the status with the IRS? Gary Evans Good question. We definitely believe this business is conducive for an MLP, you’re seeing more and more midstream companies put water business in their portfolios, so I’d midstream, gas gathering processing company and so we are still waiting for our revenue [indiscernible] letter, we’ve had our law firm working with IRS on that, we do believe that is a much cheaper form of financing for us in the future and that will likely not happen in 2015, it will be a 2016 event. Unidentified Analyst Okay. And is there any read through, obviously, you haven’t closed anything but you have — you make it in discussions, Magnum Hunter for the sales 45% [Eureka Hunter], is there any read through that you can get from there, in terms of what the MLP appetite is for these kind of assets, I mean, obviously it’s not exactly like [Eureka Hunter] but it’s not so Gary Evans The appetite for anything in this part of the country is exceptional, we’ll be announcing the eventual winner of the [Eureka Hunter] here over the next week to 10 days hopefully. It’s been a frothy exercise with tremendous amount of interest and we’ve had companies trying to circumvent the process whatever they could do to get the assets, so, we’re obviously trying to get the most value we can and we don’t see anything different with respect to the water business going forward. So, this part of the country is where every midstream guys wants to be because it has the highest growth potential because of the raw characteristics of the region. Unidentified Analyst And I guess along this lines another, I think that you talked about before was the pipeline, you have been working with nature pipeline obviously they couldn’t get the financing, is that still an option for the future and is that the sort of — were you far enough down the road there where you have rights of ways and things like that or is that more just an idea? Gary Evans We did buy any rights to way but we continue to talk to producers about consolidating their trucking operations in certain areas. So, that is still something that we are looking at and pursuing, it’s just the slowdown in activities caused everybody to kind of pull in their reigns a little bit and look at their base of business. So for us, our main focus is to get these wells filled and then we will be looking at these other opportunities. Operator And there are no further audio questions at this time. Gary Evans Thank you operator and thank all of you for listening in. It’s been a bumpy quarter but we did get lot accomplished and we look forward to reporting our ability to fill up our disposal wells going forward and other activities we have going on again. I think the new JV that Magnum is doing with these private equity partners are going to have a huge benefit for GreenHunter in late 2015, early ’16 actually goes for two years or 24 months, so we’re going to continue to keep our costs down, continue to cut them where we can, as Kirk mentioned these new 407 trucks are coming in, we’ll have them fully utilized as they hit the streets because of the type of vehicle they are and we’ll continue to look at adding additional capacities, so you think we’ll, gosh you haven’t filled up your existing wells, why are you looking for new capacity. We know what’s coming and we know we have to have additional capacity, so we’re working hard to do that. So, with that, feel free to call if you have any specific questions to our investor relations area and we’ll get back with you. And thank you for your time today. Operator Ladies and gentlemen, this does concludes today’s conference call and you may now disconnect.