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Edited Transcript of PCYO earnings conference call or presentation 12-Nov-18 9:00pm GMT

Q4 2018 Pure Cycle Corp Earnings Call

DENVER Dec 19, 2018 (Thomson StreetEvents) -- Edited Transcript of Pure Cycle Corp earnings conference call or presentation Monday, November 12, 2018 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Mark W. Harding

Pure Cycle Corporation - President, CEO, CFO & Director

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Conference Call Participants

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* Geoffrey Scott

* William Christian Miller

J.M. Hartwell L.P. - Principal and Portfolio Manager

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Presentation

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Operator [1]

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Greetings, and welcome to the Pure Cycle Corporation 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mark Harding, President and Chief Executive Officer for Pure Cycle Corporation. Thank you, Mr. Harding. You may begin.

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [2]

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Thank you very much. I'd like to welcome you all to our 2018 annual earnings call. We do have a slide deck for this call. If those of you who want to follow along with the slide deck, you can find that on our website at purecyclewater.com. If you click on the Investor tab there, you'll see the first big box there will be the slide deck for this particular call. And so what I'll do is I'll try and note the transition of the slides as we progress through the presentation, and it'll allow you to keep track with the audio and the visual portion of this.

So with that, I'd like to welcome all of our veterans, and thank you for your service if you're listening on the line. And a happy Veterans Day to you all. You will see that our 10-K will be filed tomorrow morning before open of the market tomorrow but wanted to get this earnings call out to you as well as our press release of our financial results.

So first slide is our Slide 2, which will be our Safe Harbor slide, which basically talks about -- these are forward-looking statements within the meaning of the Securities and Litigation Reform Act of 1995. You're all familiar with the safe harbor statement.

Our first slide, what I'm going to do is kind of give you a very quick, very brief overview of the company as I think most of you are familiar with the company. So our first slide really defines where our revenues are driven from. At our DNA level, we are a wholesale water and wastewater utility providing wholesale water, wastewater provider operating in the State of Colorado and primarily the Denver Metropolitan area. This year we broke ground on developing lots at our Sky Ranch property, which we will now report a new segment as our land development segment. I'll talk about that in a little bit more detail as we construct lots more single-family homes at Sky Ranch.

In addition to the water-utility side, we provide a significant amount of industrial water for our oil and gas customers. And then finally, we generate royalty revenue from some mineral interests, oil and gas minerals that we have, both -- we have the royalty revenues are generated from our Denver portfolio, but we also have a very significant mineral portfolio in Southeast Colorado.

Kind of as an overview transition to Slide 4, this is kind of we're cradle-to-grave in our water and wastewater utilities for our wholesale customers, where we have a portfolio of water rights. We developed those water rights through wells and diversion structures. We treat that water. We put that into storage. We distribute that to our customers, who then consume that, and we collect that back. We retreat that, and then we put that back into an irrigation system. We generate revenues from that. We have a portfolio of water that can serve 60,000 taps in our tap fee revenue. We generate revenues from onetime capital fees, so we have water tap fees and sewer tap fees. For a full allocation of a tap fee, we get about $26,640 per connection on the water side and about $4,600 per connection on the sewer side. So if you take a look at the map on the capacity of our portfolio, that's about $1.8 billion.

And then we get annual revenues through providing water and sewer. Our average water, sewer combined per connection is about $1,500 per connection per year. And if you do the math on that with our 60,000 connections, that's about $90 million year-over-year revenue at buildout.

So I want to turn our attention to really kind of focal point of conversation. This call will be our activities on our Master Planned Community at Sky Ranch. As many of you know, Sky Ranch is about 930 acres, located along the I-70 corridor. It's about 16 miles east of downtown, about 4 miles south of the Denver International Airport. Total zoning on the property is about 4,400 single-family homes. And that's a mix of product types between standard detached single-family, attached single-family and multifamily homes. We'll have probably about 1.5 million to 2 million square feet of commercial and retail on the property. So in total, we have somewhere around 4,800 to 5,000 connections for water and sewer connections. And then just applying those to where we have on our water utility segment, that generates about $130 million at buildout for water tap fees; about $24 million for sewer tap fees. So the utility segment of that is about $154 million. And then at buildout for Sky Ranch alone will generate about $7.5 million year-over-year revenue.

And then I want to do the highlight, our land development segment as we've now broken ground there. And so if you take a look at the same number of units, if we take a look at 4,400 single-family lots at our average $70,000 per lot, so we've got all 506 lots in this first phase under contract, so that's about $308 million at that same price for all of Sky Ranch taking the contracts that we have on our first phase. And then taking a look at sort of the commercial piece, so the commercial piece, we have about -- we're looking for about $5 per square foot price there, so that's about $220,000 per acre on the commercial piece. So the land development segment buildout at Sky Ranch would be about $343 million.

So with that, the next phase -- the next slide, Slide 6, will really kind of give you an overview of the location. We think we have an ideal location at Sky Ranch. It is located in the I-70 corridor. We have an existing interchange at the property. We've got about 0.5 mile of frontage along the Interstate we're, as I mentioned, 4 miles south of DIA, and we're really in the heart of the development activity within the Metropolitan area of Downtown Denver or the Denver Metro Area. We've got significant employment with the new Gaylord Hotel, which is set to open up, I think, next month. And then the Amazon facility, which is open just about 2 miles from our property as well as some other industrial parks. So it's a significant asset for us. It's in the right location, it's in the right demographic, good availability of land, good availability of transportation and employment.

So what I want to talk about a little bit is actual development at Sky Ranch. So beginning in March of this year, we broke ground on our first phase of this, which is 151 acres, 506 detached single-family lots. We sold all those lots to 3 different builders. We have Richmond America, Taylor Morrison and KB Home are our 3 builders on that. And then we went to work on constructing wholesale facilities. So our objective in what delivery is, is to be as realtime as possible with our contract with our builders. So to be able to deliver lots concurrently with the takedown schedule that we have with each of the 3 builders.

So our focus in this will be in the brown area. If you can take a look at that graphic in there, we're focusing in on the initial 250 lots, and those will be infrastructure that's common to each of the 3 builders that we have. And then we'll branch out from there based on takedown deliveries and absorptions by each of the individual builders. As you look at the overall site, some of the things that we were doing on the site really needed to accommodate the efficiencies of how you would develop the site. So for example -- and we're looking at grading the site, because of the dirt balance, we actually graded out all 151 acres. So the entire quarter section was graded out on the initial phase of this thing, and then we took a look at the drainage facility. So you take a look at the drainage and stormwater detention facility, which will be the green area, and while that is predominant for this particular section, it also accommodates improvements for our second phase because our second phase will drain into this first phase as well. So the sizing of those drainage improvements not only accommodated the first phase but also a future phase of what it was that we're doing.

And then some of the off-site infrastructure, so the off-site infrastructure will be the water system, the wastewater system and the entry roadway, the Monaghan Road way that brings traffic and our customers to their houses within our first phase. So each of these slides, the slide on the left will sort of look at the master grading of the entire site. The next slide is sort of the drainage improvement slide. So we're nearly complete on the drainage improvements as well. And then that third slide over there is our water distribution system, where we have pump station, treatment facility and water storage for the first phase of this. Actually, our water storage tank system there will accommodate up to about 1,500 connections as opposed to our first 500. So some of the sizing on infrastructure really went beyond this first phase just because of economies of scale and what we wanted to make, investments where we wouldn't be wasting an investment and we can optimize the size of each of the facilities.

I'll move to the next slide, Slide 8. Some of the work in progress. As I mentioned, we are working on that brown area. And so if you take a look at the overlot grading, we are finished with all of the overlot grading. And then the platted lot deliveries, so we were be able to deliver platted lots to 2 of our 3 builders that we have lot development agreements with. I'll talk a little bit more about that structure in a minute.

And then we also are looking at the wet utilities, so that's going to be water, sewer and storm within that brown area. And we're nearly complete with the wet utility phase of that, which will be important because that's another delivery milestone under our contracts with our builders. And then taking a look at the Monaghan Road, so we're about 80% complete. That'll be that middle slide there, that's the entry roadway. We're about 80% complete with getting that roadway in. Weather dependent, we'll have curve and gutter and pavement on that by the end of the month. And then some of the internal roadways, curbs, gutters, things like that, we're going to take those sort of also on a micro-phase delivery where we'll take that entry way. If you can take that yellow line, that access road, which will be yellow into the interior, that loop out will be our primary emphasis for the curb and gutter. And then we'll end up adding roadways to that as we enter -- expand that out for additional loops.

And then the slide on the far right there, we'll take a look at our sewer plant. So we've poured most of the foundation for the sewer plant. We'll start vertical on that. We'll have receptor basins in there probably within the next 60 days. So we've got a ton of activity going on, on the site, notwithstanding some of it's all 150 acres, some of it's going to be some of the off-sites and then some of it's going to be focused on initial deliveries for the first 250 lots.

Take a look at the next slide. So on Slide 9, the investments that we've made to date, we've investment about $7.2 million to date. And again, we're really hawkish on our balance sheet to try and make sure that we can get realtime deliveries as quickly as possible on that. We have closed on the sale of 150 platted lots to 2 of our builders that generated about $2.5 million of revenue for us. And we're recognizing revenue over time on this through percent-complete methodology. So we're about 25% complete on this first phase, which allows us to recognize about $2.1 million of that. Of that $2.1 million, we have about 2.1 -- $2.087 million in cost of goods sold on that infrastructure. So we do have a small portion of that $2.5 million that we deferred revenue on until the percent complete catches up to the total revenues that we received. So that will occur over the phases that we have.

And if you take a look at these 3 graphics here, you sort of see, again, the visual of the total overlot grading, a little bit more detail on some of the interior roadways. And then again, taking a look at this infrastructure, this will take a view of the drainage channel going east. You can see kind of their -- at the end of the drainage channel, we've got a pedestrian underpass, which will be -- another regional investment because that will interconnect future phases of that. So we have a trail system that our residents can bike -- have bike paths and be able to take advantage of the natural features out there. And then I will draw your attention back to this slide on the view looking east as we get to the oil and gas portion of the presentation.

Next slide, Slide 10. So we are moving forward with the next phase of this. This will be our neighborhood A, which will be the highlighted area, the yellow highlighted area, which will include about 480 acres, 160 of that will be the commercial area, and then another 320 acres of that are going to be in the residential form. We'll have some more open space features, some parks features as well as some variety of the products. So we'll have continuing detached single-family, but we're also going to have some attached multi -- or attached single-family and some multi-family residential opportunities as well as some commercial within the neighborhood itself.

So the next phase could be somewhere between 2,500 and 3,000 additional connections, so a substantial portion of that. And likely scenario is we'll have a couple of these phases going on at the same time. We'll have the initial phase, where our 3 builders are going to be continuing to build out their products. And then overlapping that, we'll be opening up this neighborhood and have as many as 6 different builders in this phase. So we'll have overlapping developments as we go along to absorb that capacity and the infrastructure that we've invested in, not only in the water system, the sewer system and the drainage assets but also the entry rate way -- roadways and the internal roadway network.

So with that, that's kind of the highlights. We're very proud of our achievements in this first phase. I think we've been able to develop a very good progress in the percent complete. We've had some good weather to be able to take advantage of that, and we'll continue to deliver that. We hope to have model home lot deliveries by the end of the year, such that the builders can then take January, February time frame and work on model homes, to be in delivering model homes for traffic sort of starting in that late March, early April time frame. So that's our objective on delivering some of those initial lots.

We'll get finished-lot deliveries for about 12 model homes. So not only are we going to get that second phase of the wet utility payment, but we'll also get the finished home lots, and then also getting water and sewer tap fees for those. So you'll start to see some overlap between the land purchase segment and the water utility segment because of the tap fee revenue that will come in.

So with that, we'll move into the next slide, which will be a little bit about our oil and gas. We've talked about this a lot. This is kind of a map that was pulled from COGCC, the Colorado Oil and Gas Commission (sic) [Colorado Oil and Gas Conservation Commission] permitted well applications. So we have as many as 4 different operators in this field now. There's been about 90 wells drilled to date. Again, we're averaging somewhere between $100,000 and $200,000 per well depending on the frac design. So each operator has a different type of frac design that they use on their horizontal wells. These are all about 10,000-foot horizontal wells, so they pool 2 square miles of that. This year in 2018, we did about 30 wells.

In 2019, we'll probably see a bump to that. We'll see somewhere around 40 wells. And the real difference here is kind of the pad site development. In, say, 3 years ago, it took about a month to drill each individual wells, in part because they were single-well pad sites. So you had a mode -- [demode] on every individual well, in part, because there was still some science going on, on some of these wells. This -- last year was about 2 wells or the last year was 2 wells per month. This year, we saw about 4 wells per month. So what's happening is the number of wells per pad site is increasing, which increases their overall efficiencies and they look to continue to increase those pad site deliveries up into 2020 and beyond into 6 to 8 to as many as, I think, there's operators that are looking as many as 21 wells per pad site.

So the density continues to improve. This is moving beyond what they call field definition and this is into sort of field development mode. So you'll start to see a lot more activity going on with oil and gas in that area. And we continue to add to our supply to make sure that we have the available water so that we can maintain those deliveries to oil and gas, multiple oil and gas operators.

And then the thing I did want to bring back to this slide is that slide that I noted before as you saw the new oil derrick out there. That was a picture of a rig that's going to be drilling 4 new wells that will pool 1/8 of our Sky Ranch minerals. So we'll have a little bit more royalty revenue attributable to that because of those additional wells that are being drilled right now.

Let me take your attention to the overall year-end results. So overall, the year-end results, if you take a look at our frac water, our overall water -- our overall revenue for 2018, significantly increased. So we're at about 570x our prior year deliveries. Most of that was going to be made up in the oil and gas deliveries. So we had about 845% over last year deliveries of frac water. Our municipal revenues were slightly up, and I think that's attributable primarily to our Wild Pointe system continuing to grow.

Nominal tap fee, I think we had a couple of tap fees that got added in 2018. Our oil and gas royalties were in line with the prior year. And the real difference here is going to be recognition of our land development segment, where we were about that 25% complete. So 2018 revenues, we're recognizing about $2.14 million of lot deliveries. So this was platted lot revenues from 2 of our 3 builders.

Moving on to the balance sheet. If you take a look at the overall balance sheet, continued to strengthen the balance sheet. You can take a look at both total assets, total liabilities. Still don't have any debt attributable to the company, so we're very proud to be able to deliver our project on a realtime basis and be able to do that out of cash reserves. We're still very hawkish over our shares outstanding. So the last offering we did, as many of you know, dates all the way back to 2010. So we're still very proud that we're maintaining that currency for our shareholders.

And then our income statement this year has definitely improved because we actually have income this year. So as you take a look at that, we'll have a little bit of income to report this year. Still, a substantial investment into some of the inventory of our land development, and then our water utility segment because of what we're building for Sky Ranch and making sure that we have capacity to serve the water and sewer taps up there. And then also investing into additional capacity for our oil and gas customers, making sure that we have additional storage and additional supply capacities to continue to serve those into the future.

So with that, I think that's our last slide. We just had the mechanics on shares outstanding. But what I'd like to do is open it up to some Q&A, and see if I can provide a little color for those that continue to follow. So I'll turn it back over to the moderator.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Bill Miller with Hartwell.

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William Christian Miller, J.M. Hartwell L.P. - Principal and Portfolio Manager [2]

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In all the different endeavors, fracking, metro and homebuilding, where do you get the highest price for your water, and where do you have the most pricing flexibility as you look into the future? That's first question. The second question is as you look out 1 or 2 years, you're going to be generating a lot of cash. So what do you expect to be doing with that cash at some point, and when do you think that point will arrive? I mean, I'm sure there are multiple things you can do it, but why don't you just go through those and tell us which looks like the most attractive way to use your cash.

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [3]

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Okay. Thanks for that, Bill. So on the first question, we -- when we're selling water to the oil and gas segment, I would say we get our highest price in the price per thousand gallons that we sell to them principally because they're not paying a tap fee. So they're not paying all -- their ratable share of all of that infrastructure that goes behind delivering that. And if they're not paying that capital, so this is sort of an on-available charge, then they pay what is -- what we classify as our hydrant rate. So we collect about $0.55 per barrel in 2018. I think that bumps up to a little bit in 2019, but that's going to be the highest price per k gallon. And the reason for that is then they're not paying the tap fee. When you take a look at our residential customers, our residential customers pay closer to -- and it's a tiered pricing schedule. So their first tier, which will be a low amount of water that if it's just a retired couple that live at the house and they don't have a very big lawn, they may be a base fee. I think our base fee is around $35, $38 per month, and then a consumption charge, which will be around that $4 per 1,000 gallons. And if you equate that to what the oil and gas guys are paying, the oil and gas guys are paying somewhere around $13 per 1,000 gallons. So a substantial difference in that. Now if the individual resident uses more water on a monthly basis, then they move up in those tiers. And so the top tier may be as much as $8 per 1,000 gallons as they use more water, but -- so we try and keep that rate relatively modest for just the internal home needs. And then as they irrigate more lawn or they irrigate more times during the year, then those numbers increase. So that's kind of the analysis on the difference between what we charge to oil and gas companies compared to what we charge to residential customers and the methodology of doing that because of the capital allocation from the tap fees.

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William Christian Miller, J.M. Hartwell L.P. - Principal and Portfolio Manager [4]

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Where do you have the most...

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [5]

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Sorry, say that again?

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William Christian Miller, J.M. Hartwell L.P. - Principal and Portfolio Manager [6]

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No, I'm just -- as you go along, where do you have the most pricing flexibility?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [7]

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Oh, pricing flexibility. Probably in the oil and gas space. And what we tend to look at is sort of the percent of capacity that the oil and gas guys are using in our system. So as we continue to use more and more of our system and they rely more and more on that system, then we will charge that into that price that we deliver to them. So that's a good component of that because we will continue to build out that system. And if they're using higher and higher percentage, which I think that, that's going to be the case, that this drilling methodology and the efficiencies that they're seeing and the returns on their wells continue to advocate field development principles for this, that we'll see higher and higher utilization of those prices for oil and gas that's compared to the residential customers. Going to the second part of your question, which is going to be when we start to generate a bunch of revenue, how does the management look at this thing. And I'll speak really from management perspective and then kind of turn it over to our board's philosophy as we've discussed this a number of times. So we look to reinvest that into current assets that we have. Can we take that capital and reinvest that into current assets, whether that's developing more in our water utilities, so we have higher capacity to deliver water to our customers, whether those are for oil and gas needs, for municipal needs, where we can trade and exchange that water out through the WISE system or directly through Sky Ranch and other connections that we provide to serve. So that's our first course of invested capital. To the extent that we find opportunities for acquisitions, so as we've talked a number of times in the past, we have our nets out for opportunities to acquire other municipal systems, much like the Wild Pointe system that we acquired a couple of years ago. We still have ongoing discussions with providers that would enable us to bring on other service areas, where you have active developments going on in those areas and participate both in the tap fee revenue as well as the usage fee revenue so that we would be utilizing our 60,000-unit capacity of water portfolio in those situations. Then we look to sort of taking -- if there's not good opportunities for either of those, certainly, we'd look to evaluate the fair valuation of the shares and if there's an opportunity to do some share buybacks. And then from continuing operations, as we continue to build our current -- or our ongoing royalty revenue from sale of water usages, everybody likes to hold water utilities because they have dividends. And so that would be kind of the pace and the prioritization that we look for, for opportunities to use our combined excess capacity. And if we can't find a good way to use that within the company itself, we'll take a look at bringing that back to the shareholders.

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William Christian Miller, J.M. Hartwell L.P. - Principal and Portfolio Manager [8]

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What about stock buybacks?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [9]

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That would be in that portfolio. I did sort of say, if we don't think our shares are fairly valued and still have opportunities to do that, we would take a look at share buybacks.

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Operator [10]

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(Operator Instructions) Our next question comes from the line of Geoffrey Scott with Scott Asset Management.

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Geoffrey Scott, [11]

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Sounds like everything is going according to schedule. A couple of quick questions. You said that revenue had been recognized from 2 out of the 3 builders. What is different contractually with the third builder that provides a different timing on recognition of revenue?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [12]

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So we have 2 types of structures on our builder agreements. One is with the finished lot delivery. So we get paid lump sum as soon as we turn over a finished lot, and they sort of pay the higher end of our overall lot development fee. We priced in that within the overall lot fee, but it's a sort of a finished lot delivery, and that doesn't happen until we turn that over. We have platted lot phase, wet utility phase, and then finished lot delivery, if you break it down into the 3 segments. With the other 2 builders, we have something called a lot development agreement. And so what we do is we transfer title to those 2 builders after we have platted lots. So we had that over the summer. And so we transferred 150 platted lots, and we got something, roughly the first 1/3 of that money and then they escrowed the balance of it. So we got $2.5 million for transferring the 200 -- or the 150 platted lots, and then they escrowed another $7.75 million. And then as we finish the next 2 phases, that next phase is wet utilities, and we're nearly there on the wet utilities because we've been moving very well through construction on the wet utility phase of this thing. We should have that done by year-end. And then we would invoice that second component of that, which will be half of that residual amount, half of that $7.75 million, 7-7 -- $7.75 million. And then when we deliver the finished lot, that will be the second half. So we have 3 payments under the lot delivery agreement and 1 payment with the finished lot delivery with the 1 builder. And so as you take a look at it, when we're finishing the lot and, let's say, we'll finish some model home lots and we'll get a dozen lot payments for both, we'll get wet utilities and call that -- I want to say end of the year, but, call it, January when we're able to bill for that next 1/3 of the purchase price on the 150 lots. And then we'll be delivering finished lots to all 3 builders. So that number will be more than just that last remaining component that would be in the escrow because the finished lot delivery agreement with the third builder will be coming into play.

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Geoffrey Scott, [13]

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Right. All right. Okay. The timing on the commercial development and is it still going to be the case that you're going to sell the freehold for the commercial and let somebody else develop it?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [14]

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So we're still -- that's still a good -- we're looking for opportunities. We've had a little bit of interest on the commercial side, and some of that was to help participate where we might be able to participate some of the land value. We're not going to go beyond delivering a platted lot for that, and that might be a pad site, that might be a 3-acre pad site for a finished lot delivery. So we'll never go more than that, but we may consider opportunities where we continue to participate on the land side with somebody that would develop it. So I would say that there's a broad range of options how we might look at that commercial piece. Some of our directors, who have extensive experience with this have consistently said they always regretted selling the commercial too early. And because we have the flexibility with our liquidity, that we can look at other structures with that. That might be something that we'd look at. We don't want to be too far afield, I don't want to be a big landlord in that area. We want to be able to partner up with somebody, who really would be representing our interest in that -- in a development of that nature. But because we have that flexibility, we can consider something a little bit more creative and maybe it's something that's a little more retractive -- attractive from a return standpoint.

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Geoffrey Scott, [15]

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And when do you have to make a decision on that?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [16]

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Nothing timely. So I mean we'll have the entry road available, and so we'll start to see a lot of traffic in that area. And I think that commercial is going to really follow a lot of the opening of what we've got from the residential side.

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Geoffrey Scott, [17]

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Okay. Last question, you didn't mention anything about a reservoir sale, so I assume nothing's happened?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [18]

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Yes, no new update there. I mean, we continue to work with South Metro and all the parties within that to take a look at how that integrates within the regional context, but nothing to update with that.

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Operator [19]

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Our next question comes from the line of [William Cunningham], a private investor.

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Unidentified Participant, [20]

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Mark, I'm actually comparing your -- one of your slides in your midyear presentation, infrastructure costs with some of the numbers in this, but the presentation is a little bit different. But if I understand it correctly, it looks like you might actually be spending considerably less than what you had budgeted for then. I'm looking, for example, the overlot grading, where you were budgeting $3 million for the first 200 lots, and you actually did the entire area more than twice that size. So I assume I could double that as a budgeted or potential budgeted number. Plus you got the stormwater facility in, which I assume is the $2 million drainage number that was listed there. Is that correct?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [21]

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Yes, it is.

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Unidentified Participant, [22]

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Or is it a little different?

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [23]

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No, it's about that.

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Unidentified Participant, [24]

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Okay. Plus you got 90% of the wet utilities in, so -- and you did that for $7.2 million. So it looks like you did it for a couple of million less than what you were originally planning, if I'm reading that correctly.

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [25]

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Yes. And don't lose sight of the fact that there's some period-over-period type invoices. So this is as of August 31 and my presentation may be a little bit more updated on percent complete on terms of all the other stuff. So I would say we're pretty close to being on pace to our budgeted cost for each of these investments. And whether those are from a timing standpoint, how they were complete with the $7.2 million and all the percentages, there may be a little bit of timing difference there. I think we're total -- our total to date would probably be closer to $9 million on all that, so it might be more consistent. And then even within how we're building those, some of that stuff carries over in terms of how we bid it. So sometimes we bid it out in the aggregate and then are only just giving notice to proceed for certain segments of that. So we bid out all of the grading. We did do all of the grading. We bid out all of the utility package, and then the only portion of the utility that we gave them notice to proceed on is sort of that brown 250 lots. We bid out all the roads, curb and gutter, and then what we're really phasing on the roads, curb and gutter are we're going to do the entry roadway and then sort of that internal loop, if you take a look at that yellow loop, and that'll open up lots. Maybe that'll open up 60 lots, and then we'll continue to expand out from there with the roadways and then incrementally deliver lots. So we really try to be as close to just-in-time inventory for this so that we're not holding a bunch of inventory and the builders aren't holding a bunch of inventory in terms of finished lot deliveries. And then our contractor can just prioritize that. They're on site the whole time, and so it's a big enough site where they can kind of phase in. So we -- Bill, I will tell you that's one where I think we've done a very good job with our team to be able to try and phase these improvements to really not get too far over our skis and really dial down our cash balance.

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Operator [26]

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Mr. Harding, there are no further questions in the queue. I'd like to turn it back to you for closing remarks.

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Mark W. Harding, Pure Cycle Corporation - President, CEO, CFO & Director [27]

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Well, again, I'd like to thank you all for your continued support. We're certainly delighted about the progress that we've made, and I think we've got a very good year in 2018. Our runway over the next several years is going to look fantastic with deliveries of lots, with the expanded and continued development in the oil and gas sector and continue to be able to look at the new acquisitions, all of which there are exciting things that the company is working on. Some of those results you see in our year-end results here. Some of those, we hope to be able to describe in a little bit more detail as those things mature, but we're very focused on execution.

We're very focused on making sure that we're investing your capital wisely and prudently. We're very hawkish on our denominator for shares outstanding, and I know Bill Miller wants us to kind of reduce that. So we'll continue to look at opportunities where we can return value to our shareholders.

So it's been a great year. We've had a lot of exciting challenges here, and I think we've met those challenges very successfully. So we're thrilled with our additions to our team here, and we're thrilled with our opportunities, both at Sky Ranch as well as our utility segments. So I'd like to, again, thank you all for that.

We will have shareholder meeting in January. If any of your travel plans will take you through Denver, please take a look at that. I think that's on January 16. So it'll be 2:00 on January 16. We'll be filing our Shareholder Annual Report together with our shareholder letter within the next couple of weeks. So you'll see that together with the proxy to the overall Annual Report. But again, thank you very much for your continued support. We look forward to continuing to value our assets for you.

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Operator [28]

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Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.