Good morning, and welcome to Genie Energy's first quarter 2016 earnings conference call. [Operator Instructions] In this presentation, Genie Energy's management team will discuss financial and operational results for the three months period ended March 31, 2016. Any forward-looking statements made during this conference call, either in the prepared remarks or in the Q&A session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include, but are not limited to, specific risks and uncertainties discussed in the reports that Genie Energy files periodically with the SEC. Genie Energy assumes no obligation, either to update any forward-looking statements that they may have made or make or to update the factors that may cause actual results to differ materially from those that they forecast. During their remarks, management may make reference to adjusted EBITDA, which is a non-GAA measure. Generally, a non-GAAP financial measure is a numerical measure of a company's performance, financial position or cash flows to either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. Management believes that Genie Energy's adjusted EBITDA provides useful information to both management and investors by excluding certain expenses that may not be indicative of Genie Energy's or the relevant segment's core operating results. Adjusted EBITDA should be considered in addition to, not as a substitute for, or superior to, gross profit, income or loss from operations, cash flow from operating activities, net income or loss, basic and diluted earnings or loss per share or other measures of liquidity and financial performance prepared in accordance with GAAP. In Genie Energy's earnings release including a reconciliation of adjusted EBITDA to net income is available on the Investor Relations page of the Genie Corporation website, www.genie.com. The earnings release has been filed on the Form 8-K with the SEC. Please note this event is being recorded. I would now like to turn the conference over to Geoff Rochwarger, Genie's Vice Chairman and CEO of Genie E&P. Please go ahead, sir.

Thank you, operator. Welcome to Genie Energy's first quarter 2016 earnings conference call. On today's call, we will review our first quarter's operational and financial results. I will start by providing an update on the oil and gas exploratory operations conducted by our Afek subsidiary operating in Northern Israel. Michael Stein, the CEO of Genie Retail Energy, will then review the operations of our retail energy provider business. Finally, Avi Goldin, Genie Energy's Chief Financial Officer, will discuss the quarter's financial results. At the conclusion of Avi's remarks, we will take questions. Turning now to Afek. Since the inception of our exploratory work in Northern Israel, we have pursued a measured programmatic approach to our search for oil and gas. To that end, we envisioned and are executing a multi-phased exploration program that began with seismic and surface geophysical surveys in our license area. In phase 2 of our exploratory program, we completed the drilling of five exploratory wells to first validate the geologic model that serves as the basis of our theory, and then to characterize the resource and better understand the composition of the area's geology. We are now conducing phase 3 of the exploratory program, a well flow test program on two of our five completed wells. We completed well flow test on the first well, Ness 3, last month and we are currently midway to a more comprehensive series of tests at a second well, our Devorah 1 well, formally Ness 2. The scope of work at Devorah 1 includes testing five depth intervals, while acquiring, compiling and analyzing the resultant data. To ensure that we have adequate time under our permit for this comprehensive testing program, we requested and have been granted an extension that increases the allowable testing period at Devorah 1 from one…

Thank you, Geoff. I'm going steal some of Avi's thunder, and begin with a peek at Genie Retail's financial results. Genie Retail had a great quarter, generating $11.7 million in adjusted EBITDA compared to $2.9 million in the year-ago quarter. The increase reflects continued strengthening of our margins and a generally favorable retail pricing environment. Operationally, we increased meter served for the fourth consecutive quarter to 393,000 meters at March 31 compared to 358,000 meters a year earlier and 392,000 at December 31. We added 65,000 gross meters during the quarter, a significant increase from 52,000 in the year-ago quarter. RCEs also increased year-over-year to 247,000 from 241,000, while declining from 259,000 in the prior quarter, as the winter weather in the first quarter of 2016 was substantially milder than it was in 2015. The resultant reduced consumption per meter significantly lowered average consumption for the trailing 12 months and that consumption is the basis of the RCE calculation. The slight sequential increase in our meter base is a significant achievement. The first quarter is typically our slowest period for adding meters, reflecting the impact of inclement weather on our door-to-door meter acquisition programs. Moreover, we managed to avoid erosion of our base, even as we scaled back our customer acquisition activities in New York, due to regulatory developments there. As we've previously disclosed on February 23 of this year, the New York Public Service Commission or PSC issued an order that sought to impose significant new restrictions on retail energy providers, or REPs, operating in that state including those owned by Genie Retail Energy. In March, the industry sought and won a temporary restraining order, barring the PSC from implementing a portion of the proposed regulations. A hearing on whether to grant the industry's request for a preliminary injunction…

Thank you, Michael. And thanks to everyone listening in and for joining us this morning. My remarks cover our financial results for the first quarter of 2016, the three-month period ended March 31. Except where indicate otherwise all comparisons in my remarks are to the results for the corresponding periods in 2015. Consistent with my approach in prior quarters, I will focus on the year-over-year comparisons, rather than the prior quarter's results, to remove from consideration the seasonal impacts on our retail energy business, which comprises our Genie Retail segment. In the first quarter of 2016, strong results from our retail energy provider business contributed to substantial year-over-year increases in gross profit, adjusted EBITDA, income from operations and net income. As in prior quarters, Genie Retail generated all of Genie Energy's revenue, direct cost of revenues and gross profit. In the first quarter, revenue totaled $58.1 million compared to $74.4 million in the year-ago quarter. The decrease was driven both by lower market rates for both electricity and natural gas and lower overall natural gas consumption, as a result of the comparatively warmer weather in the first quarter of this year compared to last. Recall, that the first quarter of last year, while not as severe as in the polar vortex of 2014, was extremely cold, particularly in the month of February. Gross profit at Genie Retail totaled $24.9 million compared to $16.5 million in the year-ago quarter, as the gross margin climbed to 42.8% from 22.1% on continued improvement in the pricing environment. Consolidated SG&A expense for the first quarter decreased to $16 million from $16.6 million in the year-ago quarter. The decrease in consolidated SG&A expense is primarily due to lower legal expenses, partially offset by higher customer acquisition expense at Genie Retail. Research and development expense in…

[Operator Instructions] And we have a question from Aaron Shafter from Great Mountain Capital Management.

I have a couple of questions. First on Genie Retail Energy, when do you expect any further news on the regulatory situation?

May 20 is the scheduled hearing for the preliminary injunction. But as I've said in my remarks, we are in constant conversation, us, individually, along with other members of the industry, constant contact with them about how to resolve our differences outside the court. And like I said, those conversations are ongoing. So May 20 is kind of the next date, so to speak. But whether, and as you've seen from our various remarks over the last month or so, the date has moved a number of times. And I wouldn't be surprised if it potentially moved again.

And then my other questions are related to Genie Oil and Gas specifically, Afek's operations in the Golan, do you have a date when you expect to finish this latest flow test?

So we are currently in the middle of this flow test. With the expansion that we were recently granted, we could take as much as, I would say, going into mid June of that. And that will be determined how the day-to-day testing goes and what procedures we want to use during the testing. But I would say, right now, mid-June is the outer cap time.

And would that would be a result available or you'd be finished with just with the flow test?

That would be finished with the second well test. If there's some real-time data that we collect, but certainly tells in comparison to the analysis that has to be done looking at the first well test that we did on Ness 3, and this well test looking how -- looking and comparing the two well test programs and then plotting with that all the data from the chores, the cuttings, the drillings that we did prior.

Have you determined, if there is anything specifically wrong with the first flow test besides the lack of time that you had to conduct it whether or not there was a pressure problem because of some problem in the well?

No. Well, what I would say is first and foremost for the well flow test program, the primary goal certainly for us with the well flow test program were these are the first wells that were drilled in Northern Israel for oil, gas or anything other than water exploration wells. The first goal was and is to establish what the characteristics are of substructure. And certainly to that end, I would say that the first flow test was successful. It did help us establish key parameters that were unknown to anyone prior to running the well test. Certainly, it would be nice and it would have been nice if we could have achieved the second goal, which was as part of that well flow test to be able to produce light oil, light hydrocarbons from that well test. But that unfortunately we didn't do. However, what we were able to do, we were able to do glean from the data collected and have made changes and modifications to our well flow test program for the second flow test. That doesn't mean, and I don't believe for us that we gauge success or failure with the ability or not to produce oil or light oil or commercial quantities of gas as a direct result of the well flow test. Certainly, we are trying to do that, but what's first and foremost the most important fact there is to collect as much data about the pressure, about the heat, about permeability, about porosity, about the ability to be able to take samples out to them better understand the quality of the hydrocarbons and of the reservoir that we have.

And can you elaborate on any of those findings that you come across so far?

I think I can elaborate a little bit. Certainly, most of the analysis, as I mentioned before, will come as part of the program to study and evaluate all the data once this well flow test is complete. But I would certainly say that, first and foremost, we do believe, based on the well flow test that we have been able to prove out, number one, that there is a large expensive reservoir; number two is that the pressures in the subsurface in Northern Israel are low. And that it is -- I would say that we do see, as we expected and as we modeled out, that there is potential of actually several different and independent target resource areas within the substructure and that only, obviously, has to be complexity of understanding each independent target zone and what needs to done in each of those based on their unique characteristics. What I would just conclude with that once we do have a final report that, and this will take obviously several months, our plan is to release that when ready with all of the data and all the conclusions that we were able to make and our outside experts were able to conclude as well.

Our next question is from [ph] Howard Leonard from Stewardship Partners.

In terms of timing, you just mentioned that these several months, when you released that forward, I assume that any kind of IPO activity or anything like that wouldn't take place until that report is out there?

I think that to respond to that the best answer is, we have been and are currently actively looking at several different financing options. Our preferred route is, as I said in my comments and also on the release, that at the end of the day, we would like to see Afek operate as an independent entity. But the different options are being mapped out right now based on where we think the timelines are and the milestones to achieve that. So each option is being measured based on what's appropriate and directly make sense.

But in terms of timing of when something will happen, whatever that may be, we're talking -- can you give a rough timeframe as to what you think? Obviously, if you're going to be raising outside money, you have to have some data for people to show them.

Right, that's correct. This is obvious. So we're not really in a position right now to speak directly to timing. Our intention is to take the data as it comes out from the activity that we're currently in the process of completing. Evaluated and based on what we're able to prove through our analysis, the external analysis, and when we think the most opportune time to take that information to the market and to potential investors is going to be determined by that data. So we're not really in a position to say the exact timing.

And then as the second well, do you think you're going to be doing a third and fourth well at this stage of the game or do you think you have enough data after the second well, second flow test?

I believe that, look I think -- I don't know what the answer to that is yet, because as I mentioned before, the different zone, which are defined by different depth intervals, which we arrived at based on a collection of all the available data that we collected. Each depth zone, each target was chosen and is being chosen based on certain characteristics that are different than the other zones that are being tested. So it could vary well be that based on what we see from these next two zones in this well test, that that may make a case to collect additional data with some additional flow test in similar zones in other wells. I would say, at this point, right now, to get us -- to bring closer to this phase, phase three of the exploration program, my best guess right now is we probably fund these two zones and that should be sufficient data to bring us to the next phase, which would be as we work with our outside experts, to start getting a much better feel for the geology, the structure in the substructure, meaning try to identify traps and other areas where we believe that we have an ability to be able to find some of the lighter hydrocarbons and oil.

So one thing you had mentioned too is that the pressures in Northern Israel are low. Obviously, that means it's more complicated situation to get the oil and gas out, hydrocarbons out?

I don't know, if complicated is the right word. I would say --

Possibly?

Maybe challenging. But the good news is that the world of oil and gas production is not new. And certainly, we're all aware of, there is a lot of advancements that have been made. And for us, the most important thing is to really identify all of the key characteristics, after which in conjunction with the outside experts, we can then determine the best news of extraction and production that's being used elsewhere in the world that matches the whole suite of characteristics that we have. And that's a process that we're going through right now.

And just one final question. The fact that you're talking about financing and going forward is obviously an indicator of -- there is a descent chance, otherwise you won't be able to even consider such a thing of getting in this oil and gas out in a commercially acceptable fashion, where you can process from it. Is that a fair statement that at this stage of the game, based on what you do know at this stage that you're considering raising that money that there is a relatively decent chance, otherwise you won't be able to place money? Wouldn't that be a correct statement?

Geoff, let me take this one. We're not in a position to sort of confirm a statement like that. The way we are approaching this is consistent with the way we've handled this investment through its inception and also sort of this company through its history. We believe and that there is a potentially commercial viable, we believe at present time, and it's why we put company capital at moving this project forward. What we're saying now in terms of our cost for the future is to give investors an understanding of how we're thinking about this long-term. What a long-term financing play might be for this resource as we look one, two, three years down the road, when it's going to need, if successful, access the capital outside of our ability to handle within the compliance of the Genie balance sheet. So we're indicating that -- not considering of what we said in the past that all options are on the table, in terms of access to private capital, strategic partners as well as potential access to public market. So I would not want to put out a statement that there is an indication of anything different than what we've said, which is we're seeing positive veins, but obviously the results of the flow test will be what are indicative of ultimate success in commercial viability, but that the company is sort of thinking long-term about what a capital structure for this might look like.

Can I ask one final question? Just Netanyahu effort to run around the world and convince everybody that the Golan Heights is -- is this real? Do you believe in anyway related to the presence of oil in the Golan?

Geoff, you take it.

It's very hard to figure out any country, what's driving politicians to make statements. And if I say that, and I say that kindly, certainly Israel are exceptions to this rule. I think that the Israeli government is aware of everything going on, probably more keenly aware of the current crisis in many countries in that. And it's hard for me to guess exactly why he did it, but I'm sure he has his political reasons for why he said, what he said. But as to why specifically, it's hard to know exactly.

Next question is from [ph] Kate Anderson from MD Investments.

I would like to ask you a few questions. The first is our investors have been following energy market in Israel closely. And we see some negative trends both from public and that from a regulatory basis regarding [ph] site oil and preservation method, are we looking at longer-term returns that are expected.

I'm sorry. It faded out a little bit, can you repeat the last part of the question.

What part should I repeat?

Just repeat the last part.

Yes. So as I've stated, like our investors have been following the energy marketing in Israel closely. And we see some negative trends both from the public and some from a regulatory basis, are we looking return than expected?

So as we've discussed on some other calls in the past, look, it's clear to seek from some of the challenges that other companies have faced as they try to get similar projects off the ground and projects that are even further, significantly further down the road than we are, that Israel like most places in the world, where oil and gas exist in some other countries, there can be a times there's somewhat challenging environment. That being said, we're encouraged by some of the more recent activity that's taken place in terms of our ability to operate and we think that ultimately as this project moves forward, we'll be able to work to get the support that we need. We plan on playing by the rules as they are articulated to us by the regulators. And for us all we can do at this stage in the game is to continue to execute and continue to focus on proving out the resource, proving its viability and value to both investors and to Israeli regulators. And then work diligently to convince them that we're going to be a good operator and we're going to follow all the rules that they've laid out to us. And then work to let the regulatory environment work in our favor.

Second question I would like to ask is about -- rumor has it that you found water in one of the wells. Is that a fair -- are you thinking of going into that area?

I would respond to that in very similar to questions about what we may have found during thus far and what we expect to find during this exploration process. It is still very early on and we're only running our second well flow test right now. I would certainly say that as with any model and any theory that builds prior to operations, and then launching operations to prove out that theory, there are things that go according to plan and there are things that are surprises. Some of them are positive surprises and some of them are negative surprises. But all-in-all we are certainly encouraged by what we've seen. And it's too early to determine the commerciality of any in that we found, but we are certainly looking at on every possibility and determining what the opportunity may mean for Afek and for Israel.

And so I would like to ask you last question. And I would like to hear that maybe what my investor say is wrong. Do you have support in Israel for the new methods you're trying, for the new acceleration method or for these drillings or are you finding it a hard time?

So I'll tell you I think best way to respond to that question is just a very quick comparison to the different stages in our licensing and regulatory activities. When we first started, when we received, we were awarded the license and then the permit, we were immediately taken to the Bagatz, the Israeli Supreme Court, by environmental groups and a couple of individual groups within Northern Israel. We in the end prevailed on those three cases. And as part of that, I think at that point, they were probably upwards over 1,000 individual complaints that were logged against the company, all that built that case. Several months ago our license, actually more recently than several months ago, just recently, our three-year license that's extendable up to seven years came up the three year anniversary, came up for a hearing, which was also subject to a public hearing, similar to the original process. I think that total complaints, individual complaints, was approximately 150 complaints, of which 90% we were able to trace the origin of the complainants. Approximately 85% to 90% came from Central Israel, most probably in the Tel Aviv area. So I think that that's speaks for itself. I think certainly it's a project that's new for Israel. It's a project that people don't understand, it's a project in very sensitive areas. But I believe, I truly believe, and the number speak for themselves that we have proven to be a company that operates within the rules. We are a very good neighbor. We have been able to create jobs for over 50 people in the Golan, and we are now one of the top five employers in the Golan, despites the sub-industries that we've created with the other services. So we will continue to take our image, take our project, take the sensitivities of the Golan and of Israel very seriously. And it's something that we're very proud of, and I think it will only improve from where it is right now, it only has to. As the programs continue to be built in, we're seeing very strong support now.

Are you concerned of the public's reaction, if you will declare that you are using some controversy method of acceleration or extracting the oil?

So as part of our agreement with our licenses and our permit, I mean, as part of the Supreme Court decision in our favor, we agreed proactively that certainly, first of all, for the exploration process, which are all these phases that we're discussing right now, we have collectively agreed on the specific methods of testing, production and extraction. And there's actually an oversight committee that was established to oversee our project to ensure that we were complying with every requirement that we have. And to date, I don't believe there has even been one violation that has been sited. So we take that extremely seriously. And additionally when and if we get to the step of actual production, everything we do in terms of production has to be pre-filed with the energy ministry and approved prior to us utilizing the technology. So there will not be any surprises. Everybody will be fully aware. We will make it clear to everybody what we will be using and we will comply 100% as we have done up until now. End of Q&A

And ladies and gentlemen, at this time, we will conclude our Q&A session as well as our conference call. Thank you for attending today's presentation. You may now disconnect your lines.