Q3 2019 Earnings Call
Good morning welcome.
Welcome to the Soleris third quarter earnings Conference call.
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Now, let's turn the conference over to use on Fletcher Senior Vice President Finance and Investor Relations. Please go ahead.
Good morning, welcome to the Solaris third quarter 2019 earnings Conference call I'm joined today by our chairman and CEO , Bill hardware, and our president and CFO called <unk> before we begin I'd like to remind you of our standard cautionary remarks regarding the forward looking nature of some of the statements that we will make today such forward looking.
And then May include comments regarding future financial results and reflect the number of known and unknown risks. Please refer to <unk> press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those right.
I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance.
One patient this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP reconciliations to comparable GAAP measures are available in our earnings release with that I'll now turn the call over to our chairman and CEO filler.
Thank you everyone and welcome everyone.
During the third quarter of 2019, we had 115 fully utilized systems deployed to customers down approximately 7% from the second quarter and inline with our expectations at park.
Overall frac activity during the quarter Grace, primarily as a result from proficiency gains and budget exhaustion as operators remain committed to producing positive cash flow.
It's worse its activity declined matched the overall industry Chen with some offsets from winning increase share with certain customers as we continue to demonstrate the efficiency and value our systems and service provider.
For the quarter, we generated approximately $60 million in revenue adjusted EBITDA of $31.2 million, which were down 711%, respectively from the second quarter. During the third quarter, we generated approximately $27 million and free cash flow as we continue to harvest cash from the capital investments we've made over the last few years.
From an overall activity standpoint, the Permian basin at Eagle Ford shale areas continue to be our most active areas. We have seen significant decreases in frac activity in Haynesville Marcellus and mid con regions as continued low natural gas prices challenge well economics rig count in the gas basins is down nearly 30% over the last six months.
It is about 15% pretty well directed rig count.
During the quarter. We also continue to make progress with our chemical system rollout. We've completed a few systems incorporate our latest design enhancements and we're very pleased with how the system modifications are working in the field. We plan to finish upgrade the remaining systems over the next couple of quarters and standby ready to manufacture additional systems based on market demand in 2020.
Several customers interested in our systems and we continue to believe this new product line will be deployed across more frac fleets and the more customers in the coming quarters as operators and pressure Pumpers look for the next bottleneck in the completions process, our chemical systems deliver operating efficiency and savings you increase well site safety by automating the handling and storage of chemicals.
Reducing the number of fluid transfer points and reducing head count on location.
Turning to our fourth quarter outlook for province system rental and services, we continue to see additional operators reduced activity for a number of reasons, including budget constraints maximizing near term cash flow low commodity prices on the gas and NGL side well performance in certain places so operators have start completing wells and dropped off right.
Crews for the remainder of the year with plans to restart their completions programs in the first quarter.
Based on this our expectation is that U.S. frac activity as measured by utilize frac fleets could decline, 20% to 30% on a sequential basis in the fourth quarter and is roughly a third of the overall market Solaris activity should follow this near term correct.
Your observations worth noting about recent activity trends the primary driver to the decline in swears activity to date has been tied to a reduction in frac crews utilized we've been able to offset some of this reduction with customers switching away from other solutions to our technology, which provides reliability and ability to capture efficiency upsides to our monthly rental model, which.
Enter the benefit of the increase throughput.
In addition to our modular system provide flexible storage capacity as required by higher intensity completions, well sites with smaller footprint, including current deployments of three packs and six packs nontax at 12 packs.
Secondly, the current level of activity is expected to rebound after the end of the year and many of our customers have expressed plans to increase activity in the first quarter of 2020. However, the magnitude of timing of this activity will not be certain until our customers get to the 2020 budgeting season that is currently underway.
Certainly well we cannot control the budget at activity decisions of our customers were using this period of softness to strengthen our company by focusing on what we can't control. This means continuing to innovate our existing solutions, including improving the accuracy of our data measurement capabilities and progressing our R&D pipeline.
Completions cycle times continue to compress we're collaborating with our thought leading customers to address additional operating and logistical challenges in completions activities.
Lastly, I'd like to highlight the company's third consecutive quarter of positive free cash flow slurs generated nearly $27 million in free cash flow during the third quarter paid or fourth consecutive dividend. Despite the temporary headwinds expected in the fourth quarter. We expect continued to generate positive free cash flow in the fourth quarter as we remain disciplined on her.
Capital spend well always been capital dollars will we believe we provide value to our customers also generating positive free cash flow for shareholders with that I'll turn it over to comp.
Thanks, Bill and good morning, everyone as Bill mentioned during second quarter, we generated nearly $60 million of revenue adjusted EBITDA of approximately 31 million and free cash flow of approximately $27 million the 7% an 11% decrease in revenue and adjusted EBITDA, respectively was primarily driven by seven.
I will decrease in the average number of systems deployed to customers.
The cash flow increased approximately 3% versus the second corner as a decrease in EBITDA was offset by reduced capital spending.
During the quarter nearly a 150 province systems work with varying degrees of utilization our calculation of 115 fully utilized systems reflects the number of equivalent systems that generating revenue everyday in the corner, which we believed as the best measure for our business activity and for modeling purposes.
Gross profit for the quarter was approximately $35 million down 10% from second quarter, primarily due to the decrease in fully utilized systems as well as reduced contribution from are translating in software segment margins were also negatively impacted by higher fixed costs, such as insurance flat field costs. Despite the decrease in activity.
And higher repair and maintenance costs, driven primarily by higher throughput through our systems.
I will ask DNA costs for the quarter were $5 million inline with prior guidance for the fourth quarter 2018, we expect total SGN, a and personnel costs to remain at approximately 5 million.
Net income for the quarter was $19.1 million or 36 cents per share. This was net of approximately 250000.
Dollars or one cents per share and nonrecurring severance and acid disposal charges.
Adjusted pro forma net income from the third quarter was $17.7 million or 37 cents per share versus $21.2 million or 44 cents per share in the second quarter.
As a reminder, adjusted pro forma net income adjust for nonrecurring items. It also assumes a full exchange of all class B shares for class a shares for a more comparative period over period presentation.
Please refer to our press release issued last night for a full reconciliation of adjusted pro forma net income.
Total capital expenditures for the quarter were approximately $4 million, which was down significantly from the $20 million spent in the first quarter and 8 million in the second quarter, primarily due to slowing our new equipment manufacturing rate.
Year to date, we have deployed a total of $32 million in capital.
As highlighted by build the third quarter marked the third consecutive quarter positive free cash flow generation for the company our free cash flow as defined by cash flow from operations less capital expenditures was a positive $27 million for the quarter year to date, we have generated free cash flow of approximately $56 million we abuse.
Some of that cash to return over $14 million the shareholders through dividends and we've paid down 100% of the borrowings under our credit facility.
We ended the quarter with approximately $102 million of liquidity, including approximately 52 million in cash and $50 million of availability under our Undrawn credit facility.
At the end of the third quarter, we had over a dollar per share of cash on hand, and today, we have approximately a $1.20 per share of cash on the balance sheet today.
We expect to continue to grow our net cash balance in the fourth quarter and in 2020 as we remain disciplined on capital spending in our balance sheet remains debt free.
Growing cash balance provide significant optionality to return additional cash to shareholders, while opportunistically evaluating organic and inorganic growth opportunities.
As Bill mentioned, we anticipate the utilize U.S. frac crew count to be down 20% to 30% sequentially as operators spend at or below capital spending guidance.
We expect our business to perform in line with the overall sector with identified opportunities to outperform through targeted share gains in 2020 as customers continue to recognize the value of our solution over the competition.
Given the recent expected decline in activity, we are evaluating our cost structure properties to reduce our fixed and variable spending even though we have always operated as a very lean organization. For example, we only have one manufacturing facility, we employ a decentralized management structure and maintain a lean corporate staff, but we believe we can still find ways to.
Optimize.
I would be it will be difficult for any changes we implemented in the near term Devon material impact in the fourth quarter financial results.
Lantus enter 2020 with a leaner more efficient cost structure when activity levels pickup.
We have lowered our Twain 18 capital spending guidance to below $40 million versus the prior guidance 40 to 50 million.
Looking towards next year, we're providing an initial range and 2020 capital spending of $20 million to $40 million with the variance driven by the amount of growth capital spend and new products such as our chemical system.
Before we open the call up to Q today I'd like to discuss a subsequent event for the quarter, which is also highlighted in our 10-Q filed.
We recently received a request from our primary customer at our Kingfisher facility in Oklahoma to end, the San storage and Transloading contract at the end of 2019.
As a reminder of the contract was partially terminated in December 2018 at which point, we received a 26 million dollar partial termination fee.
As consideration for the final termination, we will receive a payment of $1.7 million in 2020.
As local Sandy's has increased in the stack scoop plays and customer capital spending has been reallocated to other basins.
The demand for large scale rail frac sand transloading has been reduced to offset the reduced volumes weeks were exploring multiple options.
For modeling purposes in the fourth quarter, we're likely to recognize 100% of our deferred revenue balance, which pro forma for the most recent termination fee will be 17.7 million in deferred revenue recognition in the fourth quarter.
We will likely subtract deferred revenue for our adjusted EBITDA calculation on a go forward basis, starting in the fourth quarter.
To date, we've invested approximately 40 million in the facility 2 million of which was in the form of equity compensation.
No cash reimbursement from the contract amendments as approximately $20 million and by the end of this year. We expect to have earned over $8 million a cumulative operating cash flow since opening the facility in 2018.
Cash basis, we have recoup the majority of our original investment and we will still have a brand new rail facility capable of executing a multiple business opportunities in the future.
Wrapping up we expect to continue to build the cash on our balance sheet in the near term as our capital spend remain disciplined in our balance sheet remains debt free.
As we've done in the past will be thoughtful and measured in evaluating all options for our excess cash with that we'd be happy to take your questions.
Thank you we will now begin the question and answer session to ask your question you. My Press Star then one under telephone keypad.
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Today's first question comes from Martin Malloy with Johnson Rice. Please go ahead.
Good morning.
We want to Mark.
My first questions on the revenue per system.
It looks like it held up.
Better than than I would've expected given some of the commentary.
From from some of the other service companies involved in completion activity could you maybe talk about some of the the factors there and and how you expect that to trend going forward.
Yes. Good question Marty are the nature of the system and the nature of our revenue model, where we're running it on a monthly basis allows the operator to as they move more tons through the system get greater and greater benefit in lower their absolute cost per ton and then they look at it and evaluated on a dollar per ton basis. So.
It's a real effectively a sharing of the upside and sharing the efficiency gains between so our our monthly charge has not changed.
Significantly and but the benefit to the customer has throughout this timeframe in efficiency gains.
Okay, and then on the chemical management system side.
Hi, I think you've got maybe one or two of the.
Ladies versions out there that reflect the customer feedback that you've gotten throughout the year you. It sounds like you're getting some positive feedback on these newer systems could you maybe talk a little bit more about that.
Yes, I mean, and one other things that we noticed as we mentioned sort of last quarter and as that it's hard to be public in this R&D process, but this is going probably faster than the sand system rollout did one of the things that sort of happened was evaluating and using standards of six months ago on how quickly folks want to use chemicals and what rates you're pumping.
And so we had to do a revamped around the pumping capacity at around the the air handling and vacuum protection mechanisms in the in the system and those upgrades were relatively low cost I just needed to be done it we needed to spec out some new materials and in all feedback now is is that they do allow significantly higher rates to be flowing through the system on the liquid.
Side and and that's that's taking.
Doing exactly what customers want so we see that those fixes as being very positive in Marty the only thing I would add is.
It's an education process and so as we've had systems out working and as we continue to engage with pumpers as well as operators as a push and pull from both sides.
Certainly from the operators perspective, there's real value in the HSC cleaning up the well site from the pumper standpoint, it's all about getting stages down per day, and so anything that's going to bring reliability.
It is a great opportunity for the Pumpers and so it's going to push pull on both sides and just from an education standpoint, we're being patient and spending a lot of time walking customers through the value proposition.
Great. Thank you.
Thanks Marty.
Our next question today comes from John Watson incidents energy. Please go ahead.
Thank you good morning.
Our job.
Good morning, I appreciate the color on activity I know, it's early but I was wondering if you could provide additional color regarding what you're hearing from customers for Q1, I would assume Q1 activity levels remain below where you were in Q3.
Is that a reasonable assumption at this time are you seeing something different from your customers.
It's really hard to tell you I mean, we have.
Depending on the region, we've got folks and say, they're going to be back above by that by the call in February the second first quarter back up above levels in the third quarter and got other regions, where it probably takes longer to come back. So on average I think we're moving back that direction, but I think it scales itself through the first quarter, yes, I mean, there's operators that.
Completely shut down for the fourth quarter that have.
Telegraph to the need to get back going very early on it with first quarter. So I think we'll see some of that there's a heavy amount of RFP processes going on right now and so we're working to those as well.
Okay, Great and then as a follow up on the Fisher comment.
There are other customers at that site that I'm, assuming could use your transload.
Can you speak to what their contribution has been tier transloading profitability today, and what that could mean into 2020.
The majority of the profitability has been through the.
The long term contract that we had cited facility, but I think we've had.
Up to six different.
Customers at the facility throughout 2018, I think the reality is in the fourth quarter. When we look at the various basins, where we're deploying the rental equipment that particular basin is really slowed down quite significantly. So I think as we look to the near term the revenue opportunity is probably pretty small there.
But we're engaging with not only sand operators are shan't customers, but also other commodities, whether its oilfield related or even outside of that the industry. So we're we're cascade pretty wide net in terms of opportunities there.
The local San switching is obviously played an impact in the demand for this kind of facility today, we're using it for some forward staging we think there's certainly opportunities could you do that as people look for storage and sort of an interim location rather than just at the mine, but the majority the revenue has been through that dedicated contract now I will.
Say that.
The capacity associated with that contract is now freed up and so now we've got kind of additional value to offer to new customers.
Right. Okay. That's helpful and one last one for me and.
I believe that there have been rollouts of higher payload pneumatic ugly can you speak to how that benefits the soleris value proposition.
Yes, I think the there's multiple things operators trying to solve for what from a payload perspective, reducing the number of overall truckloads in the.
In the industry that are required to deliver sand volumes as a good thing Thats certainly a good thing from an HSC standpoint every time a trust attract cross of cattle guard. There's some level of risks there and then from a cost perspective as well.
Fewer trucks should result in fewer are lower costs.
When we look at our value proposition, we're all about putting a large buffer at the well site, we've been able to maintain large buffers of sand in our silos direct our development and I think just putting.
More sand per truck should ultimately only increase our ability to maintain higher levels of inventory on site.
Fewer trucks ultimately reduce the volatility in the delivery of truckloads at the well site.
Great and I think there's been a big debate about belly boxes, pneumatic et cetera. It ultimately I, we don't see huge push from operators for one versus the other they're looking at how do I reduce truckloads and how do I maintain inventory is as high level as possible and there is trade offs and everything that you're looking at and so from our perspective.
Higher capacity pneumatic are the best opportunity you've got 24 Offloading points you got the reliability. We don't have one unload point, which is what you typically see annabel items system. So the ability to think break out there and the ability to keep offloading trucks and not rely in one single point.
Unloading capacity has really resonated with our customers that are.
Consistent users of the system.
Okay I appreciate the answers thank you.
Our next question today comes from Georgia, Leery of Tudor Pickering, Holt and company. Please go ahead.
Morning, Bill morning Cow.
Yes.
And that you had mentioned cost cuts just curious as you look across the various buckets that you may be able to take cost out of the system.
Do you.
Rank order, where the lowest hanging fruit is and then any color on the order of magnitude of costs that might you might be able to pull out of the system. In 2020 at this point I realize it's probably preliminary but just how are you thinking about that.
Hi, This is preliminary George we're you know we are.
As you know we operate fairly lean start with we closely match and monitoring our maintenance spending we monitor the field tech utilization rates and focus on maintaining a pretty rational and logix, an i. I mean, it's incremental stuff around the edges that we continue to to focus on it and our product.
So from a cash perspective is really capital spending and how we manage our manufacturing operation and right now we're very careful with what we're doing out there and look at it on a weekly basis in terms of what we spend and for what.
We don't we don't have multiple districts and regions, where we've got big overhead sitting.
Outside of the well say or Houston, our and our manufacturing facility or kingfisher. So we're pretty lean from that perspective, I don't know that there's a ton of low hanging fruit.
Accountability into into that various management levels to make sure everyone's focusing on where where opportunities to cut some costs.
And you guys have had some time under your belt now looking at these systems and what their repair and maintenance Capex is associated with the said 20 million dollar number is that all maintenance capex or does even that contemplates some level of of growth.
Probably got a little bit of growth of the majority is what we would just call non growth. So thats not only maintenance, but it's also improvements in enhancements to the fleet.
So things like the auto Hopper system. Those are all incremental capital that are required to continue to maintain the edge that we've been able to sustain over the last six years as the leader in this space.
Great I'll sneak in one more if I if I could the you guys continue to generate very attractive free cash flow over the last few quarters really speak to that in particular, how do you kind of rank order priorities for for cash it seems like markets fairly sluggish so.
Gross capex, probably only comes is really good line of sight opportunities is there more of that potential that you guys look to return incremental cash to shareholders now or or are there growth opportunities that I mean not be thinking of.
I think we are as weve proven very careful and cautious and thoughtful about what we do with the cash I think we will at a minimum our dividend policy continues most likely I think we will.
I don't see a massive need for some either inorganic organic capex ought to how we get that back and shareholder stands and most effective way.
Great. Thanks for the color guys. Thanks.
Our next question today comes from Stephen Gengaro of Stifel. Please go ahead.
Thanks, Good morning, everybody.
I guess two things.
Yes, one.
Can you help us frame the quarter, a little bit in the fourth quarter. When we if we were to think about a 20% reduction and.
Utilized.
Assets in the quarter.
How should we think about them margin impact I mean, it seems like pricing has been.
Stable I know, there's a lot of moving pieces from cost et cetera, but can you help us frame that at all on I don't know if you'd want to go so far give us.
EBITDA range, if you were down 20% to 30% on the topline but just.
Anything you could do from a.
Help us sort of understanding how the decremental should look.
Sure Steven I think we're bringing down in a couple different ways. We look at the cost of rental I would see that'd be pretty linear with activity. The majority of that cost is around maintenance and so on to the extent, we've got less activity I would have generally expect lower maintenance spend there is a bit of fixed costs in that bucket.
With insurance property tax et cetera, but there should be some ability to flex that when we go to the cost of service. The biggest element of that is our is our field labor piece and.
So for the most are the field services costs.
Will remain in line the one variance in that wouldn't be just our transportation costs. So moving moving equipment around that's effectively a pass through but we will see that come down just through lower activity.
So we're not we're not going to get too prescriptive on a on the EBITDA range, that's something we've really ever ever done really don't Wanna get into doing that but I think we are very conscious of evaluating a reduced activity load and where we have opportunities to to get more efficient.
No great done that's that's that's very helpful.
As you talk to your customers I mean, it clearly seems like.
We've at least heard on the containerized solution side, there has been pricing pressure. It seems like your prices have been holding up pretty well as you as you look as you look out past the very short term.
Do you do you continue to see that trend I mean, I know CMS question earlier about competition, but you can continue to see.
Customers being willing to.
To extend contracts and continue to work equipment at or around current pricing.
Hi goes back to my earlier statements David on on on volume metric based moving up boxes $1 per ton basis ours as element of fixed costs that as the as our customers get more efficient by using equipment. They are actually their dollars per ton cost is dropping and so we believe that we can continue to remain competitive on a total delivered cost base.
This is especially factoring in reliability on top of that so we we do see pricing pressure. There is always pricing pressure right. Our operator customers are always looking for the best solution and have been for since we started the company. So we continue that at our goal is to maintain a efficiencies help them get better at what they do.
And and try to make fair margin for us and as we sit in the past we've had customer switchblade for lower headline rates.
But when you look at a $5000 an hour NPT charge.
Over the course of 30 days 24 hours, a day $130000 rental even if you're saving 30 40, 50% on the headline rental just one intuitive and then PT over the course of a marked eradicates all those savings so its people test different solutions that deferred headline rates and they do the full.
Okay.
Great.
Helpful detail. Thank you gentlemen.
Okay.
And our next question today comes from John Hunter Cowen. Please go ahead.
Thank you good morning.
So I wanted to touch on the activity guide for the fourth quarter down 20% to 30%.
In the seventies for full fully utilized systems.
Yes, I don't know about getting into the exact exit rate on December .
We've got that fight of pet on that at this point when we look at September versus October our Q3 versus October there was a step down.
Needed to one operate as an example at four Frac crews running in the third quarter the now at zero.
So those sort of anecdotes are popping up.
But that being said.
I think it's been very well telegraphed that overall service prices are coming down in the fourth quarter continue to come down fourth quarter. It.
Freight tomorrow.
And then.
Hey, here's our offering and does that offers an opportunity to gain more market share as customers prepare for 2020.
Well I think where there was a theres a constant dialogue, we have with our customers and when they're slow I mean, frankly, what it gives us an opportunity to do is his work on some of our it out stuff into some tweaking because we're not fully utilizing all of our labor. So.
I think our relationships with our customers are there that we are trying to plan for the fourth quarter over the first quarter next year, they're trying to plan for next year and we're in that dialogue with them every day about making sure that we can be ready for them of going into next year, if they're slow down like you say car, we've heard from anecdotally others with sand prices data completion.
As costs down that that Theres folks that said there were going to drop at habit. So.
It's a mixed bag and it's not a totally inconsistent practice as operators and service companies play that constant game of supply and demand on track capacity.
Great, Thanks, Bill and Kyle.
Our next question today comes from Chris ROI of Wells Fargo. Please go ahead.
Morning, guys.
Hi, Chris.
Just wanted to ask on pricing strategy in the past you guys have said that you are willing to sacrifice utilization versus price, obviously on a fully utilized basis.
Realization is a bit weak, but you said you got to 150 units work in the quarter. So it's not like Theres.
With that much slack in terms of.
The word potential.
Just if you could give an update in terms of how you're approaching 2020 conversations would you would you still prefer to have a lower active unit count and maintain the current pricing level and have you added enough new technologies on top of like large lens to maintain that kind of pricing or or has that shifted at all.
Yes, I don't think we ever target.
Not getting share I think what we do is we remain disciplined did not chase price.
We're not really focus too hard on utilization number we're looking at how much share can we captured each of those basis. So some of the gassier basins, we may be still at our third share the shares the pie is much smaller and so that result in an underutilized systems.
We've got enough systems today in each of the basis to satisfy demand. If we had a smaller fleet, we would probably be moving equipment around two to address some of those higher basins, but I think at this point, our our asset base, our utilization is really going to be driven by the relative activity levels in each location.
Okay. That's helpful. Thanks, and then to follow up on chemicals, and I don't think I caught these numbers, but if I if I have it right. I think you have 14 total system still your retrofitting. Some of those did you call out how many systems you actually have on revenues currently.
We did not we've got two of the new builds out in the field today and we are modifying several additional ones that we expect to have available by the end of the year.
At this point I think thats consistent.
It's pretty early at this point to really.
Update anyone on that given the relatively low levels of deployments.
Okay. Thank you.
And ladies and gentlemen, as a reminder, if you'd like to ask your question. Please press Star then one at this time. Today's next question comes from JB Lowe of Citi. Please go ahead.
Okay. Good morning, guys.
Good morning, so I'm not going to the beep beep on the.
The pricing dead horse here, but I'm kind of wondering on market share I want to kind of passive ask John's question a different way.
You guys captured a third of the market pretty quickly.
Do you think that there's like a natural cap on the amount of share that you could potentially capture just given operator preferences between.
Computing systems, how do you guys look at that.
Yes, I think there there is our focus is in market share we internally never really run any numbers. It's about who are the customers. We have in who we think we can help save money in their completions and and as we look at like that we see that we continue to penetrate.
New customers that have switched or had challenges with other solutions and we.
Believe we keep them after they get to use our system because of the the additional features of reliability and the information with the lens.
The whole package over a period of time and a completions program tends to be very value additive and so we see that and continue to push that and focus on sort of one customer to Tom Yes, and I think every customer is different so whether it's an operator pressure pumper some of them on their own assets some of them and economic interest in.
And differences in some of them have helped develop systems.
And so there is some piece of the market that is sort of focus on what they're doing today I think over time, we've shown the ability to to capture that some of that share as.
Some of the technologies have been able to keep up with the higher throughputs.
Okay, Great and then my other question was just.
Given that.
M&A in the NPV space has been ongoing and more and could potentially continuing forward with what's your strategy, if say that you're working for one customer that merges with another isn't using your system like what's your strategy to try to gain more business that way or at least protect the business you have if let's say one of besides uses a containerized system.
Where another side uses silos kind of what's your strategy on.
Potential M&A.
I wouldn't say, if anything, especially when we approach every customer with a value proposition a.
And I'm trying to understand what they're trying to achieve in how we can aligned with that.
One of the interesting things that has come up of late is on the front, we've gotten to RFP is in the last week or so that is specifically asked vendors to to describe what they're doing from India. She standpoint, we recently launched our sustainability report on our website, that's something that we haven't done for.
I guess on the on the silo pricing question, Jamie said it we've we've talked but a lot, but I guess I just had a question on what you're seeing from your competitors. Obviously you guys are holding a lot on pricing and that's great. But how are your competitors approaching this soft year end period are they offering strange discounts given away for free or or doing anything.
Given the low activity for the next couple of months.
Yes, it's hard for us exactly answer what our customer competitors are doing I mean there.
On things out on an offer years, we focus on just our what we can control and we can control delivered a high quality reliable product at a fair price and that's what we focus on.
Okay Perfect I guess my next question just be on capital allocation decisions.
You guys talk about looking at acquisitions or kind of areas you want to pursue all of them oilfield related or is there any interest in kind of pursuing things outside of the oilfield.
We have focused on the oil field, we have looked at a few other things that especially where we come mentioned around the kingfisher facility. There's some options that are not alone. So that's a state of the art rail facility in a nice location in Oklahoma and great asset. So theres, maybe other uses for that but I think we are our focus.
From an M&A, if we find something that we think meets our attractive return.
Desires will more than likely be in the oil and gas industry that so there's a big if there yet I think what I would add to that is.
We've got a very lean structure here.
A step outside of that would probably bring.
A significant level of overhead that we don't currently have so the most valuable thing for us to do is probably some sort of full than synergistic.
Opportunity that touches the same customers that were touching touches the same locations not maybe a different points in the lifecycle it may be drilling production.
Side of things not just completion, but I think we'd like to do things that are sort of in our fairway.
And keep us very lean and able to flex up and down cycles right.
That's great. Thanks, very much guys.
And ladies and gentlemen. This concludes your question and answer session I'd like to turn the conference back over to goes over for any closing remarks.
Thanks, Rocco I, just want to close them briefly with a with a thank you to all of our employees for their hard work in this time period all of our customers for the understanding the value proposition at all of our shareholders for for for hanging in there with US I think the market is challenging I think we continue to have a tremendous product line focus on its functionality.
And how it fits into the industry and continue to evolve it as well as the new product lines that we continue to develop we're not completely relied on the overall market, but we're clearly not immune to it.
We have a culture that is highly focused on making sure that everything we do it's better every day and we'll continue that focus on that culture.
Lastly, the cash flow generation capability. The business is strong and we continue to do that.
We're evaluating options continuously about what's the what's the best use of that cash.
Of the normal dividend and we're evaluating other options to return money to shareholders over the over the course the next several months. So thank you all and have a nice day.
Thank you Sir todays conference has now concluded and we thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.