Q3 2019 Earnings Call

Greetings and welcome to the Flex Energy Services' third quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star there on your telephone keypad. As a reminder, this conference is being recorded and is now.

My pleasure to introduce your host Christian Fife, Vice President Investor Relations and Treasurer. Thank you Mr. George you may begin.

Thank you operator, and good morning, everyone. We appreciate you joining us for the select energy Services' conference call and webcast to review, our 2019 third quarter results.

With me today or John threats, our executive Chairman Hollywood, Donnie, our President and Chief Executive Officer, and Nics, Weichai Senior Vice President and Chief Financial Officer.

Before I turn the call over Ive, a few housekeeping items to cover a replay of todays call will be available by webcast and accessible from our website at select energy services Dot com.

There will also be a record a telephonic replay available until November 21st 2019.

The access information for this replay will also included in yesterday's earnings release.

Please note that the information reported on this call speaks only as of today November 7th 2019, and therefore time sensitive information may no longer be accurate as of the time of the replay listening or transcript reading.

In addition to comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views of select management. However, various risks uncertainties and contingencies could cause our actual results performance or achievements to differ materially from there.

As expressed in the statements made by management.

The listener is encouraged to read our annual report on Form 10-K for the year ended December 31st 2018.

Subsequent quarterly reports on Form 10-Q , and our current reports on form 8-K to understand those risks uncertainties and contingencies.

Also please refer to our third quarter earnings announcement released yesterday for reconciliations of non-GAAP financial measures.

And now I'd like to turn the call over to our President and CEO of Hollywood Donny.

Thanks, Chris Good morning, everyone and thanks for joining us today.

Overall, we continue to execute on our strategy to strengthen and differentiate our position as the market leader, an integrated water and chemical solutions, while also delivering meaningful free cash flow. The core tenets of this strategy includes developing attractive organic growth opportunities investing in technologies that differentiate our services reduce our costs.

And expand our market share potential.

And finding strategic bolt on M&A opportunities to enhance our capabilities broaden our service offering and strengthen our customer relationships.

We plan to achieve this strategy, although fortifying our balance sheet pretty solid free cash flow generation and returning capital to shareholders when appropriate.

More specifically during the third quarter, we grew revenues and a challenging market through strong performance on our strategic water infrastructure assets as well as continued market penetration for our proprietary friction reducer product line.

We delivered 67 million of operating cash flow, which we deployed across several initiatives.

First we acquired a specialized market leading business that expands our water treatment capabilities with a proven team that further bridges the complementary solutions of our water services and chemicals offerings next we continue to invest in automation technology that differentiates our services and reduces our cost.

Third we continued the development of our strategic Northern Delaware pipeline project, which is progressing on time and on budget and finally, we executed a modest share repurchase returning capital to shareholders.

We accomplished all of this while strengthening our debt free balance sheet, increasing our cash position even after these capital initiatives.

Well the third quarter wasn't without its macro challenges operationally select also performed well relative to the market.

Looking at the industry more broadly U.S. unconventional activity levels typically remains strong through the third and early fourth quarter. However, as operators refocus on cash flow and capital discipline. We're seeing budget exhaustion are occurring are set to occur earlier this year for many of our customers.

And looking at specific activity level for the third quarter early indications point to modestly decreasing completions activity relative to Q2 with a fairly steep downward trajectory in September .

Our own internal Frac fleet tracking data indicates an 8% reduction and the number of active fleet during the quarter alongside of 7% decline and the Baker Hughes horizontal rig count.

Given that macro backdrop I'm very proud of the team's performance in the context of what was otherwise a tough market.

After adjusting for the previously divested Wellsite services business that contributed during Q2, we delivered overall sequential revenue growth of 4% driven by strong performance in our water infrastructure and oilfield chemicals segment.

These two segments also delivered increased gross margin and our recent cost improvement effort mitigated decrementals and our water services segment.

As I mentioned, we also continued to deliver strong free cash flow during the quarter, allowing us to execute on our investment priorities generate returns to shareholders and continue building cash on the balance sheet.

Having a clean balance sheet positions us to think ANAC strategically.

As we said in the past we're always looking at good strategic bolt ons that strengthen our service offerings and prioritize unique technologies.

We believe our recent acquisition of Baker Hughes is well chemical services business or WCS is we'll refer to it perfectly exemplifies. This strategy is it's very complimentary to our existing water treatment capabilities.

This business is an industry, leading provider of advanced water treatment chemical solutions spanning the full water lifecycle and serves all major U.S. basin with its largest area of operations being the Permian basin.

Well, we plan to report the financial results of the WCS business.

And our chemical segment going forward. This business will work closely with the operational leaders of each of our segments to provide comprehensive solutions to our customers.

As the water sourcing supply chain continues to become more complex and the opportunities for produced water reuse continued to grow the interplay of the relationship between water quality and the chemistry behind the Frac fluid system continues to garner increased focus from our customers.

We believe the comprehensive nature of our existing customer relationships service capabilities and technical expertise across both water and chemicals will allow us to more effectively grow this business further differentiating our market leading position and advancing a strategy that began with a rock water merger a couple of years ago.

I'd also like to add to this acquisition establishes a strong strategic sourcing and product development relationship with one of the preeminent chemical manufacturers in the entire industry, expanding our overall product offerings to our customers and broadening our supply chain.

Well, we continue to evaluate further growth opportunities in the M&A market, we value our strong balance sheet and the flexibility. It provides and will remain diligent and disciplined with our capital deployment.

Looking forward, we anticipate Q4 to be a challenging quarter for the industry. We're planning for general completions activity to declined 15% to 20% from the third quarter level given the typical winter slowdown in early budget exhaustion with many operators wrapping up their full year capital programs well ahead of the typical holiday schedule.

Response to the seasonal weakness, we're focused on taking proactive measures to protect our earnings and cash flow generation, requiring a critical focus on our cost structure and capital program.

If market conditions have continued to evolve and 2020 budgets remain uncertain, we reevaluated, our capex needs for the year, leading us to lower our previous 2019 Capex target of 120 240 million down to 100 to 110 million, which includes just under 40 million related to the new Mexico pipeline.

This decision will impact the pace at which we upgrade or look to grow our water services asset base in light of current rate of return expectations, but doesn't require us to defer maintenance capex.

We're balancing balancing the near term need to actively manage our cost structure and to make prudent capital investments with being prepared to support our customers as activity picks back up and the first half of 2020.

With that I'll turn it over to enact Walker, our third quarter financial performance in more detail. Thank you Holly and good morning, everyone.

Pleased to announce that we reached our full year free cash flow target a quarter early with $42 million of free cash flow in the third quarter, bringing us to 65 million year to date.

Well roughly a third of our operating cash flow came from working capital improvements two thirds can be attributed to continued strong operating results.

With this operating cash flow, we funded the WCS acquisition for just over $10 million returned nearly 12 million to shareholders via buybacks invested 25 million of net capex and still increased our cash on hand by $19 million I expect that through the remaining month of the year, we will exceed the high end of our previously talked.

We ended 2019 free cash flow range of $65 million to $80 million.

Select generated total revenue of $329 million third quarter, an increase of 5 million quarter over quarter or 12 million considering the impact of last quarter's divestitures.

Our water infrastructure in oilfield chemicals segments demonstrated impressive resilience and growing both revenues and margins during what was the challenging quarter for the industry.

We don't expect to repeat this level of revenue in the fourth quarter, but are encouraged by our customers continued preference for our people expertise technology and solutions.

Adjusted EBITDA was similarly resilient at $49 million down 3 million from the second quarter, leading the net income of $7 million as a company. We continue to remain laser focused on adjusting cost and real time with activity and we are executing that effort on all fronts, opex capex and SGN a into the fourth quarter.

Diminishing completions activity in September and a full quarter impact of previous pricing pressures led the water services segments revenues declined 3% sequentially to 197 million in third quarter from 202 million in the second.

The segment generated gross profit before depreciation and amortization of 43 million in the third quarter compared to 47 million in the second reflecting a slight decline in segment gross margins from 23% to 22 per se.

With further revenue declines in the mid to high teens on a percentage basis expected in the fourth quarter due to our customers exercising capital discipline and other seasonal impacts our operational leadership is taking decisive action that when combined with our improved efficiencies from our investments in technology should keep near term decremental margins in line with traditional levels prior.

Activity picking back up in 2020.

The water infrastructure segment significantly increased revenues by 24% from $52 million in the second quarter to 64 million in the third.

Gross profit before DNA increased from $13 million to $17 million quarter on quarter as our Bakken infrastructure returned to higher utilization and our existing new Mexico infrastructure saw record volumes.

Gross margin before DNA of 27% for the quarter improved modestly from 26% in the second quarter.

While this segment is not immune to macro volatility we expect the water infrastructure segment to outperform in the fourth quarter relative to anticipated industry activity levels with the high single digit percentage revenue decline on a similar margin.

Oilfield chemicals segment continues to improve its profitability with revenues, increasing $5 million to 68 million in the third quarter and gross margin before DNA of nearly 16% versus second quarter is 14%.

This combination of higher revenue and margins led to gross profit before DNA of nearly 11 million for the quarter up from 9 million in the second quarter.

The continued effectiveness of our proprietary products and favorable logistics with our in basin manufacturing continue to win new customers and provide higher throughput from our manufacturing facilities.

While seasonal impacts integration and relocation costs related to the recent WCS acquisition will likely pressure margins temporarily back into the low teens for the fourth quarter on a similar revenue base. We expect this to rebound in 2020.

The addition of WCS furthers the integration of our chemicals group and to the full water lifecycle value chain and unlock new customer opportunities across a wider range of solutions. We're very excited about the potential for this business will provide more guidance for the anticipated contribution of this business as we progress further with our 2020 budget process.

Looking at our other corporate costs higher tax expense. This quarter was driven primarily by the accrual methodology, we follow along with state taxes based more on activity and we expect the full year tax rates finish in the mid teens, we don't expect any material change and depreciation in the fourth quarter well, let's see in Asia declined by a mid single digit percentage through our ongoing cost.

Cutting efforts.

We continue to have zero bank debt and enjoy a net cash position at $43 million as of September thirtyth with an expectation that will generate substantial additional free cash flow over the fourth quarter. This fortified balance sheet enables us to compete more effectively in a down market as well as they prepare to exploit organic investment are targeted acquisition opportunities that.

They emerge while growing our cash balance and executing on a targeted bolt on acquisition our share buybacks. During the third quarter brought our total capital returned over the last 12 months to roughly $29 million, while over the same time period, eliminating $65 million debt.

The remarkable cash flow generating potential of our franchise has manifested itself through positive free cash flow every quarter since the rock water merger and we expect that to continue through a challenging stretch in oilfield services.

While remaining opportunistic in our pursuit of high return investments, we will continue to safeguard the balance sheet and prioritize cash flow and returns on capital above all other financial metrics with that ill hand, it back to Holly for some concluding remarks.

Thanks, Nick to quickly wrap up.

Our leading position in the marketplace and debt free balance sheet uniquely position us to manage through the current market environment and take advantage of opportunities in the coming quarters.

So the market will present challenges outside of our control in the coming months, we continue to focus on the things we can control our costs, our customer service and our disciplined capital allocation.

We remain focused on our strategy of generating returns and free cash flow for our investors and consistently executing for our customers, while keeping our employee safe every day with that I'll turn it back over to the operator and we'll take your questions.

Operator.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a confirmation on will indicate your line is in the question do you May Press Star too if you would like to remove your questions in the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star Keith.

Please we ask that in the interest of time, you limit yourself to one question and one follow up and re queue for additional questions. One moment, please while we pull for questions.

Our first question comes from the line of Sean Meakim with JP Morgan. Please proceed with your question.

Thank you Hey, good morning.

Morning.

[noise], so Holly Yep.

Given the outlook that we have here heading into 2020.

Can you maybe give us sense of how you're thinking about.

Yes.

The continued effort on the part of it continues to focus on capital discipline, how that impacts.

What you think about water infrastructure investment opportunities.

And you know both from the from a sourcing side as well as on the produce such kind of where are you see those opportunities and how has that shifted.

And the last few months in terms of the opportunity. So do you see out there.

Yeah, I mean, we definitely see.

Operators looking on the post frac side, they've built some fairly meaningful system over many years and the market valuation of those with some recent deals is pretty robust and so I think there are lot of those guys looking at whether or not you know there's sort of an arbitrage there between.

What they the multiple they could sell those businesses for versus how they're they're valued so I think we'll continue to see I'm at least active discussion around larger systems that operators and put together on the post frac side I do think from our perspective, we're more focused on.

Call It the spoke solution to.

And operator challenge, which means there will be smaller organic.

Investment opportunities, just because I think the valuations and the size and magnitude of some of these large systems is is outside of the sweet spot for us and.

We're challenged to find opportunities that will generate the kind of returns on the capital that we would need to deploy.

I just don't see it meeting those hurdles, but we'll continue to be really focused on on being able to work through what we call singles and doubles and when you start to add those up it can become a nice growth opportunity for us and you know as an example.

During the third quarter, we were able to negotiate a small produced water.

Line for a customer and the Permian, where you know we we spent a few million dollars to connect to their fields to allow them to manage their completion programs and maximize the is produced water and.

Have a contract associated with it and it has nice returns and I think that the smaller investment sizes and by doing it organically is going to give us. The returns we won but I think trying to go attack. Some of those big system is not going to be the right fit for us.

Got it now that's that's very helpful. I appreciate that feedback.

Maybe just talk a little bit about WCS acquisition as well.

Just going how we see that impacting that chemicals business what was it the Genesis Scott wasn't a push or pull type of transaction and just you know.

Maybe I don't think investors necessarily have a good.

A lot of visibility into what that market looks like maybe giving us a better sense of.

How plentiful or the opportunities for bolt on acquisitions and that business and how you see.

M&A versus organic opportunities and then cam so well have a lot of pieces there, but that's kind of flushing that out I think would be helpful.

Sure. So you don't Miss I think that they're both organic and bolt on opportunities and chemicals, you certainly saw the growth in our.

I thought fr volumes based on the proprietary product line, we have in the impact that had on our quarter as we see market acceptance there were getting our volumes up which means that then we get our you know our cost structure in line, we can absorb those additional manufacturing costs. So organically things are playing out really well there.

Sure and particularly with the amount of produced water that's being used in the Permian. The team has been able to develop new products to meet those needs, it's fairly complicated and they've done a good job of of being up to the test and actually our volume we were touching capacity full capacity in the third quarter across our.

Plant. So it was enough that we're actually now looking at expansion opportunities there not big dollars because that's the good news, we can expand under roof line, but adds.

Some further volumes into the system, if we see the right you know demand indication for it and then more specifically on WCS that was one that we have certainly had an interest in that particular business for us.

I guess I'd have to go back say, probably 12 18 months and so we stayed around the who to understand whether or not that was going to be core and and as it turned out Baker Hughes you know earlier. This year, we were able to convince them that you know maybe we can do more with it then than they were and ended up being a really great solution because we brought over.

Are you know almost a 100 employees that really know the treatment business, well and I think importantly, with this particular opportunity is that what we refer to it is helping you know bridge and connect our services business and our chemical business, but what we mean by that is it historically the treatment the.

Asian, and the Frac fluid system fluid decision have been separated and it's really important and I think there's value to be had the more you connect those two things because the water quality going into the Blender really then is that so important to the frac fluid.

System that you choose so now we can attack it I think more effectively from both in and solve for a fairly complicated equation, but when you take our water services capabilities you know all the logistics all the management, we can do there you add more robust treatment capability and then our proprietary.

Larry friction Reducers at work and you know multiple water quality, it's a pretty powerful thing and we do think that the addition of WCS will put us into more conversations with our customers in that regard. So it's it's relatively small acquisition, but I think strategically the way it positions of it positions as it is pretty important.

Very helpful. Thanks Ali sure.

Thank you. Our next question comes from line of Kurt Hallead with RBC capital. Please proceed with your question.

Hey, good morning.

Sure.

So all the I'm, it's kind of curious is going to look at the the water pipeline business and as you get into into 2020, you get a major oil company.

You know looking you about 40% of that that volume in that pipeline you extended the pipeline because there's some other customer interest just wanted to kind of gauge whats.

The latest dynamics or are there and whether the the appetite to fill that pipeline is still robust given some of the dynamics on budgets exhaustion. We're seeing this year in their first prospect for you know some limited budget growth into 20 point.

Sure No. It's a good question I'll tell you we still feel really good about the positioning of that system. When you look at current rig level activities and you look into 2020 that part of the northern Delaware is is still active and we expect it to be active in and and to 20.

20, so and one thing I'll expand on there that we saw enough demand and the third quarter that we put in some temporary solutions to connect our high rate sources.

To be able to fill the gap on some volumes prior to that permanent line you know coming on the operations and so we were able to leverage the right of ways that we had the high rate source is essentially bridge to the completion of our construction and what will happen now is it something that was part of the benefit to our third Arthur.

Third quarter, but now as we get the system online, which again on budget on schedule, it'll it'll be up and operating this quarter.

You know a fair amount of those volumes will transition to that pipeline and that will then help US you know from an operating cost perspective. So we and these are volumes largely they're not associated with the take or pay that we put into play. So we're finding good opportunities for near term commercialization of those.

Hi rate water sources, and look forward to getting a moving across the the permanent system and we are in conversations with our customers now to really start thinking about the more holistic 2020.

Solution to their water needs, but all in all feel really good about about positioning and our ability to commercialize the the pipeline <unk>.

Great appreciate that Matt maybe on the follow up on WCS acquisition on an annualized basis.

On a revenue contribution are you expecting that to make.

Yeah, well roll out a lot more on that as we do our 2020 budget, Kurt but but what I'd tell you is it fair to assume that the margins on that business are gonna be fairly similar to the improved chemicals margins you saw in Q3 and that you know, we certainly expect it to be an accretive.

Action.

Relative to to where we trade today.

Okay. Thanks Ali I appreciate it sure. Thanks.

Thank you. Our next question comes from line of Tommy Mall with Stephens. Please proceed with your question.

Good morning, and thanks for taking my questions.

Good morning.

I wanted to stick on WCS for a second.

I think I'm hearing you correctly that this ties into your longer term strategy for produced water recycling.

So if you could.

Articulate that.

For us if I'm correct and that assumption. It and then also bring us up to speed on what inning are we in there. It's a theme that's come up a lot, but my sense is it still pretty early days and so it would be helpful to know where we are in that process. Thank you.

Sure I'm, starting with with the ladder.

This is one of those conversations there's the Permian and there's everyplace else and where we're seeing the big transition is in the Permian Tommy and you're right. It's still I'll call. It relatively early days and the challenge there as you have to be producing enough water and the right location.

To support that the next completion program. So for example, the example, I gave on the I'm doing a a relatively short produced water line to to connect two of the field of one of our customers in the Permian. It was so that they could balance out utilizing that produced water it and that.

The most cost effective way to do it was to put some permit infrastructure in and so the major operators in particular and those with some cored up acreage are I I'd say moving as quickly as they can to being able to use the produced water. It just it's making a lot more economic sense the cost of disposal.

Is.

In certain areas, you know going to become tight and so that's an avoided cost by not having to dispose of it and because of the advancements in the chemistry weekend design Frac fluid systems to work with you know a very wide range of water and there's really not any water in the Permian that we can't deal with.

What WCS helps us do as I said it we're just at the table with customers I think we'll have more of an opportunity to do that now to have that conversation of here's a particular produced water that you're dealing with because it changes not only by yeah, Midland basin versus Delaware, but.

No what part of the stack or you are you dealing with what part of the formation and so what do we need to do to optimize the treatment and then match it up with the right Frac chemistry, because you could spend an awful lot on treatment and then had a fairly low cost frac fluid system or you could limit.

The amount of treatment, but then you'll need a more robust frac fluid system to really get the best performance of the completion and so.

The fact that we have the knowledge of both sides of that.

Equation I I think it will allow us to create more efficient solutions for our customers.

Thank you Holly that's helpful and shifting gears to capital allocation.

Would you be able to give us a peak at a range of.

What capex might be for 2020, and then offer any comment to the extent there's.

Free cash flow leftover as I suspect there will be there would be significant free cash flow to decide how to deploy what's the appetite for continued share repurchases. Thanks.

Sure Tommy I'd say looking at 2020, obviously, we'd have a lot more detail on our next call with our budget.

But if you look at our Capex for this year, where we've we've said would come in around 101 10 today.

If we did not have that new Mexico project, obviously that would that would reduce that by about 40 million and so I think that underlying total there is probably a decent range to start from for 2020, barring additional new infrastructure projects.

So you correctly point out that that leads you to a pretty robust cash flow number now when we think about that.

I think third quarter is a good microcosm of how we approach our cash flow. So first of all its a core tenet of our strategy and we always want to be generating substantial positive free cash flow, how we allocate it.

I will be a portion that.

It goes to investing in the business not only maintaining it but doing those singles and doubles and allergists talked about.

We would like to continue our our practice of returning capital to shareholders, whether thats through a buyback or other means.

That that's something we'll continue to think about going forward, but currently it's the buyback.

Then when were find tuck in acquisitions like WCS that makes sense and both from a strategic and accretive.

Perspective.

Enrolled we'll execute on those.

I think putting all that together for 2020, we'll have more detail but.

For that's certainly our philosophy and how we operate and think about cash flow today.

Probably the only thing I would add onto that as a general rule of thumb, you know because free cash flow. It is so core to our strategy. We built the business model to support that and we think about maintenance capex typically running a third of our EBITDA. So that does leave us meaningful.

Cash flow to to put to other uses is isn't it describes but I do think you know one of the things that.

We're comfortable right now and doing is building up some dry powder, we don't know what the next 12 months, you know what sort of opportunities they might hold fourth and so we're not really in a position today to make broad capital allocation commitments, but I do think and this kind of.

Market, creating optionality is is really valuable and so we're going to be focused on doing that but step. One is generates cash flow and then step two is to maybe a little patient and see what opportunities present themselves and then we'll go from there.

Okay.

Thank you very much I'll turn it back.

Thanks.

Thank you. Our next question comes from the line of Thomas Gran Curran with B. Riley FBR. Please proceed with your question.

Good morning, and thanks for the last name correct presentation there [laughter].

Nick would you please tell us how that the balance sheets in Threeq, you total assets break down across the three divisions and if you don't have that for total assets, perhaps just for Noncurrent assets, you know, the piney goodwill and intangibles right abuse and other assets.

Yeah, Tom will probably a follow up after the call. It again, a little more detailed there, but it is relatively translates to the current revenue.

You are going to have fixed manufacturing assets and chemicals.

Infrastructure, we obviously have a built in a fair amount of P. acne and our new Mexico infrastructure projects, because it's not currently online, but we'll be shortly.

And then it of course and water services, you have a wide array of equipment there flowback.

Transfer.

So it's spread out but we can we can talk more offline and get into the details of how those categories breakout.

Okay, you would imagine because of the limited investment on say the chemical side, even though our has lower margins. It can deliver a still deliver a nice robust return on assets for example.

Great and then Holly returning to those be spoke infrastructure projects. It do fall into your wheel house for organic investment.

How has that opportunity set evolved since the last call and in terms of number and attractiveness.

Maturation stage of discussions and and at this 0.1 is the earliest you'd expect.

To get one of those across the finish line.

Yeah, I would say, it's a it's a fairly robust lists we have a team of folks that literally that's their job every day is to be out and and creating solutions for our customers and again that that's where we found that will find the most excess versus always a hammer looking for the nail let's go.

Find out what their problem is and then and then how we might be able to solve for it and so I would say it is a it's a very robust set of opportunities, but each of them have their problems and take time to obviously did it get it over the finish line, but as we said you know we did one of those in the third quarter.

Her and well keep plugging away at those and interestingly enough about the small.

Opportunity within the third quarter it could lead to further opportunity. That's it's a big customer that's very active and so once you're in the door that might accelerate future opportunities and so its really hard to predict Tom and I wish we could give you better clarity on guidance on that but well keep working as hard.

But but we absolutely continue to believe that the organic approach is going to give us. The returns that were looking for and that there are sufficient number of those that we'll have have an opportunity to deliver on those and and 2020 and we'll obviously be really thoughtful about.

Putting our capital to work and if it's not going to meet the return thresholds and then we won't be executing on those projects.

Thank you for taking my questions sure.

This concludes the question Andrew answer portion of the call I would like to turn the floor back over to management for any closing remarks.

Thanks, and again, thanks for taking the time to join US This morning, and as I guess it becomes somewhat customary the only thing I wanted to leave you with is what are our top three priorities and we've hit on most of those already this morning, but you know we do expect a softer Q4, I'm, obviously that will rebound.

That's our view and 2020, but we've got to manage our caution our capital in the near term. So we're looking at rightsizing to to matter activity levels. We're gonna be laser focused on free cash flow. We're very proud of the seven quarter track record of delivering <unk> positive free cash flow and and we're going to maintain that and then the way.

We do that as is leveraging our folks and our technology and meeting our customers' needs. So I'm just executing in the field everyday is is that last priority. So thanks, everybody and have a great day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.