Q4 2019 Earnings Call
Greetings and welcome to nine Energy service fourth quarter 2019 earnings Conference call. At this time, all participants are in I'll listen only mode.
Question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference call is being recorded I'd now like to turn the call over to your host Mr. Guy Circus banking you may begin.
Thank you good morning, everyone and welcome to the line Energy Service earnings Conference call to discuss our results for the fourth quarter and full year 2019 with me today are and Fox, President and Chief Executive Officer, and Clinton radar Chief Financial Officer, We appreciate your participation.
Some of our comments today may include forward looking statements, reflecting nines view about future events forward looking statements are subject to a number of risks and uncertainties many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors.
Skus in our filings with the FCC, we undertake no obligation to revise or update publicly any forward looking statements for any reason.
Our statements today also include non-GAAP financial measures additional details in a reconciliation to the most directly comparable GAAP financial measures also included in our fourth quarter and slow your press release and can be found in the Investor Relations section of our website.
I'll now turn the call over the and Fox.
Thank you Guy good morning, everyone. Thank you for joining us today to discuss our fourth quarter and full year results for 2019, I want to start off and congratulate how their Smith, our VP of IR and hurt Stephen to arrive at new baby She will be out on maternity leave that guy scare guess RVP.
Strategic development will be filling in for her during this time and he can be reached any investor relations contact information on the web site.
Despite a very tough market this past year I'm happy with the execution of our strategic initiatives that have uniquely positioned nine for completion tool market share growth.
At the beginning of 2018, we put a plan in place to better align our business portfolio with our strategy being asset light completion, So gets company with higher barriers to entry around our business lines.
This strategy would facilitate higher margins stronger cash generation and better three cycle returns to do that we wanted to shift more of our topline revenue derivation towards completion tool, while simultaneously shedding non accretive service lines and geography.
We also wanted to properly and successfully integrate magnum and Frac technologies into nine to propel the development and commercialization of our new downhole technologies for both near and long term.
During Q3, we successfully completed the sale of our production solution segment and close down wireline operations in Canada, which will be accretive to our wise the adjusted EBITDA margins and cash flow generation. We also reduced our capital needs moving forward, which has contributed to the significant reduction of Capex in 2020 and beyond additional.
<unk> nine is not 100% completion, so guess and our head count has been reduced I approximately 35% year over year.
The integration of Magnum in Frac Tech has gone well with both organizations fully ingrained into nine financial systems as well is now operating under the nine brands. Our approach of one brand. One culture has helped enable the teams to collaborate on our new technology and implement standardization across the organization.
I am confident that each copy on its own would not have accomplished the engineering materials science advances in the timeframe, we did which is exactly why we consummated the partnership.
I will give a more detailed update on our technology later in the call well, we have successfully commercialize our low temp Dissolvable singer club, which continues to be Ron and child, amongst many customers and across multiple basins and have begun successful trials for high tempt Dissolvable plug.
The timeline for new composite blood remains on track as well for Q3 of 2020, we believe the development of these tools. It gives nine at first mover advantage and the Locums dissolvable market and as volume increases so too will our margins cash flow and returns profile. These products also require little to no capex.
Which transitions nine towards a more asset light model with strong patents and exclusive supplier arrangement to provide additional barriers to entry around IP design and materials science.
From an operational perspective, 2019 was really a story of price deterioration versus utilization. Our operational teams were able to once again proved their ability to grow market share in a declining activity environment with nines percentage of U.S. stages completed increasing from approximately 16% in 2018 to approximately 17%.
In 2019, our wireline group increased total stages completed by approximately 11% year over year. Despite no Canadian contribution in Q4, our cementing group increased market share in the Permian basin by approximately 400 basis points over year end 2018, with only one additional unit coming in throughout the year the told.
The number of see many jobs completed increased by approximately 9% year over year, while simultaneously maintaining a flat average revenue per job illustrating we were not buying market share.
I'm also extremely proud of our employees the ended the year with the Lois and best T., Our IR safety score in the company's history at 0.77.
Finally, we were able to generate strong cash generation for full year 2019, our cash flow from operations was 101.3 million an increase of approximately 13% over 2018.
Our cash flow from operations per share for 2019 was $3.46, which fell below nines original target of four to $5 per share as back half activity, especially in the gassy region was worse than we originally anticipated.
Our capital budget came in at 62.1 million falling within managements original guidance and it's allowed us to properly capitalize our cementing and wireline service line for the near and medium term.
Company revenue for the year was 832.9 million net loss was 217.8 million an adjusted EBITDA was 113 million.
Basic EPS was seven negative $7.43, an adjusted net income for the year. It was 9.4 million or 32 cents per share.
Hi, Steve for the year was 6%, which fell slightly below management management's original guidance a 7%.
Now turning to Q4 this quarter revenue outperform managements original guidance and adjusted EBITDA fell within the range of management's original guidance. Additionally, we continued strong working capital management ending the year with a cash balance of 93 million.
How many revenue for the quarter was 163.4 million net loss was 220.5 million, which includes intangible assets PPD and goodwill impairment of 106.3 million associated with the coiled tubing service line, an intangible asset impairment of 95 million associated with the completion tools service line.
Adjusted EBITDA was 11.6 million basic earnings per share was negative $7.51. Adjusted net loss for the quarter was negative 16.8 million or negative 57 cents per share ROI fee for the fourth quarter was negative 3%.
As anticipated, we saw drilling and completion activity taper off into Q4 due to holidays weather and budget exhaustion revenue declines were also magnified as we had no contribution from production solutions and Canadian wireline, which contributed approximately 23 million of revenue in Q3.
Market share remains somewhat stable across service lines. So we did see full quarter realizations of Q3 pricing concessions, which led to the majority of margin compression from Q3 to Q4.
Overall with the exception a very challenged regions like the northeast and within the cementing service line incremental pricing pressure has mostly subsided.
Cementing had been our most resilient service line throughout 2019, but has recently come under pricing pressure as Capex budgets continue to decrease and their rig count continues to fall. It does however continue to be one of our best performing service lines.
Gassy basins remain very challenged especially in the north east where activity is down over 50%. During Q1 of 2019, we estimated active frac crews at 55 to 60, which we now estimate could be down to below 25 to 30.
Our team is focused on gaining profitable market share and has rightsize organizational structure to meet current demand outlook for 2020.
As a reminder, in the northeast we only have wireline income completion tool exposure, both capital light businesses in which we are still able to generate returns, even a price and activity declining environment.
Cementing remained steady with activity down approximately 8% quarter over quarter, despite and U.S., new U.S. wells drilled decreasing by approximately 13% quarter over quarter U.S. wireline market share was stable throughout Q4 with more significant activity in price declines in the northeast then the Permian.
Coiled tubing has been the hardest hit service line from both of you utilization and pricing perspective. This is due to an oversupply of large diameter units coming into the market coupled with a decrease in activity across regions, especially in the mid con in Haynesville, where we operate two of our three coiled tubing facilities.
From the end of 2017 to year end 2019, we estimate a total of approximately 80 to 90, new large diameter units have entered the market with approximately 250 estimated in the market as of yearend 2019.
With a large capital commitments associated with these units many competitors are under pressure to put units to work, which often comes as lowering pricing as we mentioned on our last call because close using as a more highly capital intensive business, we're watching pricing closely and we'll stock units. If warranted. We have also stated that this is not as service line where we.
We will be allocating growth capital due to the current market, but more importantly, because of our strong belief in the Dissolvable thesis. Accordingly, we completed the sale of two of our small diameter units in Q4 for approximately $6 million in cash.
I would now like to turn the call over to Clinton to walk through segment and other detailed financial information for the year and quarter.
Thank you Jim.
Completion solutions segment fourth quarter 2019 revenue total current 63.4 miles with adjusted gross profit of 23.4 million.
During the fourth quarter, we completed 1026 see many jobs a decrease of approximately 8% versus third quarter.
The average blended revenue per job increased by approximately 2%.
She many revenue for the quarter was 52.1 million a decrease of approximately 7%.
During the quarter, we received five incremental seeing many units none of which made any revenue contribution. During 2019. The majority of these units were or will be deployed in the middle to end of Q1, as we finish filled and maintenance test we hope to receive the remaining three units associated with 2019 Capex.
At the end of Q2 2020.
During the fourth quarter, we completed 9495 wireless stages, a decrease of approximately 19%.
The average blended revenue per stage increased approximately 4%.
The average stage stage price in wireline did not increase with the decline in northeast activity, a large portion of our stages completed or in the Permian, which has a higher average stage price in the northeast inflating the average price per quarter over quarter.
Wireline revenue for the quarter was 49.4 million a decrease of approximately 17%.
The decrease in wireline revenue was largely driven by the closing of our wireline operations in Canada, which may know contribution in Q4 versus approximately 6.9 million of contribution in Q3.
We did not add any growth capital wireline units during the quarter.
For completion tools, we completed 16953 stages, a decrease of approximately 17%.
Completion tool revenue was 36 million and decreased by approximately 10%.
During the fourth quarter or coal tubing day's work decreased by approximately 13% with the average blended day rate decrease in by approximately 4%.
Coal tubing utilization during the quarter was 46%.
Coal tubing revenue for the quarter was 25.9 million a decrease of approximately 17%.
During Q4, we sold two small diameter coil units, bringing our total fleet count to 14 12 of which are large diameter.
During the fourth quarter. The company reported net loss of 220.5 million or negative $7.51 per basic share, which includes intangible asset any goodwill impairments of 106.3 million associated with the coal tubing service line and intangible asset impairment of 95 million associated with.
Completion tools service line.
We have spoken at length around the deterioration on the coal tubing market in Q3 in Q4 with a significant number of new units coming to market, coupled with declining U.S. activity.
Additionally, the outlook for coal tubing has diminished with the use of Dissolvable plug technology, which can eliminate or significantly reduce the demand for coal tubing.
These factors together resulted in the impairments for the call to be server tubing service line.
With his nine has taken the approach of having one brand of one culture, where rather than operating under legacy company names.
This enables cross selling more efficient allocation of resources incurred standardization and creates a unified identity based on the same fundamental principle across service lines. During 2019, we completed the transition of both Red zone, and Magnum and their associated trade names over to the nine brands, resulting in a trademark impairments during.
Q4.
Net loss for the full year 2019 totaled 217.8 million or negative $7, a 43 cents per share and adjusted net income for the full year was 9.4 million or 32 cents per adjusted share.
The company reported selling general and administrative expenses of 20.3 million compared to 19.2 million for the third quarter depreciation and amortization expense in the fourth quarter was 15.4 million compared to 16.8 million in the third quarter.
The company recognize income tax benefit of approximately 2.3 million in the fourth quarter of 2019, and overall income tax benefit for the year of approximately 3.9 million resulted in an effective tax rate of 1.8% for 2019.
The fourth quarter tax benefit was primarily attributable to a change in the company's deferred taxes due the impairment associated with our coal tubing and completion tools business.
Cash tax expense for 2019 was approximately $400000.
During the fourth quarter the company reported net cash provided by operating activities a 14.5 million.
The average dsos for the fourth quarter was approximately 53.4 days compared to 57.8 days in Q3 Rds over 2019 was 53.4 days.
Total capital expenditures were 14.9 million for the fourth quarter of which approximately 18% was maintenance capex for the year ended December 31, 2019, we reported total capital expenditures of 62.1 million of which approximately 22% was maintenance capex, which was within our original capex guidance.
Approximately 4.8 million of our 2019 capital expenditures related to our cementing spreads will be delayed into 2020 and part of our 2020 Capex guidance.
As of December 31, 2019, nines cash and cash equivalents were 93 million with 99.2 million of availability under the revolving ABL credit facility, resulting on a total liquidity position of 192.2 million.
As of December 31, 2019.
Our aviall remains undrawn, what availability decreased quarter over quarter due to our reduction and accounts receivable and inventory.
I will now I'll turn it back to add to discuss the outlook for Q1 and 2020.
Thank you Frank and.
As you all have seen there have been very significant moves in the oil price over the past several days, we are closely watching us and we are going to the includes dialogue with our customers. During this difficult time for the industry. We had intended to provide estimates of activity levels and company guidance for full year 2020, however, given the rapidly evolving needs.
If the market we're not providing these at this time, but we'll do settle in due course as things stabilize and our visibility improves.
We remain very optimistic around nines commercialization of our three new plugs technologies, our new low temp offering continued to perform extremely well and we have concluded a number of successful trials in the northeast Permian Rockies mid Con and Canada with both large public customers and smaller private companies we remain extreme.
To me confident around the tool design and materials as well as our overall dissolvable thesis.
Right now we are illustrating the cost benefits to our customers, which can lower their plug and mill out cost by more than 60% and the dissolvable plugs ability to increase IR by 5% or more with the elimination of a drill out and their ability to bring production online faster.
In January one of our diversified operators and the Midcon, who started their trials only running a finger in the television well ran a full wellbore of the singer Dissolvable plug. The fingers were successfully deployed held up to 12000 PXI during the stage fracturing and even with the operator performing a clean out the operator estimate savings of approximately.
250000, or 3% of the total well costs and three to four days saved for wellbore versus the traditional drill out.
We anticipate this is a trend we will continue to see from our customers as they become comfortable with the performance of the tool and realized both cost and time savings.
Additionally, we have already run a number of successful trials during Q1 for high Tech Dissolvable plug and still anticipate this tool being commercial during Q2 2020.
The design, which is identical to the low temp plug utilizers proven materials that continued to perform well.
Our timeline of Q3 commercialization for our new smaller composite plan remains on track as well and will be vital to margin accretion as we replace our existing two offering with a lower cost option.
We want to continue to reiterate that oilfield technology does not shift overnight and we do expect to slow walk of adoption through 2020, especially within a very challenging market backdrop management is not able to pinpoint the exact timeframe for large volume adoption, we do not anticipate a significant revenue or margin increase to occur in Q1.
Our Q2, but should begin to slow the increase in the second half for 2020 and into 2021 as all screen New technologies, our commercialize trials and adopted.
Lastly, we were extremely excited to unveil the results of our cradle to grave Environmental report conducted by environmental resources management, comparing to greenhouse gas emissions of using Dissolvable plugs for his composite pipe. The results were staggering. The report found that the dissolvable plugs footprint without clean out per Wellbore was 91% lower.
Our or 67.3 metric tons of carbon equivalent, which equates to the emissions of 14 passenger cars driving for one year for one Wellbore. This study shows that dissolvable plugs reduce carbon footprint and mission intensity in a scalable way that can be applied on a per well basis.
For some contact fear is projecting approximately 610000 stages in 2020, using our assumption for the study of 70 plugs per well this equates to approximately 8700 wellbores.
Assuming dissolvable adoption across the industry, we could reduce emissions of approximately 585510 metric tons of carbon equivalent or 121800 passenger cars driving for one year.
Q1 is off to a slower start this year versus 2019.
You all had been living this dynamic market with us and our significant unknowns around the current a virus the presidential election, and global supply and demand fundamentals, which has created a very challenging backdrop.
We are forecasting within the context, we know today that is extremely volatile and changing rapidly.
For Q1, we expect total revenue between 150, and 160 million and adjusted EBITDA between 10, and 13 million, which is relatively flat to Q4.
Our 2020 capital expenditure budget ranges from 20 to 25 million a decrease of approximately 64% versus 2019 at the midpoint of the range.
The total Capex range includes approximately 4.8 million in 2019 growth capex related to the seasoning spreads it has been delayed.
With the execution of our strategic initiatives, we are positioned to significantly lower capex generate free cash flow and build cash on the balance sheet. We will now open up the call for acuity.
Thank you.
At this time will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
A confirmation tome indicate your line is in the question in queue. You May press star to we'd like to remove your question from the Q4 participants uses speaker equipment, you may be necessary to pick up your handset before pressing the star keys, one moment. Please why we pull for questions.
Our first question comes from Sean Meakim with JP Morgan. Please proceed with your question.
Hi, good morning.
Good morning.
So to start off I guess it will be best maybe we just addressed the elephant in the room.
Yeah I'm sure you said much of the weekend.
Considering the impact of Saudi shifts in strategy as many of US did if we're looking at something like $30.
Extended periods, a 12 24 months can you just talk about the framework of how you would manage the business.
Levers that are available to you to conserve cash.
Reduce that were available and just by yourself time for a better environment.
Sure. It's a great question I think I really think it's the most relevant question given today's environment on you absolutely go into survival mode. We have been here before in 2015 and 16, the very large benefit for nine is that about 60% to 65% of our costs are variable. So what that means is it.
Up to the management team to cut in time not to cut too soon before you get that revenue and EBITDA, but to cut very quickly thereafter, so clearly you're stepping back any benefit you've got to a huge amount of cash comp that can come off the table.
But we're also business that is not quite admired by a complex contracts, so take or pay commitments on its a very simplistic business in fact to cut cost. So we're obviously working hand in hand with our customers I will be shocked if you don't see a multitude of large operator and small operators cutting capital.
And so we are certainly anticipating that we will hunker down we have on you know as Glenn mentioned close to $100 million on the balance sheet and a similar figure for a our I think it's about 96 or so.
So of course, what we experienced in 15 is that those accounts receivable can pile down into cash on your balance sheet, you're obviously going up credit risks that were very aware of and in front of.
But the reality is when we run scenarios at this company at very low low levels of EBITDA, we can still be cash flow generative and again because of that receivable impact on you could actually see increased cash flows.
So I think we're in a good position to withstand this on for a very chunky period of time, our debt matures in 2023.
So you know we're prepared to do that as a team and this very theme team from the field up from supervisor level up they have been with us.
In this downturn before so they know exactly what to do and they're preparing for that right now.
Okay. Thank you for that I think that's that's very reasonable.
Yes, Matt you've been through something like this before in 2016.
As you think about.
That experience this time around the commercialization of the Dissolvable is really still the crux of the thesis here.
Can you talk about your expectations for how to manage that process and what could be a substantially lower activity environment on the one hand as customer slow down.
They may have more time are there has to look for ways to improve.
On the other hand of course, there's.
Inertia can be a powerful force and you need any need to to convert new customers to drive.
The commercial the commercialization maybe just address.
How you think about those factors in this potentially new.
Paradigm.
Sure. So I think that the couple of the fundamentals that are really important for people to understand is one it really doesn't take us either much expense on the Cogs line and or from a capital perspective on to personally feel forward completion tools is carried the lowest labor intensity of any of our service lines services and.
Other really critical important point to understand is we think about labor intensity on the Cogs line. We also think about capital intensity as it relates to the balance sheet cash flows.
So we can push this to align forward without impeding our liquidity Sean.
So that strategy and a marketing strategy, we have in place for these tools is not impeded by the current.
Challenging backdrop of activity. So what does happen. If you use the word inertia you have customers right now feverously panning out a new plans for capital spending where they're going to cut costs that deferred the attention they have on bringing on new technology adoption. However, the counter to that.
It is that it's very hard now and figure out how to take out fundamental cost and save real days, not just hours, but real days in this cycle and if all of US are going to survive. This we're going to take out whole segments in pieces of the completion process, which is exactly what the dissolvable plugs do so as we've stated even before Corona virus.
And before the Saudi Russian site here, we we were projecting very slow penetration very slow market adoption. So it wasn't something on that we were quote counting on for the survivability of the corporation. So this is just going to be some frosting that we get the drip in.
Thats going to be very accretive to the margin very very high cash flow generation. The good news for US is after meeting with many of the C suite levels of most of the operators.
In the country the desire for Dissolvable. The strong it's very strong and so folks are really beginning to think about what is the next step and what is the next piece of a of the process that we can pull out so I.
I think this is just something that we're very lucky to have in our pocket I think theres not a lot of other companies that have any binary growth opportunity in this type of market onto I consider myself very lucky to have that and then of course, if you know.
His team is just enormously talented.
So they will figure this out and they have taken massive amount of market share in the past downturn I expect they will do the same.
I appreciate that thanks, Dan.
Our next question comes from Chris Volk with Wells Fargo. Please proceed with your question.
Thanks, Good morning.
Hey, Chris How're you.
Oh hanging in there I guess.
I guess first I wonder if you can give us an update on the customer base in terms of the split between you know majors large independents and then smaller him he's just.
Some kind of slice there.
Sure on so the way I the easiest way for me to cut that for you is if you think about our revenue profile for the Corporation. You have you know about 45% a little more coming out of the Permian Basin on you have give or take about 20% coming out of the northeast when you think about the.
And all the majority of our customers there are super independent Super majors are very large public if you think about the northeast that 20% you're talking about a smaller companies and or smaller Publix and then if you think about our exposure in the Haynesville then you're talking about much smaller.
Our private so I would say a solid 45% to 50% of our revenue is coming from very large corporation, but I will also note. You know you also exxon's announcement last week I would I would be very surprised if you see many of these folks not cut activity in this environment. So I do want to be really clear about that.
Whether you're a steeper independent or not.
All right that's helpful. Thanks, and then.
I guess.
It's way too early to judge and I'm sure you haven't contact with many of your customers since this announcement, but.
If we think back to the last down cycle.
In terms of procurement pretty much the cost guys, we're putting a driver's seat.
I think was harder to introduce newer technologies are science type technologies in that environment, but you know your critical products. They also are attractive on the cost side in fact yourself, Saudi after an upsell and cross they should be better, but they're also different.
And then the SG angle frankly, it is getting a lot attention now as well that's a huge Pos plus.
Can you maybe discuss.
Whether whether you have there how much inroads you have these people and if you feel like it's the same kind of guys you're talking to or if there's a way to think about you know is going to be a tougher sell because of.
Having to change the design or change way, they're doing things that could that work in this environment or is there enough uptake on MSG and you know the cost side of equation that you could still again penetration even in such a challenging backdrop.
So those are great questions I'll talk to all of the but I do just want to point out that the most important thing for our customers absolutely is that the plug isolates the stage. It absolutely have to hold pressure can't have fluid bypass must isolate the stage. So that is that is the first order.
<unk> business and not as what Weve conquered.
We did do a very comprehensive customer road show to kick off this year and as I said that was widespread in across either C suite level are very senior level.
So we had a lot of great traction there I think a hit rate from the that road show will be very high we've really did not come away from that thinking Oh, Darren you know what this strategic thesis was off in fact, we had exactly the opposite sentiment from that so I think again, what where you'll see as I mentioned earlier the inertia.
It's just these guys must focus now on rejiggering their capital plans in their spend that is their first order of business as it should be on and so their teams will have a period of distraction.
And that will slow down the adoption, but they are absolutely absolutely looking for lower cost tool. The green aspect of this is critically important on those folks that are on larger and focused on or who have blackrock in their stock in a significant way for instance, there definitely focused on the E.S.G.
They have to be focused on the E.S.G. side. So that was a very big catch I think people were very appreciative that we started to quantify that emissions reduction as it relates to the completions, you'll see us do more of that on so I'm very excited about this I think we could see again, a temporary pause and how fast it.
On but I'm really not questioning the fact that we think the majority of the U.S. stage count over the next couple of years will be Dissolvable plugs.
The price point is such that why would you turn away from it when you can save money on the drill out.
And the completion costs, it's hard to move DMC down and these guys need to do that it even harder to find ways to move IR. So now that we've got that value proposition all the way around it's on it's something that's very very compelling.
Okay. That's helpful. Thank you I'll turn it back.
Our next question comes from Georgia, Leary with Tudor Pickering Holt. Please proceed with your question.
Putting in Washington.
Good morning.
From a.
Velocity of dialogue with your customers perspective, and given we've seen some announcements from folks like saying and partially already this morning.
Already started to have a dialogue with your customers as of this weekend or are they going to hunker down and running through their own budgeting and planning just.
Have they reached out to you guys at all and kind of how that dialogue going or if the answer is no thats fine too, but just trying to get a sense of the velocity of dialogue with your customers.
Yeah, I think on we will be an active conversations with them. This week you know obviously most of the world figure. This out certainly by Saturday night or Sunday morning, you know when I I think some of the operator, you mentioned had already had some plans in place.
So I just suspect you see a lot more come out and I think Exxon really set the stage for that.
Okay. That's helpful and then.
Just thinking about working capital into Sean's question. Your response to John's question earlier.
Typically for most of those businesses, we see a seasonal working capital build early in the year and then that can maybe unwind depending on the trajectory revenue throughout the year is that kind of what we should expect for you guys for machine of working capital build and blow down throughout the year Q1 kind of a build and then.
Maybe some opportunity to whittle that down as we progressed through the year.
Well I think the current environment all slip this over to Clinton and just the second but I think the current environment has you know will end should reshape look at Q2 in Q3 activity.
Sometimes give rise to that build and then that subsequent unwinding.
So again I would say that this current environment reshaped a lot of thoughts on that but I'll I'll turn it over to Clinton.
Yes, I would agree with am wondering on you know just point out you know in Q4.
We had a very strong performance only cash if you remember or last call. We had talked about we had a number of onetime.
Oh payments are going to hit in Q4 roots transaction bonus. We also had a large capex and than we had our.
Interest payment and yet we still maintain some balance we ended Q3 at around 93.3 in into your at 93 million originally prior to all the market announcements lost a few days as we look through the year, yes that would have been reasonable under the norm normal circumstance for right now I think everything's on.
The two I think.
What you could see is actually working capital we source of cash than a level of activity for 2020.
Okay, Great I'll sneak one more if I can you guys.
For the lot of different customers across a lot of different geographies and.
Given your all completions all the time now and I thought your earlier.
Comment that.
You can see 70 stages per well on average was an interesting one just curious any other well design changes you're seeing on the completions side of the equation and let's just.
Strip out whats going on currently with respect to their crude oil price and geopolitical issues and.
Chris what what would the biggest change have been year over year in 2020 versus 2018 from a completion design perspective.
Yeah, I mean, I won't hit the design necessarily because I don't think is meeting super revolutionary there, but wasn't it was really impactful for us on on our road show was on the lateral lengths and we just heard multiple customers talking about three mile laterals. So I think a lot of folks in the U.S. it kind of cap that lateral horizontal lateral lengths on 10000.
Pete and I think you'll see especially in a cost conscious environment those folks that have the acreage to support it will be pushing out which you know of course is another driver obviously of Ah Dissolvable technology. So that was like a drumbeat and every office we went into on Pulverizing the wellbore.
Hey clusters, that's been around in 2019 that continues.
So other outside of that I don't think Theres any massive game change nothing revolutionary we're seeing in completion.
From 19 to 20.
Got it thank you both for the color anyone.
As a reminder, if you'd like to ask a question. Please press star one on the telephone keypad one moment, please while we poll for questions.
Our next question comes from JB Lowe with Citi. Please proceed with your question.
Hey, good morning, and wanting Quinn.
Good morning.
So.
Given that [laughter] likely that North America in general is going to take.
The brunt of of the production has.
Over the next couple of months I'm. Just wondering if you guys are that you have some small deal with.
I mean or other international players to kind of expand your products internationally.
Yeah.
Could talk about the strategy there to see if you could expand that even further.
Yes, I really can't give you any more details on that specifically I would say that we're very focused on increasing our footprint in international markets and increasing on our our focus of effort under the business development side, there and we're really happy to have some great partners that we were.
Work with and that's really all say there.
Okay.
My question was.
Just for Clinton.
I was wondering about what your plans are on a kind of balance sheet strategy.
Debt repurchases could be in the workings just given the price action that we've seen and how you're kind of balancing cash the balance sheet versus opportunities like that.
Yes, I would I think we've been pretty consistent with our view utilized as and I've been asked that question I think you'll continue to see us take a very conservative approach and.
Maintain that cash on the balance sheet.
Especially as we're managing through these uncertain markets. So you'll continue to see I was just building cash on the balance sheet.
Okay last one for me is just you guys you mentioned credit risk earlier in the call I'm. Just wondering if you could expand a little bit on strategies to to mitigate that as much as possible.
Yeah, and then of course on your you're looking at their balance sheets, there availability, where there revolvers are how drawn our day I, we're watching all that really closely for our customers and then we've got policies internal policies about how much credit week.
And et cetera, So thats something that I think you know most of my peers are probably watching very closely as it relates to empty community.
Alright, Thanks, guys. Good luck.
Thank you thanks.
Our next question comes from more cars, they eat without a corp. capital. Please proceed with your question.
Thanks for taking my question Hello, and pension.
Oh good morning. Good morning, Good morning, <unk> My question kind of relates to the ABL credit facility is there any covenants that we should be aware off and then is that a volume or.
Uh huh.
Yes, so the A.B. all the only covenant way I was we have a fixed charge ratio, but only kicks in when the availability is either less than the greater of 18.75 million or 12.5% loan value and the term of that it's six months prior to the churn.
Tony.
The bonds.
Okay.
And.
And.
In terms of pricing for doses.
What's your expectations from pricing.
For the remainder of the year as activity may take another step down.
Yeah, I think you could kind of expected downward trend in both activity and pricing, so could anticipate and incremental margin compression on baseline services.
Okay, and then in terms of the three mile laterals that you mentioned.
The completion technology button on the bumping side another's everything is is the I do continue to support a three month laterals on a consistent basis.
Without a lot of.
MPG.
I think there's there's certainly and you can add some of my pressure pumping peers, but I think there's certainly companies that are are very adept at handling those types of laterals not all but we feel confident that we have the completion capability to do that we've done laterals like that.
In the past two car our longest horizontal lateral was just shy of 20000 feet.
So you know it it definitely can be done and it can be done with relatively no nonproductive time is and properly and you have the right service providers at the well site.
Yeah.
Just final question I've mentioned, just housekeeping what do you expect the every number off yes, cementing production available in the first quarter second quarter, and maybe code quotas.
Well you don't quite have we talked about is that we will be completing the field and maintenance test on the five new units at the throughout Q1. So we don't expect those to be available until Q2 and then the additional three will be delivered in Q2 that I wouldn't expect those until Q3.
Okay, and so once we have all those will be at 40.
Okay great.
Thank you very much that's on Uh huh.
Thanks Waqar.
At this time I'd like to turn the call back over to and Fox for closing comments.
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