Q1 2020 Earnings Call
Speaking presentations that will be question answer session toss. The question. During his section you will need to press star one than the telephone keypad.
This conference is being recorded today and went to the fixed stuff may 2020.
The conference over to your Speaker today, David Jones General Counsel. Please go ahead.
Thank you everyone welcome to aspects first quarter earnings call today's call is being recorded.
It's David Jones time aspects General Counsel, Chief compliance officer.
Yesterday, we reported financial results for the quarter.
It is released in this presentation are posted on the company's website at <unk> Dot com.
The available on aside for at least six months.
During this call will be making forward looking statements, which are predictions projections and other statements about future attacks.
These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
These statements involve a number of risks uncertainties assumptions include any effects to cope with 19 pandemic such as its duration. Its long term economic impact measures taken about governmental authorities to address it and the matter, which depend Ginnie Mae exacerbate other risk and uncertainties that could cause actual results to differ materially from there.
I was paid results implied by forward looking statements.
These risks and uncertainty or are detailed in aspects 10-K tinctures another filings with the FCC.
Please see the Fccs website or Innospec side for these other documents.
And our discussion today, we've also included non-GAAP financial measures.
A reconciliation to the most directly comparable GAAP financial measures is contained in our earnings release, a copy of which is available on the innospec sites.
There are included as additional clarifying items to eight investors and further understanding the company's first quarter performance. In addition to the impact these items and events have on the financial results.
Also with US today from aspect to our Patrick Williams, President and Chief Executive Officer, and Dean Clemens Executive Vice President and Chief Financial Officer, and with that turned over to you Patrick.
Thank you, David and welcome everyone to Innospecs first quarter.
2020 conference call, we're very pleased our first quarter performance.
I'd like to start by reviewing the current situation.
I'm Sad to report the passing of Yocum roster, who is a non executive director of Innospec for 12 years.
You welcome to come to Cobot 19 on April 26.
He was a valued call it a great friend and he will be greatly missed.
When we consider the twin issues of the Kobin 19 pandemic.
And the collapse of crude oil basin our industries.
Acutely conscious that you need to hear how we're responding to these challenges and how we see the near term prospects.
Our first priority will always be the safety and health of our employees their families and our customers.
My thoughts are with those employees, who are sick and with the families who are helping them get through these difficult times.
As well as align ourselves with our national and local government advice.
We have enhanced our hygiene precautions and ensure that our teams are able to operate remotely and safely.
We're conscious of our role in supporting our neighboring communities and we have already donated a large quantity of respiratory protection equipment and operate our laboratory facilities as a resource to the health authorities.
In terms of manufacturing.
We are covered by the definition of essential industry.
So we have continued to manufacture at all our sites.
In doing so we've employed social distancing, while ensuring that our employees are protected by appropriate personal protective equipment.
I'd like to take this chance to publicly acknowledge my appreciation to the great people of our company, who are keeping us going through these difficult times.
As a result of these actions we are continuing to meet our customers' requirements and all our business units globally.
In the near term three strategic businesses face different challenges and opportunities.
Products for the personal care in healthcare industries are seen sustained and even increased demand.
This has been moderate a little with some temporary limitations to customer facilities.
Fuel specialties is driven by fuel demand.
This will take a short term hit but should bounce back as miles on the road, especially for freight and trucks returned to normal.
The outlook for oilfield services is very dependent on crude oil and natural gas prices.
We have already responded to the downturn it customer activity and unfortunately, we've had to make redundancies to right size the current cost base.
The survival as many companies through this unprecedent period.
Depending on their financial strength.
Therefore, it is important to spend a little time, reviewing our first quarter performance and the financial outlook for the rest of the year.
We're very pleased with our performance in the first quarter 2020.
Had not been for the carbon 19 pandemic and the pressures on crude and natural gas there is no question.
Spec was on pace for an outstanding year.
We delivered a 13% increase in operating income and a 14% increase and adjusted EPS in the first quarter.
Just as importantly, we ended the quarter with a very strong balance sheet.
We entered these unknown times with a net cash position.
And with significant headroom on our existing credit facilities.
We have held discussions with our banking group and they remain very supportive of our strategy and of the management team.
The financial strength of our balance sheet gives us the confidence to continue with our dividend.
And I'm pleased that the board has approved holding our semi annual payment at 52 cents per share, which is the same level as a second half 2019.
Performance chemicals had a very good quarter overall.
Volumes were up significantly even after line for headwind of five points from customer in sourcing in Q2 last year.
Revenues were down as we pass through lower raw material cost.
Volume growth to focus on gross margins and cost control, we delivered a 16% increase and operating income.
Fuel specialties performed against a strong compared to quarter, especially with the headwinds of a mild winter.
Resis has recovered from the supplier disruption of last summer and has a more sustainable foundation for the future.
Against data charities Jared deteriorating market.
Oil field services performed very well with both revenues and operating income down only marginally on the same period in 2019.
We also had a modest but encouraging results by developing new business and drag reducing agents and completion and production business and the middle East.
Overall, we have continued to demonstrate the value of a balanced portfolio and the benefit a prudent deployment of capital.
Now I will turn the call over to him Clemmensen Who'll review, our financial results in more detail than I will return with some concluding comments.
After that we will take your questions.
Yes.
Thanks, Patrick.
Turning to slide 18, the presentation. The company's total revenues for the first quarter with 372.3 million a 4% decrease in 388.3 million a year ago.
The overall gross margin increased slightly from last years to 30.6% driven by improved margins in performance chemicals.
EBITDA for the quarter was 56.7 million.
Since increase compared to last year.
Our GAAP earnings per share $1.64 cents, including special items that thats defensive which decreased our first quarter ratings by eight cents per share.
A year ago reported GAAP earnings per share of $1.17 cents, which included negative impact from specialized sons of eight cents bisha.
Excluding special items in both years, our adjusted EPS for the quarter.
$1.42 cents, a 14% to increase from $1.25 cents year ago.
Moving on to slide nine revenues in fuel specialties for the first quarter were 147 million, 6% decrease from the 156 million reports for the years ago.
Volumes were down by 5% against a strong can parts this quarter, which together with an adverse currency impacts to 2% was partially offset by positive price mix of one cents.
Specialties gross margin for the quarter.
Q4, 0.8 cents down slightly from 35% to 7% in the same quarter last year within our expected range.
Operating income for the segment was 32.1 billion down just 2% from 32.9 billion in the first quarter 2019.
Turning to slide 10 revenues in performance chemicals for the first quarter were 113.1 million compared to $118.1 million last year, a decrease of four cents.
Volumes were up by 7% or there was not versus price mix effects of 90% driven by the pass through of lower raw material prices on a negative currency impact of 2%.
Gross margins of 24.4%.
Nine percentage points over the first quarter of 2019.
Operating income for the quarter was 15.6 million over 16% from a 13.5 in the components this quarter.
Maybe going to slide 11 revenues in oilfield services were 112.2 million a decrease of just 2% compared to 114.2 million last year.
Reduce customer activity in completions as possibly partially offset by increases in revenue from production chemicals truck, reducing agents, who are new business in Saudi Arabia.
Gross margins of 32.3 cents were down slightly from last year.
Cost is 33%.
Operating income of 7.2 million was also down 8% on the 7.8 million for the same period last year.
Moving on to slide 12.
We expected that would know sales not say not just in the for this quarter.
As a result of this this is submitted an operating loss of 2 million in pets or an operating loss of 2.8 billion a year ago.
While I won't have any customer continues to use our photos of no further old is in place.
We will continue to update you on future calls.
So just licensing corporate cost for the quarter, which locally.
Pets 15.2 billion, a year ago, driven mainly by reduction in accruals share based compensation.
The effective tax rate for the quarter, Switzerland, <unk>, one per cent compared to 26% last year.
Moving to slide 14, net cash provided by operating on to this is in the quarter was 2.4 billion compared to 13.2 billion a year ago.
Capital expenditures 7.8 million for the quarter.
As at March 31st and as they have 68.1 billion in cash and cash equivalence and socal debt, So 59.9 million, resulting in net cash position of 2 million.
In addition to the net cash position. We also have 190 million of withdrawn headroom on our revolving credit facilities.
Access to a third 125 million accordingly, so let's see if needed.
The results and it's because the high level of liquidity and is well placed demise through the course turbulence in the economy.
Now lets me bucket was punctured some final colors.
Thanks Ian.
Our first quarter results were extremely good and we ended the second quarter and a financially strong position.
However, the combination of cobot 19, pandemic and the collapse in crude oil and natural gas prices.
Provided challenge for our company.
I'd like to preface my next set of comments with the caveat.
With the level of uncertainty, we have any comments or forecast on the future are very speculative.
And are subject to the rapidly changing global environment.
They are the best view, we have right now.
As our businesses faced different challenges, let's address each one separately.
Performance chemicals may see some limited impact in the second quarter due to delayed consumer demand and the personal care sector. However.
We expect this to be offset by higher demand for homecare and disinfecting products.
I would expect the overall market to recover and we should see increased growth with the enhanced consumer focus on cleanliness hygiene and syndication.
Fuel specialties prospects will be largely defined by demand for fuel, which is particularly important in freight and trucking sector.
It is clear there will be a substantial downturn of fuel demand the second quarter as some parts of our industry are closed down.
As the economy recovers, we would expect fuel demand to return to normal levels.
The oil and gas industry is cotton perfect storm.
Global markets are oversupplied.
And the Cobot 19 pandemic has caused the biggest demand erosion we've ever seen.
The second quarter, we feel would be most challenging period in 2020.
Within a very substantial decline customer activity.
This market may take some time to recover and it's also the most difficult market to predict.
As I said earlier, we have already made the first phase and changes to our cost base.
And we prepare ourselves for further actions if required.
When markets recover we expect and return to sustainable growth.
And there may be fewer competitors.
Only those with the best technologies and strong balance sheets will survive.
Our strong liquidity allows us to maintain our semiannual dividend at the same level as a second half of 2019, which is 52 cents per share.
Depending on market conditions, we intend to increase our dividend for the full year.
We believe our strategy is aligned to long term growth and we've adapted to the current conditions.
In addition, we are the financial strength to see us back to these challenges to emerge stronger and well positioned for organic and acquisitive growth.
Now I will turn the call over to the operator, any and I will take your questions.
Thank you, ladies and gentlemen, if you wish to US. The question you need to press Star one on your telephone and wait for name to be announced if you wish to cancel that request. Please press the heskey. So once again at star and one if you wish to asked a question today.
Your first question today comes from the line of Sean Tundra Contango CTG Securities. Please ask your question.
Good morning, gentlemen, nice quarter and my condolences.
Lots of your director sorry to hear that.
Hi, John.
Maybe to start.
Yeah, and could you give a little bit more color on the decline in opex from last quarter, how much was active cost cutting.
This comp accruals and then kind of the impact of on the stock price on non competition as well.
Yes, George on the national and pop from viruses pretty minimal.
First quarter.
So a little bit of impacts in fuel specialties fuel specialties business and marine.
So middle of the course of shipping in China.
There's a little bit holdup.
Reits was the ended the quarter, we started seeing in miles on the road, which impacted our trucking business slightly but again.
In the fuel specialties.
Forms chemicals.
On the site.
For the whole with the courts in flight thrown virus.
Perhaps just a little bit of production was impacted from short period ample evidence buckle up and running now.
And our oilfield business that was mainly down to the parts of crude.
To do is that well, especially as the demand side.
The.
Groups on fuel filler side.
In terms of what.
The big move is incentives and share based compensation for the press release less noise.
Highlights it seems in some sense. So yes, it was about 5 million.
Credit in the quarter, which is equipment.
Two cents per share, which the quarter benefited from.
Cash based.
And chat Bryce.
Got it okay. Thank you and then just as you look forward.
You mentioned.
Reductions and causes, particularly in oil field, how much you're expecting to save in terms of.
Our another expenses on a year over year basis.
Ill take this up and I'll I'll address that after is done.
Sure. So obviously is a good deal with with a lag between the decisions that with folks and how to make on the potential impact coming through so we've made decisions, which will broadly say is probably about $4 million to $5 million quarter and operating expenses in oilfield right now.
We will probably makes the decisions.
Enroll those three so I think you'll probably see somebody gets stock Q3, you probably start to see us over five 6 million dollar saving operational expenses per quarter without going through.
Got it even those funds sorry topic at that.
Yes, it's interesting that.
We've seen this before in 2009, we've seen in 2015 16 so.
There is a pre prep that has been done in the we've gone through this process before.
So we have lined up additional cutbacks if need be but what you don't want to do John is decimate the business. So when it does come back you are scrambling to take care of your customers. So we had to be very prudent.
On our cutbacks and our cost base to make sure that we don't fall.
On our face down the road.
Understood and I know, it's kind of hard to tell at this point, but what are your expectation for profitability for the segment for the year comment and again, what assumptions are you, making that oil price cuts to get to that number is you have an internal view.
Yes, if you look at we're talking specific to oilfield.
Crude probably needs to be in that mid Thirtys range.
Low to mid Thirtys to see activity start picking back up.
There's a lot of hedges in the market in some areas. So people are going to be okay.
I think for us it's a function of.
Taking some of the cyclicality out of the market, which we've done.
And we just have continue to watch it.
Again, it's supply demand issue and as soon as we start seeing miles on the road improve you'll start seeing inventories come back down and you will see prices start going back up.
So it's just it's more of a wait and see than anything else.
Okay got it you mentioned a little bit of I guess.
Client or production headwinds in the performance chemicals segment can you quantify kind.
Kind of qualify what going on there.
Yes, some of our customers had some of their facility shutdown due to the cobot 19 pandemic.
And so.
When you can't get into a facility deliver product you can get manufacture products. So that was part part of the issue most of those have been resolved.
And so most of our our customers are back up and running.
And so we're seeing a pickup in volumes again as we anticipated.
Got it Okay, and then finally, Patrick just on the commentary the dividend.
Pretty pretty strong commentary, especially as if you are coming to increasing in later this year.
How committed are you to that given the headwinds are facing.
The castle there to support it.
And what's driving your confidence that really.
Yes, I mean, we haven't we have a great balance sheet and we've always been very prudent on how we spend our capital not only from an acquisition standpoint, but from on shareholder value in returning.
Money back to our shareholders.
And so if you look at the outlook in Q2 Q3 in Q4, we still feel very strong that will be in at a nice position to go ahead and increase our dividend long term, we feel the dividend is very valuable we think it's a very prudent.
Issuance of our cash.
We still have nice credit facilities to tap into doing them to do an acquisition.
If we so be it and if the market.
Multiples come down any valuations come down into a territory, we fill is fit for our strategy.
So I think if you look at our overall balance sheet, we're in a great shape to continue the dividend.
Probably increase the denim, but will be the reason why we didn't do it and the in in this quarter is because we want to make sure that the markets are coming back as we anticipated.
We are starting to see that which is a good sign.
Okay, great. Thank you.
Thank you. Your next question today comes on line of Davidson.
C.L. King please ask your question.
Yes, hi, good morning.
Yes, I have several questions.
I guess.
Maybe I'll just start with the performance chemicals.
So if if I'm reading this ray the operating income was a record in that the group.
And I'm wondering if you could point too.
Where the incremental earnings came from in other words wasn't the sale of higher margin products.
Or was the continued efficiencies that you were able to.
Ring out of that business and then secondarily.
[music].
Little bit counter maybe to the trends in your other two segments.
I mean, it it would seem.
That performance chemicals would.
The well positioned to benefit from.
The increase demand for disinfection and sanitation products.
I believe that your company is kind of more position that.
The higher value and that the business there, but maybe if you could talk about.
The secular growth opportunities you see in the current.
Post pandemic environment for maybe a structural.
Pick up.
Demand in performance chemicals. Thanks.
Okay Theres, let me, let me six month and I'm sure Patrick will come over there with some additional comments. So this will you correct. So Q1.
It was a record performance in terms of operating income for the business I was delighted with the performance of the guys have produced.
No kudos to them and pretty difficult times.
For the driven is our continued focus on new product introduction.
Changing the sales mix towards higher and higher value.
Prototypes, some initiatives to reduce costs in the operational.
Ended the business and all these things all these incremental things that we do a really starting to show through them. So that's where you're getting the devote additional volumes coming through that's why you got an additional gross margin expansion and that's why we're starting to see.
The benefits and the the assets at the guys that are really talking suites, and Youll freights and income line.
James is.
Actual products is really across the line folks in our personal care and home care products.
You called it pretty small cell not David it sounds as though the medium and so long that said, we do expect to the will to change is habits.
We do place was the stabilization in the hands on it summarizes the disinfectants.
Cleanliness on a lot while products play into those in slows arenas and we do see it obviously is going to be a changing consumer services, whether there'll be more focused on those items. So we've got a very very good opportunity coming down the track.
I would just to go our existing coal business also it's a lot on some more lines in the Sunday station area in the disinfectant area and really grow off business in many different wise.
Yes, I think you made some good comments there David night, what are the things that we talked about when we expanded this business and.
A while back in May the acquisition over in Europe.
Is that we will focus on margins and conversions of margins into Op, Inc.
And product mix, and we and we've done that you've seen that consistently over the quarters.
And it's really starting to show and credit to the guide in the business for for doing what they've done.
I think he is right theres, a lot of new secular trends and secular growth going on in this market primarily pushed by the cobot 19.
And as the as you alluded to the anti bacterial the anti viral.
Theres multiple things that we look at that fit right to our strategy long term and right into our technology growth sector and so it could expand its its its pause into many different things when you start looking at shampoos and body gels and lotions and things of that nature. So there's a lot of thing.
Is that you're going to see in this market, where some will be.
What we would call a mid tier and some will be specialty and I think there will be a good balance moving forward and again, it's all consumer trends.
That's what you have to look at social behaviors consumer trends and Thats really what we're going to be looking at moving forward.
That's great color. Thanks.
Patrick can you going to stick with with you here and.
Hi.
I know that your historical background is in the oil field.
Services area and.
I have a number of questions, but that I'd like you to comment on but just in general.
You know I mean, yes oil prices go up and down and as always impressed with your company's ability to gain significant.
Share over the past few years.
The bundled product and service offering that was very appealing to fully.
To customers.
Just a couple of things, but do you think that there might be share opportunities for you.
As oil prices recover and production resumes in other words.
With production down it gives the remaining operators a chance to rethink how they want to operate one.
Conditions are more favorable.
Ed will that that bundle.
Product and service offering proving from mentally more attractive to that.
Coming out and then maybe ancillary to that from an M&A perspective.
I know you said that you think you have everything you need.
When you read your bouts of M&A activity roughly.
Five or seven years ago, seven or eight years ago.
But in this environment.
Yes, it's an opportunity to add I don't know a single service or an additional incremental product or two that you think would.
No improve your competitiveness by with greater breadth or with a greater.
Portfolio to to bring bring to bear on the market.
One once it does resumed back more normal operation.
Thank you sure sure David.
If you look at the oilfield sector.
There is a lot of balance sheets that are very stretched specialized services side.
And you could even locked in midstream as well.
Our focus right now, we'll obviously be on technology, and making sure we're prepared for when that growth comes back.
The benefit of our balance sheet is it gives us the ability to wait these things out.
We can do things a lot of companies can't at this point in time.
A lot of but equity a lot of small companies have jumped into this business when it came back out for 2016.
And again, they have a lot of stretch balance sheets out there a lot of majors do on unless the majors are going through layoffs like we are.
That's what you have to do to rightsize the business.
But I think our focus on technology really put us on the forefront and Thats why we were able to grow a lot quicker than most of our competitors in this marketplace and I think that will also help help us grow as we come out of this sometime in the near future.
So yes, it's a lot of really watching where we can be advantageous in the market.
I think there will definitely be some customer growth coming out of this.
And again, our focus needs to be technology, and customers and Thats really what we're doing right now and rightsizing the business, but not decimated the business. So that's the focus moving forward for oilfield specialties I think if you look at if you look at acquisitive growth.
Most of what we've done as we is what we did in the past a strategically placed our business the lowest lift cost basins.
Additionally, that we said and we've said on numerous calls that we want to take as much cyclicality out of the oilfield business that you can therefore, we got into DRA, which is more midstream and we think we have the best DRA product in the market.
I think secondly, we got into.
The middle East, which we had two.
So we've set up a base in the middle East and we're now currently some product in the middle East.
And as well as in South America, and all the America. So we've gone outside the shale play in the us to really expand our product to rise in customer base.
So if you look at acquisitions, a lot of the acquisitions right now.
You know I, probably wouldn't even pay asset value for.
We are focused on technology. If there is a technology in this market sector like water, which could crossover into fuels in other parts of our business, we would look at it.
Work.
Waters, one of the one things that we don't have in our portfolio yet.
True water based business.
So thats something that we would look at but we are developing technology internally as well.
If you look at for the majority of what we do in oilfield were covered it's more about funding some new technology, if we don't already havent in our portfolio or are working on it.
We're looking at some form of organic growth and controlling our own destiny in certain markets. So thats really what we're looking at doing on the M&A side oilfield, if we do anything at all.
That's great color Patrick. Thank you one last question if you don't mind.
And this would be one area, where maybe you were a little fair on comment that I was anticipating.
I would be.
Session of the year new product.
Effort.
And you did touch on the DRA, but I was also interested.
With.
Fuel at the low sulfur marine fuel additive and the Gd engines and on the low sulfur fuel I was wondering I guess my understanding was that there had to be kind of a feedback loop.
Between the operators and.
You will additive makers, such as yourselves and.
I am wondering even would reduce.
Travels.
Maybe I am wondering if.
With slower operating demand or slower operating conditions has that.
Allow yourselves and your counterpart to kind of.
Analyze the results to date and maybe come up with.
Fuel additive solutions that kind of addressed the needs and.
Certainly not over the next quarter, but do you think you can accelerate the development and commercialization of those additive formulations that Youve thing.
The IMO 2020 affected vessel will.
We'll need and then secondarily any any comment on your penetration of the GDP engine market. Thank you.
Sure.
If you'll look at the IMO 2020, and the advent of the low sulfur fuel.
It takes time for some of these vessels engines to have problems to build up articulate to have problems the tanks et cetera.
And we've said that that this is we know there's going to be a problem.
It's a function of do you treated at the refinery do you trade at the terminal or do you trade on the vessel or is it all three.
And until you start seeing major problems in the field with these fuels or with operations.
People, obviously are going to pay for feel as if they don't think they need to until there's a problem.
We're now starting to see that and unfortunately with the cobot 19.
Issues on hand, it slowed down quite a bit on vessel frame.
And so for US once you see that picking back up I think you'll start seeing the IMO 2020 products.
Going back into play we are selling them.
We were expecting to sell a lot more until the pandemic hit I think were properly position with great technology.
We are starting to see the problems in there and they are out in the open public domain.
So you will see that pickup David overtime, and we feel like were properly positioned to take advantage that market in its and its a highly functional highly technology technological product that is typically a fair margin for our business and so we're looking forward to getting back to get into some back.
Form of an normality. So we can see the increase in sales in that product line.
On CDIY, it's the same I mean, you're seeing most engines coming out in our Judy their gasoline direct injection or no you don't see any pf by engines out there.
But the old fleet is pf by the new fleet as Judy.
And again, we have a great product that is patented.
That is really waiting for the market to to stand up and mature and that's just going to take time. These are both the I might be the IMO 2020, and the GDP are both future products that will start seeing benefits when we start seeing miles on the road and vessel activity.
And so I think it's probably a.
Third fourth and first quarter next year, where you'll start seeing the benefit of those sales.
Alright. Thank you very much that was at great color again I appreciate it.
Thanks.
Thank you. Your next question today comes from the line of Chris Shaw Moness Crespi Hardt. Please ask your question.
Hey, good morning, everyone, how you down.
Hi, Chris.
I guess is pretty much a question for Patrick I know you know your experience and you've been pretty.
Good good fortune teller on the how the oilfield business looks in general So I wanted.
How is this downturn do you think going to be different than in 2015 16, both for the industry as a whole I guess, maybe more specifically for your business I mean, I know, there's the changes you've mentioned the or a middle east.
In the I guess, specifically for in us back to the I guess the profit bottom.
War much higher than it was in the path.
Yes, I mean did two very different downturns.
2016 was recessionary driven.
But you still had miles on the road you still had demand.
Are you still at planes flying cars driving vessels moving.
This is a downturn in I hate to use the cliche word of unprecedented.
This is a downturn that nobody's ever lift through.
And so it's very difficult to say you know what the timing is on it how long it's going to take to get through it and what the overall ramifications are and again this bodes well for companies and we stated this in our in our script for companies, who have great balance sheets and this goes for all of our businesses.
And I.
I think coming out of this.
We're all looking that when do when do some of the governments and local authorities and local agencies start opening up and we're starting to see that across the globe well, you're starting to see demand come back now that demand is just not only we're not talking about just fuel demand in oil demand.
We're talking about demand Lex specialty shampoos that go into hair salons things of that nature, which we've never seen the likes of in 16 in comparison to what it's like in 2020.
So this is really.
It's just difficult waters to chart on because we've never seen before.
But I think that were sold well balanced that we will get through this is just going to be at what timing.
At what quarter when did things get back to normalcy and if they don't get back to normal see for instance, consumer trends or consumer demands or social behaviors and we have to make sure as a company, we're adopting and adapting to those social behaviors in consumer trends and Thats, a constant going on not only with our executive team, but with our.
Our sales team with our technical team, it's it's a constant revolving door right now as to what's going to happen future I think we're on top of it I think we're well positioned.
And again I wish we all had the crystal ball and I can predict what's going to happen I can't.
Thanks, specifically for your customers and oilfield I mean is there.
Anything different this time, we think build or will be anything different in their behavior or the like you simply said before once we get back up to $35 per barrel thankful to start right back up.
We'll see things will be somewhat normal.
Yes, it's interesting.
When you shut in wells, you still have to traded for bio instability and things of that nature. So you don't mess up the well formation.
I think some wells we'll come back.
And have some issues I think people are going to be reluctant to come back real quick, especially to go and drill in frac at $35 a barrel.
Some companies are hedged appropriately.
And.
They are going to be okay through this process.
I think overall.
It's it's it all depends on where you are what basin, what's your cost consist of.
To see if agency, how it's going to look when crude goes to 35, I think what you'll see a 35 as people who have shut production.
At least come back on.
I think what you'll see in companies that were hedged through this process.
We'll start drilling and completing again wells at 35, some won't just come back I mean, the there is there's no possible way.
Until it need to go through bankruptcy or somebody bells map.
So what you're going to see in our opinion is you have a big build right now.
I think you're going to see a big drop off.
And as demand returns that drop off is going to still big decline.
So all of us and you're going to see a big spike and and volumes and a big spike in and usage, but you won't have products. There you won't have the oil sitting there like it is right now because you've obviously had OPEC cut back.
And you've got a lot of production going out not only in the U.S., but globally.
This is happening globally.
And I think so so for us to be properly positioned.
And take advantage of this is the right thing to do and you've got to do through technology, but we've got to make sure. The customer has the right technology getting the best cost base and that's what we're focusing on during these times.
Great. Thanks, Thats really helpful.
Thank you we do have one more question at the moment. This comes on line of Bill does and then of Titan capital. Please ask your question.
Thank you do have a couple of questions. The first one is relative to the octane additives business. You did mentioned Mr customer is using product.
Longer term, whether you've seen in terms of their conversion and what you think future orders could look like understanding that you said you did not see any any.
On the order book now and then secondarily.
And you.
Look at I think it was specifically year performance chemicals business that maybe you also saw this happened in fuel specialties, you said that some customers plants shut down and I guess the question as.
Is that permanently lost business or is there catch up that one.
It needs to be done because those products in fact, we're being sold.
We're inventory was being drawn down while the plants where shutdown.
Good morning, Bill good questions.
On the Oh by the way demand, we all know the last countries Algeria.
We have been speaking to them on a constant basis.
They still are using excess inventory that's sitting in country.
We're waiting to see if they're going to order again, we don't think they are.
But again, it's a wait and see you just don't know and in these times, what they are going to do.
All the refineries Baldwin have converted over to too.
To the new fuel and so we're just going to have to wait and see.
Yes, that's probably all I can say about.
Staying at UBS.
On the performance chemicals business and others, if you look at the customers who.
Were shut down a lot of that was because the pandemic it wasn't because of lack of demand as you said.
I think you'll see some catch up in sales.
Especially some of the specialty products.
But it won't be that big spike that that you might look or anticipate.
But you'll definitely see some catch up in sales as they are starting to all come back online.
And we're in the the plants in the products that were being produced whereas that demand.
Negatively impacted debt buying the virus soon or.
Or did that demand for the country and or increase adjusted the plants were not considered essential.
The plants just that were shut down due to the fact, they had some cobot activity.
And so personnel were not able to get on the plant and their operation.
At a skeleton crew and so a lot of Thats whats happened now they're coming back on we're starting to see more activity.
With orders.
That's helpful. Thank you Patrick.
Thanks Bill.
Thank you then no further questions at this time Petrino. Please continue.
Thank you all for joining us today, and thanks to all our shareholders customers and Innospec employees for your interest and support.
If you have any further questions about as spec or matters discussed today, please give us a call.
We look forward to meeting up with you again to discuss our Q2 2020 results in August have a great deck.
That does conclude teleconference for today. Thank you.
Meeting you may now disconnect.
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