Q1 2020 Earnings Call
Greetings and welcome to Flotek industries first quarter 2020, <unk> earnings Conference call.
All participants are in listen only mode of question. So some will follow management's prepared remarks.
Once you're required I.
Since during the conference. Please press Star zero on your telephone keypad.
Mine during this conference is being recorded.
It is now my pleasure to introduce Danielle Oh, one senior Vice President Chief of staff for Flotek. Thank you you may now be good.
Thank you and good morning, everyone. We appreciate your participation joining me today are John Gibson, Chairman Chief Executive Officer in President.
Thomas President of JP, three Elizabeth Wilkinson, our Chief Financial Officer.
On today's call. We will first provide prepared remarks concerning our business results for the quarter.
Following that we will answer any questions you have.
Yesterday, we released our earnings announcement for the first quarter, which is available on our website.
Today's call is being webcast a replay will also be available on our website.
In addition, we haven't investor presentation around the acquisition announced that will supplement the earnings call.
Please note that any comments, we make on today's call regarding projections or expectations for future events are forward looking statements.
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 a current expectation.
Listeners to review our earnings release, and the risk factors discussed in our filings with the FCC.
Also please refer to our reconciliations provided in our earnings press release as management May discuss non-GAAP metrics on this call so with that I am happy to turn over to John.
Did you.
Good excuse me from Michael here. Thanks, Danielle I hope everyone is healthy unsafe and I just wanted to thank all of our employees the flow trackers for their hard work and commitment to our organization during this challenging time.
The started this year's principally on real the oil and gas industry has experienced an oversupply of oil an undersupply storage and the destination of demand by the global reaction to covert night pain go at night things forced us to transition to distance leadership, where teams and zoo Musreau most of my days and all of the employees days as well amazing.
What has emerged as less dependence on real estate and face to face engagement and a complete an older focus on our mission.
There's markets created such chaos that numerous growth opportunities, both organic and inorganic have emerged we've been disciplined embedding those opportunities where the desire to reduce our dependence on rig count reduce our dependence on U.S. on conventional market and establish an offering in the digital transformation market, particularly in.
They're chemistry in the cloud.
As part of this assessment were excited to share the news of our acquisition of JP three high growth data and analytics technology company, which diversifies, our company's business mix and helps us transform our company for the next stage of profitable growth.
All they have like the first address today's acquisition announcement.
Weve up loaded a presentation that we will be referencing this morning.
I just have met Thomas pressed the J C joined our call it share his thoughts on the deal as well next we'll address ongoing cost measures related to the near term challenges and our long term goals to rightsize our cost structure and then briefly discuss our Q1 financial performance. Let me begin by providing you with an overview and a rationale her out today so.
Now, it's one of our acquisition of JP three.
We acquired 100% ownership of JP three on a cash and stock transaction, which is comprised of $25 million and cashed in 11, and a half million shares and Floteks talk with an additional 5 million dollar earn out based upon appreciation of flows back stop.
And the transaction close yesterday my I take.
The acquisition offers compelling strategic and financial benefits as we've outlined on slide four burst the transaction diversified floteks business across all segments of the hydrocarbon value chain second J C is a high growth business with significant upside over the past four years Shacey threes generated a robust revs.
New growth rate of 58% with 60 plus clients.
And there's an addressable market of about a billion dollars annually in the U.S. along with significant growth opportunities outside the U.S. that we can leverage by taking advantage of Floteks international market access.
[noise] Flotek strong liquidity position can fuel growth opportunities by accelerating JP threed data as a service or dash product offerings.
Finally, JP Threeish continued transition to the das business model will yield a high margin recurring revenue stream that is sustainable even in a more volatile commodity market.
We have a vision for being the platform that will optimize profitability all away from the reservoir to the refined products final destination looked at kind of I've chemistry should increase the ultimate recovery reserves and JP three state enables a new dimension to this vision by measuring the injected chemistries effectiveness and the reach in power of J phase three the.
JP Threed data go far beyond that refinery optimization requires consistent feedstock until the development of JP threes data solutions buyers used 80 odd gravity as a proxy for the composition of hydrocarbons with the deployment of JP three systems. The actual composition of the crude can be determined at the wellhead allow.
Refiners to purchase all matching a refineries design or to blend production from numerous locations to create the most profitable feedstock further having the knowledge of the catch most valued by refinery such as the components that go into gasoline or diesel will allow us to design reservoir chemical for producers to enhance recovery of the most valuable mall.
Secures the separation terms, we can begin refining within the reservoir.
In short the more we know about hydrocarbon the more efficient clean safe and profitable we become as an industry. Most turn this over to Matt Thomas President of JP three for some remarks, we're excited to have you here Matt once you take over tells about Jake great. Thank you John it's a pleasure to be here we're truly.
Got it to be a part of the Floteks family and see many ways in which JP three is now well positioned for accelerated growth.
Given flotek strong liquidity position and their reach in the global marketplace JP three we'll be able to build on our track record of double digit growth and fast track the ongoing transition to recurring revenue and a das model.
We will continue to drive increased profitability for our clients by maximizing the value of their hydrocarbons using the data created with our real time optical analyzer systems.
JP three is the leading analyzer and data delivery platform in the oil and gas market and we were excited for technologies to be recognized as the benchmark in the industry earlier this year with the adoption of the midstream industry associations G.P.H. 21 19 standard.
We originally launched our line of advanced <unk> barracks analyzers in 2012, providing our clients with real time composition and physical properties of their liquid and natural gas hydrocarbon streams from the wellhead to fuel terminal well cost effectively overcoming the limitations of traditional technologies.
In conjunction with our Viper cloud analytics platform illustrated on slide five of the accompanying deck.
We now deliver data to everyone from small independent producers to midstream MLP is to major refineries across North America.
Even in the midst of the industry's current state of disruption JP threes proprietary data platform is enabling our clients to generate increased revenues and higher profits on their existing product streams.
Now with Floteks capital behind US, we will be able to expand our das sales and marketing efforts accelerate the development of next generation technologies and create international sales opportunities through Floteks global reach.
As you can see on slide six JP threes data products enhance value across the industry.
An upstream crude analysis at the wellhead, eliminating outdated apiay gravity proxies and aligning production contract pricing with finished goods value.
In midstream gas plant balancing optimization and giveaway reduction.
And and refinery optimization of crude feedstock plans and distillation tower performance.
To further illustrate the power of the data provided by our analytics systems I want to highlight one downstream distribution application a particular importance.
Last week, we were pleased to announce our joint initiative with Phillips 66, So launch I Revolutionary data service solution and the refined fuels market aimed at substantially increasing profits for find fuel producers transporters and distribution terminal operators.
First some context using slide 11 to illustrate.
In refined fuel product streams LIBOR refinery they travel in a common pipeline carrying gasoline and jet fuel diesel and other products to their end markets natural mixing occurs between adjacent batches of these fuels and this interface transportation mixture or transmix must be separated and routed to special holding thanks.
For reprocessing, meaning net losses for operators are very ex data platform is now enabling companies to reduce the level of product downgrades due to transmix and improved profitability by as much as 50%.
The automation and control solutions inherently depend on the real time data produced by our data platform.
JP threes innovative joint marketing agreement with Phillips 66 for Das sales and refined fuels validates the power of our platform and the profitability that our customers are seeing with the use of our data.
Phillips 66 already enjoys a strong position and the refined fuels market and together, we can significantly expand our market share and capture increased value in this space with the power of JP three technology platforms and the performance data that Phillips will provide there is a huge opportunity to expand our presence in the.
Downstream distribution market and this is just one example of how our clients are using our real time data to change the financials of their business.
In summary, JP three brings a differentiated technology platform with hundreds of demonstrated applications with growth in the marketplace and a clear runway to a billion dollar domestic addressable market and now as a part of Flotek JP three we'll be able to accelerate our topline growth and recurring revenue model.
Significantly not only our their major opportunities within the oil and gas industry, but our data platform is scalable to other industrial markets as well.
We look forward to being a part of the Flotek team and to helping build shareholder value and now I'll turn it back over to John Thanks, John Thanks, very much math.
Well, let's move to the second time here, which is really addressing the market conditions in cost and given the difficult market conditions that we've been facing we've developed several cost measures to help mitigate the risk across the business an increase efficiency and effectiveness. We remain disciplined that our expense controls in order to enhance our financial flexibility and recent.
Near term actions include lowering the salaries of the executive team decreasing based at the board of directors as well as reducing the size of the board from seven to.
Reducing head count and cutting back discretionary spending across the entire organization. These actions have not been taken lightly but are necessary and today's market environment.
As we look forward our priority is to focusing on focus on de risking our business as the oil and gas industry fundamentals have significantly changed we've been busy identifying additional opportunities for cost reduction. So then we can regain profitability over the mid term.
Last quarter, we discussed our priority to right size and reprice, our relationship with Florida Chemical company in February we work with FCC to amend our propane supply agreement, which will enable us to materially improve our cost and cash flow through the term of the contract and help us better manage our inventory given these changes were now to position to be more competitive in.
The market with regard to our procurement specialized chemistry portfolios. This also opens up opportunities to pursue new channels to market such as utilizing proprietary technology for data analysis to the full hydrocarbon stream from our acquisition of JP three.
These new opportunities will be able to reduce operating costs and maximize our profitability.
Q1, 2020 unfolded reveal substantial disruption in our operating environment, we recorded an impairment charge of 57.5 million in the first quarter related to the impairment of property plant and equipment right to use assets and intangibles.
We also have taken various actions to improve the financial strength of our company as we aligned our workforce and operations with the level of activity that we are seeing at today's environment in which will enable us to operate more effectively in a totally different world. Additionally, Elizabeth will fail you have on the consolidation of our office spaces Lastly.
We also want to quickly highlight our team's effort and giving back to the community and our customers I'm extremely proud.
To see how flotek came together to utilize our excess capacity from our manufacturing facilities and confidence in chemistry to produce alcohol based hand sanitizer. As a result, we were able to produce about 12000 gallons a hand sanitizer donate to first responders hospitals schools homeless shelters.
As senior residential communities in the the communities, where we serve with that I'm going to turn it over to a little bit to discuss our financial results more like detail Olivia.
Thanks, John as we mentioned in prior calls the financial tables in our press release present, the operations of our C. I see T. segment.
As a discontinued operation for all periods I will focus my discussion today on quarterly results from continuing operations, which include our energy chemistry business, which we look referred to as he see Ti as well as they're supporting research and innovation and corporate functions as we review our financial results.
Revenue for the first quarter was 19.4 million compared to 43.3 million to the same period last year, but generally in line I never sequential basis with the 19.5 million from the prior quarter.
Easy T. operating expenses were 22.8 million in the first quarter of 2020 versus 44 million in Q1 of last year, reflecting 48% reduction year over year.
Included in the first quarter of 2020 was a $2.3 million charge, reflecting a loss on turpin purchase commitments and an incremental reserve against chirping inventory on hand, as a result of the work done in 2019 to improve supply chain and operational efficiencies coupled with our negotiation.
One of the amendment to our chirping contract in February we will be able to dynamically manage our inventory to lower levels going forward.
Corporate DNA decreased to 4.5 million in the first quarter of 2020 versus 7.3 million in the first quarter of last year due to a reduction in headcount and other costs as well is incurring a lower severance charge <unk> point 5 million in the current quarter versus 1.6 million euros.
Earlier.
We reported a loss from continuing operations of $64 million or a one dollar and seven cents loss per diluted share for the first quarter of 2020 compared to a loss at 15.2 million or 26 cents loss per diluted share for the first quarter. The prior year philosophy 64 million included a fifth.
The 7.5 million impairment charge related to tempering, a very long term forecast in connection with the developments in the current economic and political environment.
Our adjusted EBITDA for the first quarter was a loss of 6.5 million, which narrowed from last year's loss of 7.6 million.
The improvement in adjusted EBITDA is primarily due to a significantly lower headcount and significant expense reductions in freight equipment and travel and entertainment expense.
Please refer to our table in the release for more details.
Turning to the balance sheet.
We continue to be pleased with the strength of our balance sheet position.
As of March 31st 2020, we had cash and equivalents of 80.3 million no debt outstanding 6.6 million in escrow funds on the balance sheet, reflecting our claim to the remaining balance of the indemnity escrow related to the sale of Florida Chemical's Archer Daniels.
Midland or ATM.
In addition, as of March 31st we recorded a tax receivable at $6.1 million related to.
Tax refund pursuant to the carriers that provision for extending the net operating loss carry back period.
Furthermore, in Q1 management finalized its plans to consolidate office space in Houston, where in all corporate personnel will be moving to our Houston Global Research and innovation Center at the end of this month in conjunction with this plan it termination of our Houston headquarters lease has been negotiated at an attractive disk.
Which is anticipated to save the company approximately $900000 annually between mid 2020 and mid 2023, so with that we will now open it up for questions.
Operator.
We will now begin the question answer session.
Yes. Good question Pneumo Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset <unk> mis suppressing the keys.
Withdraw your question. Please press Star then too.
This time, we'll pause momentarily to assemble a roster.
Our first question some that Daniel Burke from Johnson Rice go ahead.
Yeah, good morning, everyone.
Wanted Daniel.
Yeah, John first of all congrats on the deal do you have a couple of questions on on JP, three but maybe maybe one on the existing business first.
But the pace of this decline a in the oil field and particularly on the completion side, it's been pretty pretty precipitous what inside if any can you give us on what how Q2 Q3 look internally and just the ability to Ah to manage towards a cash neutral position over that period of time money liquidity that scarce.
Resource right now.
Well I really haven't changed the goal of getting to breakeven, which I stated last quarter and so we're working hard on the cost side of that.
Cost of goods sold us come down when your activity levels drop is precipitously as they have and then we really are managing the other cost as tightly as we can.
Q2, Q3, Q2, I mean, we're basically.
Up to our elbow and that at the moment and I don't really see an increase in market activity.
In Q2, nor do I see any of our competitors talking about an integration we are seeing some stabilization in our customers Daniel in terms of because the prices come back from a ridiculously low level to the something that's at least tolerable and they'll continue to produce.
Side, whereas we were beginning to think that shutting in what's going to be a predominant activity I think the shutdowns old Ob declines.
And we're going to see.
See people continue to produce and the storage capacity didnt get to a point, where it was critical so we've got a reasonable market. We don't have a good market.
So we'll manage our cost to doing that we'll continue to work on on reducing that Q3.
I don't have a crystal ball here, so I'm, having a hard time FFO forecasting cobot.
19, and its impact and also in Q4, because it's hard for us to ascertain exactly how rapidly the virus will ramp back up as we go into the fall and we think that's going to be a bigger driver on activity. Then then oil and gas price. We I think that's where we're going to see some difficulty in getting back work.
But I think we're a is you could see from our numbers, we took out a lot of cost.
And where I think were down.
47 to the half percent.
In our our cost quarter over quarter year over year, excuse me and that includes cost to goods sold but it shows a real focus on that and we're going to continue to do that.
As weakness we go forward happy to take another question, though Daniela rambled too long on that.
No no. That's that's helpful. John Let me give it to JP three that's certainly interesting.
Deal.
And let me ask one or more maybe immediate question I need a given this given JP three sort of midstream downstream orientation I would imagine the impacts to their business. This year have been modest, but but just can you give us any any footing her perspective on how their businesses stared over the last few months.
I mean, obviously slowed down a little bit as a result to covert but still strong and there's a lot of opportunity as a part of diligence I've talked a number of their customers that are committed not only to what they're doing today, but have used cases that.
I would allow us to expand the company, which is the reason that we're so excited about it I.
I don't see them being impacted in the same way through the rest of the year that drill bits are impacted and so one of the important parts of this was moving ourselves from being rig count oriented and drill bit oriented into having availability the totality of the market and we think the midstream.
The downstream and the distribution systems continue to stay strong and have less volatility and so we're very excited sort of de risk.
Where we think the company's going over the next few years by picking up JP three.
Okay, and then we think about JP three maybe just over this initial timeframe from from from inception here through sort. It ended this year. It seems like it should be a pretty capital light business, but but you guys want to want to one invested the business you want to foster its growth I mean, as this business to consumer of cap.
Over the remainder of the year or is it a generator of cash over the over the remainder of this year.
I don't think of it as a generator of cash or earnings really Daniel its an investment opportunities small company with huge growth rate opportunity that can throw off substantial gross margin as we go forward. So but the investments you point out there are the right way to look at it it's not capital and pass business.
It's a it's a business it has been short it on the sale side and I hope, we can add some sales resource that'll continue that acceleration or even.
Capitalize it and we also think that Theres a couple of other things that we can do that will bring use cases into our our business. It flotek as well so that we can the simplest terms, yes, we want to know how fish at an effective we are on treating reservoirs. So if we pump a thousand gallons and we get non back we should have pump more.
If we bump in a thousand gallons when we get 500 gallons of it back we pumped in 100% too much and so how how do we really know that we're doing the right treat much. We think that this is going to actually build some use cases for us on the reservoir chemistry side as well, so we're hoping they'll pull our business through differentiate us from from.
Competitors also but cash like.
Yes investment opportunity here is about rapid growth and that's where we're going to put our focus is they have 58% growth year over year, we've got to see if we can't make the right moves to accelerate that through enhancing our international sales effort as well as our domestic sales effort as well.
Got it Okay, John will look I appreciate it I'll leave it there. Thank you.
Well you're welcome.
Again, if your question. Please press Star then one.
Yes.
Our next question is from Brian.
From Excelsius capital Partners go ahead.
Good morning.
If you could.
Discuss the other alternatives for for capital allocation at the a at the corporate level.
Relative to.
Stock buybacks versus.
Opportunities like like JP three.
In truth, Brian I, probably won't make everybody happy, but I'm not focused on stock buybacks I'm really focused on stock appreciation.
We were talking this morning as management team here about really focusing on the growth of our our company and the growth in our equity value. So that we can do more of these acquisitions I I look at this from the in this way.
There are some great high growth high margin companies available out there that are in that space, where there's not an IPO market for them today.
And but they're very much in line with chemistry, and we can basically provide a platform for them to be public and so the use of our equity value to sort of transition those companies into our space almost like you'd think of us back.
We want to bring those companies they have a so I'm focused on the growth in the share value and the ability to really build a platform of high growth companies in high growth activities going forward.
Okay.
Okay.
That's good color.
Uh huh.
How did you guys found it fine JP three or how did they find you and and maybe with that.
Could you speak too.
Current pipeline or current opportunities.
<unk>.
Well this is sort of a disclosure moment here for me I guess as you know before joining Flotek I was a in investment banking at TPH doing their emerging technologies energy technologies group and we identified JP three than and I can I can honestly site.
I thought it was a great company when I was at the bank when I got to Flotek out of the whole portfolio. It really match Flotek, the best and diversification.
Which does bring me to the fact that had to make sure that everyone knew that I'm not conflicted and they asked I.
I chose to take the didn't choose to take I should never take but I chose to take no bonus from this deal from TPH and so there'd be no remuneration, there and that it was really making sure that didn't have any conflict, but I knew of I've known about this company for at least a year and in fact, several the customers Weve talk.
To our customers I introduced JP threeq two so I've been on their sales staff already for about 12 months and understand the technology. So it wasn't something that just came about in the last few months is something I've had familiarity with for probably a year.
Okay, great. Thank you.
Our next question is from Peter Rabbit from Oh Capital go ahead.
Hey, guys.
Stratum a deal I guess just wanted to echo the previous question a little bit more.
I mean.
John I know you said, you're focused on high growth opportunities and I guess I'm. Just wondering is there any growth in that business and you know what gives you the confidence that.
This growth will be there given how in disarray, the oil and gas market isn't how it might take years for it to shake out.
It's a great question. So I said in the opening comments that we're trying to diversify away from being rig count driven or drill bit driven.
I do think that the core properties and the the Permian and the Bakken and others will come back because those can be produced profitably even at lower price point, but maybe not all of the acreage comes back in the same way so I'm I'm expecting a softening in what we think obviously I conventional market.
And as a result, we think it's still a good market, it's going to be a smaller market.
And we wanted to make sure that we brought on things that had no constraint on growth and so we still believe there's got to be huge demand for energy, we think that Oh operators continue to produce and solutions that improve profitability of the midstream like the tranche make solution that we're working on with Phillips 66.
How you handle towers at refineries.
All of these are going to be markets. It just continue to grow and so we wanted to move over into a high growth market and another real breakpoint about this I'll go back to Daniels question.
On the capital question, we did not by a company that requires research and development in order to deliver product they have a commercial product.
So we're excited that this is something that separately the age.
Aggressive sales, it's not something where I'm in the R&D business I'm trying to put capital into a business to make it work. It works today and we're going to deliver it today and that's the reason that way we did the acquisition. So we think if that's a real high growth component of the market for us and we want to just make sure. The other side we're capital discipline.
And that we're cost discipline to show that we can bake that part of the business profitable as well.
Okay. If you have a question. Please press Star then one.
At this time, we have no question Oh, yes, we do I'm sorry.
Are we have two okay. Our next question is Peter Rabbit from our capital again.
Hey, sorry, guys I think it went on.
And then it got disconnected, but I I just wanted to follow up on the question about the acquisitions and.
Yes, given how much cash you had what a basket was last few bonds.
I assume you probably had hundreds of calls from from guys like JB, three and I guess I'm just curious you know.
What made them so special relative to everybody else, where they had shoulders above everybody else.
How many more opportunities like that you see and and maybe I had one more on the financials aspect of it so.
Oh, no happy to answer that were not interestingly.
We bet is a number of passengers.
One of them very similar in this space has had a different approach to measuring chemistry in real time, because we believe that you you can't Mike If you want to make money you cannot manage what you cannot measure. So we took a look at a couple of a different companies I hear some feedback but.
Yes.
Thank you.
So so we looked at several companies and and this I was just saying a moment ago, what the very first when we looked at really a large company great technology great people.
We felt like it would be anywhere from $10 million to $15 million and investment in order to get the product commercial it wasn't ready for the market and so after looking at that and we gathered together as a management team and where we're not here to try to invest in venture capital. We're here to invest in growth markets, where you have a product and so weve.
Passed on it even though if your technical person here to go boy. This is great, but it was great but didn't have that immediate sales opportunity that we had with JP three so you're absolutely correct. My telephone ranks constantly there a lot of people in heavy debt situations that laid out and so they look at our capital and they'd like for us.
Just a basically pay off their debt merged with the company we've had opportunities to do other technologies, but the truth be known we called JP three JP three did not call us and so I'm, Matt I mean, I'm sure you've had other people call as well I've been out of the bank for awhile, but we really approach JP three because we knew it was such a.
Perfect fit.
Matt is that yes, and I just want to add thinks a further question Peter and to build on what John was saying you know from our perspective, we looked at this is a really great fit for a few reasons first of all certainly those strong liquidity position that flotek brings to the table.
Can accelerate our growth.
The access to the international markets that we don't have today I think is very attractive for us. But also you know this is a very strong management team with an impressive track record.
As you probably know John has a successful history of acquisitions I think something between 25 in 30 acquisitions in his career and and we looked at that and said. This is this is the next step in the growth of JP three that we've been looking for and so it really made for an attractive fit for us.
Okay. Thank you and I guess, just I know you guys have not disclosed financials et cetera, but I.
I guess I'm just more curious on how you see your cash position shaking out with this investment and a <unk> you know I don't know is that a loss, making investment cash, but how much cash do you think you'll need to invest you know.
Staff and any color you could give us I really appreciate it.
And I guess, how well operationally.
Obviously, we spent 25 million. So you can expect the 25 million to come out of our our cash position.
On the investment side, we're going to work hard towards trying to stay within our Costa.
With the goal again still have a goal I want to get US breakeven. This year I have not backed off on that even though the market is terrible.
I will tell you that I saw the hurdle go up significantly over the last couple of months, what I've said. This in Q1 I have no idea that I was going have to do a seven and a half, but hi, Jeff as opposed to two and a half, but how job, but we were focused on it we will find the money to enhance their sales.
Part of its training some of our sales staff, but part of its bringing in das salespeople, which is a different market and they have a team already a JV three and we're we're already interviewing some senior people that we think would make a big difference and Catalyzing This and and reached out to them early on in the process to see whether or not they.
To agreed with the what we saw us or market. So it's a bit of validation to see.
Experienced salespeople in the dash market look at this and consider joining because they actually this is a huge growth platform and opportunity for them as well.
Okay. Thanks, I appreciate the color.
Our next question is from San Michele.
Sure.
Go ahead.
Hi, Good morning <unk> John.
Matt Congratulations on board the deal.
Yep.
You have to comment on your 10-K.
Hello, John you've said.
But on the Q1 called.
If you look to see a tremendous adoption that drilling it should not impact that ability to go out and make a difference, but those that have been completed and I know I love the different pond.
Although the timing, but still.
40.
No it wasn't Twentyth Cody.
Budgets have been cuts at different border now, but I'm wondering.
But the take or <unk> or <unk>.
So.
A lot for you can sort of maybe but it will be stable comment which is that.
It should not impact I mean, it to go up and make a difference on the valves, which will be completed or.
Let me just too damn good question, given given team and cobot, but any color.
On your ability to gain market share on board.
Good that'd be great.
Okay. So you were breaking up a bit it sounded like how are we going to grow market share growth in our core business.
So it being nimble and small is really important and what James Solace is here with us as well I don't know marks on the telephone runs our sales and we had a meeting where we where you know you've got to be flexible in a market like this and what else can our chemistry do other than enhance production on initial production or IP rights.
The other piece that we think we can add a lot of value to is enhanced oil recovery now and these reservoirs, where the wells already exist in the infrastructure to produce in place and that is some capital. There is a tremendous opportunity to use chemicals to do enhanced oil recovery or enhance product recovery from the.
Reservoirs and so we're focusing our efforts there in order to really make sure that we're doing what we believe customers are going to need and that in the coming much.
And this if they don't drill they'll still produce and they'd like to produce more you're looking at recovery factors of between four and 8% for unconventional reservoirs in the initial production. If we can do not unlike the north sea, but double that recovery from from 4% to 8% to 8% to 16% as an industry that is.
Hey, huge uptick for the unconventional players and so we're studying how chemicals impact that you are and we think thats going to really enhance our core business as we go forward as well and the shut in opportunities, but shutting out is what you do when you think the market is not going to come back you are activities.
Where we're we're taking a look what you do when you think that the market will will come back answered yes.
Okay, great. Thanks.
This concludes our question and answer session I would now like to turn the conference back over to John Gibson.
Alright, and CEO President.
Well I just want to say thanks to everybody for joining US today, we're excited about the acquisition of JP three and we do believe it will accelerate our growth and it's got to be complimentary to Floteks chemistry applications and it's got to enable the strength of our underlying liquidity in market access just kind of leverage that as we go forward.
We believe that we're positioning our company for a successful and bright future and we surely appreciate the support of our shareholders and hopefully through this acquisition you see we've been listening to you you shared with me where you think the future is and will continue to update everyone. On our continued efforts as we move forward with our next stage of growth I Hope you hear from.
From me before next quarter, you guys have a good day.
The conference has now concluded. Thank you for attending todays presentation you may now disconnect.
Thank you.