Q2 2020 Chart Industries Inc Earnings Call
Ladies and gentlemen, today's conference is scheduled to begin shortly please continue to stand I think you pay patients.
[music].
After the speaker's remarks, there will be a question and answer session.
Companies supplemental presentation was issued earlier this morning, if you're not received their release you may access it by visiting trucks website at Www Dot Dot chart in the streets outcomes.
A telephone replay of today's broadcast will be available following the conclusion of the call until Thursday July Thirtyth 2020.
A replay information is contained in the company's press release before we begin the company. He would like to remind you that statements made during this call that are not historical in fact, a forward looking statements. Please refer to the information regarding forward looking statements and respect is included in the company's earnings release and these filings with the S easy.
The company undertakes no obligation to update publicly or revise any forward looking statements I.
When I looked at Tenda conference call over to Jellybean go try industries CEO.
Thank you Joe well good morning, everyone and thank you for joining us today to go through our second quarter 2020 result in business update.
Joining me today, it's got Merkel, our Chief Accounting Officer, we will share recent order trends, what we're seeing globally and our new normal, including a dramatic increase in interest from government and private industry in the transition to clean energy and finally provide 2020 full year guidance as we walk through our supplemental presentation released this morning.
You can see on slide three our strategy is unchanged and the long term fundamentals in our end markets are stronger than ever in particular around the global movement to renewable fuels.
Which include the equipment processing solution from both our energy and chemicals business as older distribution storage segment.
We are seeing a heightened demand for upfront engineering of the solution and through rethink cost out actions are well positioned for profitable growth.
Let's see slide four to level set on where existing products and solutions play in this clean energy transition I.
I've said on numerous occasions that the destination well not rely on one specific fuel rather it will be a hybrid solution of all the fuel sources in storage you see on the left hand side, it's like for.
Our existing engineering and products are able to be used in all of the blue applications or letters Athree Jay for those of you weren't colorblind.
LNG is the most mature of these future power generation tool from a cost and infrastructure perspective, others are gaining steam at a very rapid pace.
There are many forecast regarding renewable share a fueling source in the coming decade, one thing. They all agree on is that it will be a significant portion of the total power generation in the coming 20 years.
On the right hand side, it's like for you can see one example from BP dropped by 2040 gas and renewables are expected to comprise nearly 50% of the total you'll hear today, how our products are being utilized to facilitate this transition.
Cobot 19, sparking emphasis on health and clean energy transformation accelerating effort and Incenting governments to think through investments in renewable energy sources in storage, including hydrogen carbon capture yes, LNG CNG solar and wind.
As a prime minister of Norway stated the crisis. We are now in hasn't made the need for transformation smaller it has increased it.
The Norwegian government will spend nearly $400 million on investments to make its economy greener.
Governments have been responding on a massive scale with stimulus packages many of which are targeted to kickstarting or further progressing this transition and to achieve their climate target.
Slide five shows countries that have targets of being carbon neutral or 100% renewable power by 2050 or sooner you.
These countries or just a subset of the 86 countries that have set a specific clinical 68 of them have announced actions in 2020 on how they plan to achieve those goals.
And today, there then over nine trillion dollars of stimulus measures related to the transition to clean energy and we'll discuss some of these when we chat about the hydrogen boom in a few moments.
This is not just about stimulus packages in clinic commitment, but actions that dry behavior, including recent laws passed in late Q2.
The German whole exemption extension of three years for natural gas vehicles will benefit us in or LNG infrastructure products, ranging from LNG tanks for over the road trucks to LNG fueling station, both of which had historical record order month in quarters in June in second quarter, respectively.
The United States LNG infrastructure build out got a boost on June 19th when regulations were finalized two love for the real shipment of LNG.
We are well positioned with our gas by real product offering and expect that this progress will enhance the transport of LNG in the states and support small scale projects.
The Indian government announced further measures during June to raise the share of gas in their energy mix with a target increased to 15% by 23.
India attach rates on both diesel and petrel were increased twice in the second quarter and city gas networks were open to all entities not just government approved ones to build infrastructure.
Also in June Minister proud Han and the petroleum and natural gas regulatory board announced that a new pipeline tariff policy would be unveiled to rationalize gas prices and a gas trading exchange was established we continue to make progress on the first virtual pipeline in India under our and will you with Exxon Mobil, India LNG and.
<unk> steel, including receiving third party approval from Lloyd and a design approve of approval from peso for the chart ISO containers that are being built at or Sri City, India location.
It's certainly not finally, but my last example, today on June 25th, California past, the advanced clean trucks rule, which requires heavy duty pickup trucks to be zero emission vehicles.
This rule will be phased in and supports one of the sure fire winners in this transition hydrogen.
In the past three to six months, we've seen a significant increase in quoting an were activity for hydrogen on slide six you can see our product and so.
Overall Green energy planning a few worth noting.
You launched the European clean hydrogen alliance, which serves a springboard for kickstarting industrialization of hydrogen technologies.
Australia now the 300 million dollar fun for hydrogen and there are over $3 billion of hydrogen project competing for.
And the United States Department of Energy announced plans to invest up to $100 million into new deal, we consortium to advance hydrogen fuel cell technology R&D.
Well not as mature as LNG in the evolution of cost in infrastructure, the increase scale and global nature of hydrogen is ramping up far faster than LNG did previously and has expanded to nearly every geography around the globe, which in turn increases infrastructure and connectivity similar to the LNG infrastructure Buildout.
For example, the South Korean government will secure enough hydrogen to power 50000 hydrogen vehicles this year.
And fuel cell trains are expected to be a key part of Italy's transportation system and I could go on and on with these examples.
For chart, specifically, we are working hydrogen projects in equipment for China Europe, India in the United States. These projects include and certainly are not limited to the following.
The first of all kind of for a new liquid hydrogen trailer design for which we have received 1.3 million dollar order in the second quarter.
Another first of the point for liquid hydrogen and walked pumps good for a space launch application.
And multiple new marine liquid hydrogen projects in partnerships are being discussed primarily for shipboard power generation or propulsion application. These build upon her first quarter announcement of the study with a major cruise line in fall similar applications for currently provide using LNG.
We're currently working with a different customers under nondisclosure agreements for hydrogen applications compared to being under four and for hydrogen at the end of Q1.
We also have multiple internal R&D work underway, which we're not sharing for competitive purposes, but I can ensure that we have included in our second half 2020 forecast the hiring of eight additional hydrogen engineers will also be building a hydrogen test facility at or Minnesota location.
The test facility will greatly enhance industry knowledge regarding sees procedures for the design of equipment and handling of hydrogen which can be applied it fueling station transicold stores depots and other hydrogen plants.
Our facility will also be used to test new hydrogen related products designed and manufactured by her chart.
Testing at the new facility is anticipated to begin in the fall this year.
Another hot renewable biogas and bio methane and we're seeing this gain traction in Europe. As it is also a beneficiary of stimulus packages and pro renewable regulations.
Slide seven shows her how our equipment from both DNS and NZ, including Air coolers can be used in this application in many cases as a full turnkey solution from CEO to removal liquefaction to tanks installation and transport.
Currently we are working with customers on 10 potential biogas plans across Europe, and see significant growth potential in these embryonic applications. A scale was achieved implant sizes are optimized.
Currently planned sizes range from 10 tons per day 265 tons per day or.
Or putting pipeline for these applications is about $40 million and realistically, we see a few plant moving forward to order stage end of year 2020.
We booked in order with great bio methane in Q2 for one of our tanks, which will be installed at a bio gas production site.
Hydrogen and biogas Biomethane are part of our overall specialty markets as our food and beverage candidacies lasers wastewater in each LNG you can see some of our specialty marquee customers on slide eight each of these customers placed an order with us in the second quarter, along with many more that we are unable to share publicly.
The second quarter 2020 specialty market orders were 39%, although the second quarter 2019, and year to date specialty market orders or 18.4 person, although the first six months of 2019.
Year to date every specialty market, except speed has had an increase in orders with Canada's up 69% wastewater 29% in hydrogen 25%.
And we just in early July received the 700000 dollar order from the Indian Space Research organization.
Water treatment has been a sleeper surprise market for us and we're expecting a high level unrelated order activity in the third quarter. There over 10 different municipalities currently looking at water treatment equipment with us in the month of July.
As we continued extend our presence from an application market and geographic perspective, we see new customers, who are becoming more familiar with the chart name.
In the second quarter, we booked orders with a 132, new customers, bringing our year to date, new customer totaled 260.
These are specialty market related and include over 50% outside of the United States.
As we've said on numerous occasions or product support our customers in achieving their yes. She targets with one example shown on slide nine.
This example from the second quarter was the installation of our Doser CCEP reader VIP tank and inspection system. It Cargill high speed production line for vegetable oil in Brazil.
As packaging line uses lightweight 15, Graham P.T. or plastic bottle operating at 36000 bottles per hour. This is one of cargills measures to reduce their carbon footprint by using less plastic.
Perhaps most striking about this SG example is the annual amount of plastic that will be saved in bottles from the four cargill filling operations, taking this initiative on.
That's 1.6 million pounds or close to the equivalent we have 24 adult humpback whales or 160 elephants.
Moving to slide 10, there's quite a bit to talk about regarding backlog and order activity. Both from how Q2 played out month by month in particular in June as well the areas of strengthening demand.
Let me start with medical oxygen koby to related demand the safety and health of our employees is our number one priority.
Throughout the Koby crisis, our team members have stepped up to every challenge across every one of our global locations and as a result of the focus on additional social distancing remote working were applicable and other protocols, we've been able to continue to manufacture multiple day shutdown at any location in the second quarter.
Overall medical oxygen related orders generally for use with coded patients increased 24% in the second quarter of 2020 compared to the first quarter. We saw a peak medical oxygen order month in April with related orders. He brings more typical levels in late May and June.
In early July orders have begun to pick back up for these applications due to round to cold and hot spots in the United States in Latin America.
We are fully prepared for any additional increase in demand and this will not disrupt our other operations.
Total chart orders for the second quarter were $267.6 million with 125 million in the month of June.
Well down 12% sequentially from the first quarter and 17% down compared to the second quarter 2019. The June rebound was significant and we expect to see continued recovery in the second half of the year.
Backlog of $697 million includes 72 million for venture Global Kelcy past project as shown on slide 10.
The top rules slide 10 shows Q2 2020 compared to Q2 2019 in the bottom ROE. She was Q2 2020 compared to Q1 2020, I would point out the increases in backlog for easy cryo, excluding big LNG were up 3% versus the first quarter and up 10% compared to last year.
It's worth noting that both DNS businesses backlog when using either comparison have demonstrated resiliency through this global pandemic, including DNS record backlog of $157 million at the end of the second quarter.
After a slow start to Q2 for each LNG vehicle tanks due to the shutdown of our two major customers production in Europe, resulting from coated the both reopened earlier than we had originally anticipated. Additionally, one of our customers is responding quickly to the extension of the toll exemption for natural gas vehicles in Germany, we received a significant.
In month commitment of tanks and shipped our first H. LNG tank from our new Italian production line on July six.
June was a record order month in excess of $20 million for orders for each LNG vehicle tanks.
In the east we booked 22, LNG fueling station orders in the second quarter, the highest quarter of fueling stations in our history.
This brings our first half 2020 orders for fueling stations to 36 compared to the first half of 2000 1923 station orders.
Well Big LNG projects are pushed to the right by 12 to 18 month, we continue to be bullish on a few of the projects moving ahead F.I.D. in 2021 in particular, given that supply and demand will be tightening in the coming years, driven by lack of new LNG terminals coming online as well as from the expected growth in LNG global infrastructure and trade.
We continue to execute on our deliveries of the equipment for venture Global Calcs, you pass project for which the first liquefaction with their cold boxes occurred this quarter.
Pictures on Slide 11 show the magnitude of the scale these boxes.
We recognized $23.8 million of in second quarter related to that project and expect similar revenue levels for that project in Q3 in Q4 2020 as well as Q1 2021.
As our view that venture global Plaquemines project will move forward within the next 12 months in particular with Fercs June 15th approval of their request to proceed with limited site preparation.
We also believe that shears Corpus Christi stage three project insular in Driftwood Phase one project will as I'd in 2021.
Total chart content of these three projects first phase only work, meaning what would be booked at S. I'd. In 2021 is expected to be north of $500 million and this does not include the other opportunities we have in dig LNG, such as international projects, Jordan Cove, Magnolia LNG and point LNG.
And while we remain positive on certain big LNG projects moving forward to F. I'd in the next 12 to 18 months. We also are taking advantage of the strong pipeline of small scale facility activity, primarily for power generation in the second quarter, we booked a $13.3 million order for a small scale utility project in the United States.
In our quoting pipeline for small scale projects. There are 48 that have had various stages of activity. So far in 2020. These 48 totaled $775 million of potential orders for chart content in our geographically broad based with 15 in the United States 12 in Europe, five in both Canada and Mexico for in both.
Africa in South America, and three in Asia.
As mentioned earlier LNG by rail facilitator in potential accelerator small scale LNG in the U.S.
LNG by rail adds another solution for transporting natural gas into regions within the states that lack sufficient pipeline capacity need peak shaving solution.
As a reminder, in Q4 2019, we received the 21 million dollar LNG by rail order for customer in Mexico, which shows the ongoing adoption of the small scale model.
To conclude the discussion on order activity in the first quarter. We told you about 15 first of kind orders received underscoring the amount of engineering work that is happening impact the clean energy transition.
This trend continued in the second quarter with 24 first of the kind orders ranging from an order for dosing saki in aluminum cans. The two hydrogen example, given earlier the first liquid nitrogen dosing for cannabis and containers in Pennsylvania, and three new process studies for innovative LNG concepts.
Slide 12 shows the demand trends, we're seeing in DNS as we head into Q3, the bold I tell size font indicates the changes from what we're seeing in April when we talk to you left the changes in the segment have been substantially positive I already touched on the order records for each LNG vehicle tanks in LNG fueling stations.
Heightened demand for both is expected to continue well into 2021.
Additionally, food and beverage recovered ahead of expectations in the month of June with the month beverage tank unit orders the highest since February.
Customers, such as Chick Fil, a and young brands have reiterated their 20 for Newbuilds.
Overall industrial gas inclusive the specialty markets has had a strong start to July the majority of our customers quoting an order activity in the first few weeks of July than at or above junior levels.
Critical care demand for Kobin related oxygen has moved into the consisting category as I described previously and finally, China and India. Each have softened for different reasons first India short term orders have been impacted by the country shutdown. While we are able to continue to manufacture some customers have not been able to.
We continue to see medium and long term demand for LNG products in that region in out of the gate in July in India, We book to be $700000 space Order I mentioned as well as a $1.7 million order for trailers.
In China, the second quarter sales of $30.4 million were the highest since Q4 2014 and operating income as a percentage sales was 7.2% the highest since 2013, China orders are are trending to more consistent levels as we head into the third quarter from tightening levels in the second quarter.
As you can see on slide 13, we've not seen any meaningful change in the areas of demand in our agency businesses over the past two months repair work and Sumitomo related work have been helping offset some of the softness in Nat gas processing.
You may recall that at the end of Q1 2021 of our for global Brazed aluminum heat exchanger competitors had their Japanese certification permanently revoked as a result of this revocation year to date, we have received $9.1 million of orders from customers that would have previously used this competitors equipment with the majority of this in the second.
Quarter, we view this as long term opportunity to continue to expand our breeze into industrial gas applications globally.
June was the highest order month of the second quarter for Finfet ends.
Within the Finfet segments fans continued to perform as expected.
Demand for air cooled heat exchangers is weak, although quoting activity has not softened dramatically.
We are seeing opportunities on the process side for air coolers related to Petrochem and LNG projects. Additionally, both midstream and upstream customers are working on international projects much more so right now than in North America.
For example, we're quoting air colors for India, and Middle Eastern and Southeast Asian, Regus biogas and compression work, which we think will be the new trend for many of our customers in these markets.
One key element to our strategy has been to expand our long term agreements to more customers.
Include parts repair and service in the agreements and target longer duration.
Historically, we had few long term agreements in place and none had a repair and service component.
As you can see on slide 14 in the second quarter, we executed agreements with meaningful industrial gas customers such as Matheson in Praxair. We've added an extensive parts repair and service agreement with a major and in June we completed our first ever service agreement in Europe with gas them for parts service remote monitoring and calibration for all gas.
Awesome.
CNG stations supplied by chart to the Nordic countries.
Our long term agreements now touch a broader set of products in our lever in our medium term target of over 20% of total revenue in aftermarket repair and service.
Our aftermarket repair and service revenue for the second quarter is over 13 in half percent of our total revenue. This is an increase from both the first quarter of 2020, which was 13% and from the full year of 2019, which was 12.2% in 2019, no individual quarter was more than 12.8% of aftermarket repair and service.
Year to fill excuse me I'm going to turn it over to Merck sorry, I was on a role there.
Year to date through June 2020, we have taken out of projected 61 $61.2 million cost across the business units, which is a reduction of 25% of our workforce since the beginning of year to breakdown of savings and cost by segment is shown on slide 15, approximately 62% is from cost of goods sold and 38%.
Yes, you date, which is consistent across the segments.
While corporate.
Okay.
In early July we executed on a further reduction in force in the midstream and upstream air cooler business within been band to size the business to the weak demand.
This equates to $3 million of anticipated annualized savings also in the third quarter, we expect additional restructuring charges related to consolidating our Tulsa, Oklahoma Air cooler facility into our Beasley, Texas location at which we own 260 acres of land.
Annualized cost savings, resulting from the reduction of this rooftop is expected to be $12 million added we expect a project to be completed at approximately nine months.
We will maintain a small office location in Tulsa for the engineering and sales teams and we're pleased to share that we have been able to offer all of our remaining TOSA based team members the opportunity to relocate to Beasley, Texas.
As a more detailed slide in the appendix in table in the press release to provide specific information by segment on cost reductions.
Sales of $310.4 million for the quarter resulted in opt reported earnings per diluted share of 57 cents as shown on slide 16.
Adjusted EPS was 63 cents.
Severance cost of $4.3 million were associated with our second quarter reductions in force.
On road one of the table you see the impact of an 18 cents add back for restructuring and transaction related cost.
This is partially offset by the completion of a sale of our former Chinese manufacturing location in the second quarter, resulting in a gain on sale of $2.6 million or seven cents EPS as shown on road to.
On ROE five we reduced adjusted EPS for the benefit of our Mark to markets on our minority investments of two cents in the tax effect of these adjustments on rose six.
Our year to date EPS of $1.19 is a 12.3% increase year over year 20 right.
This reflects partial savings from our cost out actions and as Joe come up commented previously we expect gross margin as a percent of sales to expand throughout the remainder of 2020.
Second quarter gross margin as a percent of sales was 29.8% on a GAAP basis and when adjusted for severance was 30.3% a 210 basis point improvement over the normalized second quarter of 2019.
Normalized question, a $43 million in the second quarter was in line with our expectations.
And while there are puts and takes we expect us to can continue in the $43 million to $44 million range for the remaining two quarters of 2020.
As shown on slide 17, we had $54.8 million in net cash provided by operating activities during the second quarter, which equates to $44 million of operational free cash flow after spending $11 million of Capex working capital management continues to drive positive cash generation and flipping to slide.
18, you can see our continued improvement of collections from data from our JD Edwards locations.
In addition to DSO of 40 days, we also have 25% of our supply base that have accepted our extended payment terms as a result of the strong quarter. Our net leverage ratio is now 2.97 down from 3.12 at the ended the first quarter.
At this point, we have enough visibility to provide 2020 full year guidance shown on slide 19 full year sales are expected to be 1.3 billion to $1.4 billion and includes $46 million venture global Calcs. She passed revenue in the second half of the year.
Anticipate full year diluted adjusted earnings per share to be in the range of $3 $3. A 50 cents on 35.3 million weighted average shares outstanding are assumed effective tax rate is 19%.
Our capital expenditure guidance is increased to 30% to $35 million from our prior guide of 25 to 30 million. The increase is driven by our decision to proceed with the parts repair and service Greenfield site in eastern United States. As a result of the positive reception to our long term agreements with our industrial gas customer base.
The yard will be tank ready by the end of the third quarter and the Greenfield building is expected to take approximately nine months to complete.
The total cost of this project to $7 million and we have included 5 million of it in his 2020 Capex guidance. Additionally, there was approximately three and half million dollars of Capex required for our building expansion to how the air cooled heat exchanger product lines that will be consolidated into our Texas facility. We have included half of this in our second half 2020 guidance.
With that I'll now turn it over to Joelle to open it up for questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question pest upon key in the interest of time, we ask that you. Please limit yourself to one question and one follow up please standby, we can probably today roster.
Our first question comes from James West with Evercore ISI. Your line is now open.
Hey, good morning, Joe Mark.
James.
You had to fully aftermarket.
Our revenues, 20% over total.
From I think the original got it a couple of years ago was 17% mice 300 basis points jump there.
What's the roadmap.
Getting there is there a difference and moved away contracts. The orders structured now is the salesforce incentives. What are you seeing that gives you comfort that you can move that their best vehicle if it goes to margins overall.
The primary movement.
For us on those parts repair and service side has been this additional increase in the long term agreements that we have and.
We did we really had zero commitment on the Prs side in any of the long term agreements that existed previously and without going to specifics on which agreements have what in some of these we do have a go forward volume commitments and in some cases durations of these agreements are.
Five years versus previously two years plus one so that is a big piece of this movement from the 13.5% where we are today to over 20%. We also to your comment we have changed some incentives with our salesforce and there's a lot of activity thats been generated from multiple different customers and different region.
Yes.
Weve implemented various different repair servicing refurbishment products. So previously we didnt do many repairs on our air cooled products and we're seeing a lot of activity around that given some of the decrement in the market fundamentals for originally equipment and so that's benefiting us as well and certainly to the last part of.
Your question margins are better across the board on both the DNS side. It will decide for these types of products.
Got it okay, Thanks and show up.
From a.
On LIFO hydrogen.
I want to.
Making a lot of the was right now.
You guys have the equipment.
Products and services to focus on that market I guess.
Two part question, one what kind of percentage of normalized earnings do you think hydrogen could be and then two are there any adjustments to your products.
Hey.
In order to capture this market versus.
More manageable LNG surety.
In the current environment hydrogen to small piece of our total earnings per share, but that certainly gaining a lot of momentum as described by some of the order activity in the NDS that were under in this particular space, we're very well positioned with our current products and solutions and I think the biggest differentiator for.
For us in hydrogen is our upfront engineering capabilities. So we're able to do first of declined projects that other companies aren't able to say, okay. I have this piece of equipment, but I'm able to.
Solution in the design of what that could look like and then we'll figure out how we fill in the supply chain around it.
But to be very specific there are some areas that we are developing internally.
And leaders not a lot of hydrogen businesses for sale out there there's a few but many of these.
Early stage start up so we really feel like organic development and given our engineering capability is going to be the primary way, we get additional capability.
And I'll be completely transparent liquid hydrogen pump is.
We're going to be huge differentiator for us and that's the number one priority that our engineering team is working on in this space. We're also working on some liquid storage, which will help for a longer haul transportation.
In both classy trucking as well as passenger vehicles.
Got it thanks Phil.
Thanks, James I appreciate it.
Thank you next question comes from Martin Malloy with Johnson Rice. Your line is now open.
Good morning, congratulations on the quarter.
Thanks, Marty I, just want I wanted to follow up on the hydrogen.
Hi area and.
Are there maybe a few of those product categories you could identify as.
Being the most impactful to the chart.
Over the next 12 to 18 months and then on the liquefaction in particular does that involve brazed aluminum heat exchangers and are you working on a technology process similar to the IPO somar.
So the most impactful on in the short term are going to be the transportation as loan fueling areas and that really goes to what you hear about almost daily in the news of the development of fueling stations as well as some of these various different transportation and trucking companies that are looking for hydro.
Again vehicles as a longer haul solution. So we're well positioned with customers on the fueling station as well the transportation side of things.
In overall.
Now going to answer the second part of your question because theres some competitive dynamics, there that I don't want to give away I'm on the liquefaction, but the short answer is yes.
Longer answer is would put us into a more competitive dynamics that.
We have a very strong headstart on.
Okay understood.
Second question is on the gas by rail.
Is it obviously positive to see the.
And announcement from the government regarding both transportation.
There's been a couple of high profile pipelines that run in the permitting difficulty can you maybe just speak to the activity and the potential in that market.
That was a big win for LNG by rail to have that regulation past, especially given some of the states that had been challenging it over the past 12 months.
Definitely an enabler for the continued infrastructure build out of LNG in particular on the small scale side and we've had.
Different discussions with customers that are looking at how do they utilize rail systems at or near their locations, whether it's a small scale terminal location or a traditional railway customer we do anticipate that theres, probably handily kind of $75 million of potential order.
Activity on the horizon for us in the very short term, meaning in the six to 12 month period of time on and that's really with customers that are looking to utilize existing.
Real systems that are physically available and to transport at a cheaper.
Deeper in some cases safer way to do that.
Thank you ill turn it back thanks Marty.
Thank you. Our next question comes from Eckstein with Craig Hallum. Your line is now open.
Hi, guys got.
Eric.
Hey, so Greg TV order bounced back in June.
Curious how much of that do you think is a catch up given that April and May obviously, we're pretty weak for obvious reasons.
And then just I know you talked about specific areas.
But just to be clear I mean, it sounds to me like you are expecting that that June run rate.
As a good way to think about the months.
Going into the third quarter.
The way that I'm thinking about it is I think June to 125.
And I remove the 13.3 million for the small scale terminal that I take out about 18 of.
What I would consider bounce back or whether it was related to h. LNG vehicle tanks or other aspects of the business. So I'm kind of looking at that 90 million on month run rate on the order side of things I'm heading into the second into third quarter in the full second half of the year and the way I think about the revenue guide is we've got about four.
150, plus of our total backlog that will ship in 2020, the rest of this in 2020 and beyond and then I feel that in with and of that 40% book and ship level from the order activity of June normalized for those two items I just mentioned.
Got it very helpful.
And maybe SEC on for me just on Big LNG I mean, clearly it seems to me you're more confident.
I mean, youre confident on plaque amines, but more confident on some of the other projects that while they still pushed to the right that they are.
Pretty good order opportunities for 2021, so just curious.
Given that the market spot price of LNG, I mean, a lot of things there have not changed.
Just some reasons for that confidence.
There's certainly a lot of customer discussions that has happened in the last six weeks around what does that look like and what that timing is so you can hear the public domain guys talk on their own but the confidence level was owned how they're thinking about doing phase one versus the total project. So if we had.
And having this conversation a year ago. The number I quoted today of north of 500 million for phase ones would have been north of a billion. If they were doing the full extent of the projects. So I think theres been a calibration around the size of the starting point for construction, which I think is appropriate given what's happening in the market and then.
And back to the comments around there is a point, where you know there's demand continues to grow in the supply doesn't catch up.
Which is secondary to my first comment that I think these projects are closer to being able to start a phase one than trying to go for the big Bang right out of the gate.
Got very helpful. Thanks, a lot.
I think there.
Thank you. Our next question comes from Rob Brown with Lake Street Capital Your line open.
Hi, good morning.
First of LNG stationed activity you shifted a number of orders where are you seeing the the activity. There is it is it Europe and China boats, or where you should be activity.
Yeah, It's both Europe and China on Prime OTI. The majority is in Europe, but China has been a surprise in terms of how many have come about in the first half of the year compared to what our expectation was.
And we continue to see that accelerate I don't think thats going to slow down in the coming.
Excellent.
Okay, Great and then I think you mentioned in China saw some near term softening.
What's your sense there when do you think that kind of recovers or is the visibility still not.
Hi, good there.
So India is tougher to answer that question. We've built in continued softness throughout the second half of the year into the full year guide a could bounce back a little bit faster than that but it really depends on what happens with the corona layer situation.
Although I would caveat that answer with the statement that we're seeing these medium to longer term orders still coming in so the $700000 for the space application and then the 1.7 for trailers. Both of those are kind of medium term types of applications, which further supports the continued infrastructure bill.
No doubt that we expect to see rebound once things open back up fairly quickly on the China side. It wasn't a surprise to us and we had planned. This this way more tempering I would say versus a dramatic drop off and we had seen such a quick rebound once things reopened in February.
Gary in terms of orders in China particular for industrial gas and we've not expect that to continue through Q3, and we're seeing that kind of happening right right on par with what our expectations were the on the one thing that has the potential to slow China, a little bit more is the flooding thats been happening in certain regions.
And that could push some of the commissioning out to the right on certain infill projects that de minimis impact to them to the chart business.
Okay. Thank you.
Thank you. Our next question comes from John Walsh with Credit Suisse. Your line is now open.
Hi, Good morning, K morning, John.
You know I just saw a question first on the.
The capex and how to think about it going forward obviously your funding.
Some very attractive opportunities here on the aftermarket in service and productivity.
Are there more of these you talked about this one facility I think in the eastern us.
Should we think that there was a larger build out as you continue to grow that mix on the aftermarket side.
The southeast United States was the last U.S. geography that we needed to footprint in so there will not be any additional greenfields in the United States on the only other region that we are building out repair and service as well as rental capabilities in Europe, but our locations that currently do originally equipment also have the sort of.
Patients to be able to repair and service. There. So this is really the less that we needed to do to have the complete coverage of the installation base that further goes into the long term agreement discussion that we had earlier I would expect that though to tail into 2021. So if I were thinking of the 2021 Capex Guide I would.
December 30 to 35 million range.
But there are more productivity projects that are well underway are emerging and executive leaders that are in the program have all been able to participate in identifying what those types of projects look like and I think on average you're looking at on $2 million to $3 million year for productivity projects that return in less than one year.
Thank you and then.
You have in the release you talked about the gross profit margin expansion that you expect throughout the balance of the year.
One I think that mix is kind of driven maybe you can give a little more color on that if thats kind of the specialty in the aftermarket or if there's something else. There and then how to kind of balance you know as we think next year's gross profit margin expansion with maybe some of these variable costs.
Factor related coming back next year.
So there is theres three components to the gross margin expansion in the first is that we'll have the entirety of the $61 million of cost out that we took at various points in the first half of the year will be reflected in.
The second half in full so we had some staggered based on the times in the dates that we did those reductions throughout the first half.
The second piece is the continued growth in the repair service in aftermarket.
Yeah as I commented is to James's question, those certainly or margin on both sides of the house the differential between the traditional gross margin of a route originally equipment on DNS to aftermarket service and repair is smaller than it is on easy side DNC side, just given the quick turn around.
Ships in installation needs, we tend to be able to command a slightly bigger differential on the gross margin to the traditional segment margin and then third.
We have this year you've seen us in the first half of the year had a nice bump from having the additional volume in our agency cryo business from having the big LNG project running through that shop. So I would look at 2021 as what our run rate coming out of Q4 is I do believe we can sustain that heading into 2000.
Anyone in there some productivity that can give us a additional increases and I see the biggest opportunities in 2021 being in our DNS East segment, and our NC since and segment.
So I would expect the low thirtys to the as a percent of sales for gross margin to be very viable figures in 2021.
Great. Thank you.
Thank you.
Thank you.
Next question comes from Tom Hayes with Northcoast Research. Your line is now open.
Hi, Good morning, Joe.
Hey, good morning, Tom.
I was just wondering how regarding the order wins it.
Customers.
Solutions on that I was just wondering is that this is a good exist previously are you taking share from somewhere.
Yeah. Thanks, Thanks for the congratulations it really goes to our commercial team and these guys have done just a yeoman's job of finding the available customers and also finding customers that were able to take share from I'd say is about 30% taking share and 70% new customers for for us that would be.
The addressable market that previously we either didn't have the products for or are we didn't look at the full solution of being able to take our DNS and easy products and put them together and get in there and some examples of that would be like on the marine LNG side of things, we've been able to get into applications that previously we didnt have.
So again, a great shout out to the commercial team for their efforts.
Hi, Great. Appreciate the color there may be secondly, just circling back to hydrogen and it.
Certainly that sounds like acoustic growth is certainly very strong. There's just not masks would you kind of expected to see as we enter definitely 20 or have you thought about recycling market opportunity right square sector yesterday.
If then above expectations in the first half of 2020 I definitely thought it was going to continue to March along in it had been picking up.
Some pace heading into the end of 2019, but many of the level of activity in hydrogen quoting right now is beyond my expectations.
I would not change the size of the addressable market in the current state right now from what we shared in November but from a more medium term perspective, meaning kind of four to six years out from now it definitely is bigger than what you see there just given the adoption and the infrastructure build out but it needs to it needs to get a little more mature on.
The cost side of things in there needs to be some connectivity on the infrastructure before I'd expand that the addressable market size, but I would I would bet or whatever the expression is dollars to donuts that.
That addressable market size is significantly higher than what we showed within half a decade.
Thanks appreciate the color.
Thank you Sir our next question comes from Greg Lewis with BTI G. Your line is now open.
Hey, Thanks, Thank you and good morning, a morning, Greg.
Ill.
I'm curious on August last week.
You kind of move forward with our.
A couple trillion dollar stimulus package and there was some thought that seems really counting geared to some other things you guys are doing.
At this point have you guys had a chance to kind of goes through that and see really what the opportunity.
Natural gas and hydrogen is for chart.
From a package.
We have and we've gone about it probably a little differently then direct dollars in spend it's been more around shore. The application customers that are that we already know are going to get some of that funding. We've done the theme on the U.S. side, where the but $65 million of the deal we for.
The hydrogen has been allocated and if you look at the U.S., We've got access to right out of the gate already existing relationships with about 60% of that $65 million of the deal we spend on hydrogen and then on the EU side, we have direct access on applications and or customers.
To about 75% of where that spend is going to go now obviously you can't just take 75% of the total package because it depends on what piece of content. We would have you know what are we had a full solution or just traditionally kwitny components that go into those types of applications, but significant.
Significant opportunities for the chart business as a result of this packages.
Okay, Great and then just as we think about this and clearly you guys are excited about the opportunity in the medium longer term.
As you look around the world and it seems like local content is clearly going to be an issue.
At least in some areas is there anywhere where where maybe chart needs to beef up its footprint or Khan, who as you think about it where you got screen from global standpoint.
How are you comfortable.
I'm very comfortable and I wouldn't have been able to say that was ago in the reason being that through the Viavi acquisition, we've been able to have a broader footprint in Europe and.
From the four side of the Viavi founders and owners they were really well positioned in India for the make in India activities. We also were able to get a another Indian location location in Hyderabad through our air Exchangers acquisition last year, which has allowed us to build out over 50 engineers in that location.
And multiple other capabilities. So we've not only been able to maintain cost competitiveness globally, but also have that local presence and we've seen that truly benefit us in particular in the Asian regions.
Okay perfect. Okay, great. Thanks for the time and have great day. Thanks.
Thank you. Our next question comes from Conor Linac with Morgan Stanley. Your line is now open.
Yes. Thanks.
I was wondering if you could talk a little bit about.
Full year guidance, obviously be.
The revenue range relatively wide and I guess.
Apply some pretty significant improvement versus the second quarter. So I was wondering if you could characterize which segments are the biggest contributors and how much improvement versus say.
During the early July levels is this baking yen versus what we can't see and the sort of be shape within the quarter.
Sure. So first of all the wide range. So we had about that internally and we could have more precise but given.
The first time back on guiding in there is still some uncertainty out there in the world. So we thought we'd give a guide to kind of get into the stadium versus getting into the seat itself.
We have very direct line of sight on how much backlog will ship in the second half of the year. So a piece of the answer onto the step up from the first half that second half is backlog so existing orders in the book and then the second is around the book and ship activity activity in the DNS side of the business.
Is really where that comes from we're we've guided pretty conservatively on the fees both the cryo in fans.
I have been pleasantly surprised on the cryo side of the business with the repair work and some of these additional orders from the competitor that lost and certification, but the the biggest opportunity for us in the book and ship Arena is on the industrial gas piece of the DNS businesses.
Okay. That's fair, maybe just within that range what are the big swing factors that would.
Driving to be more on the 1.3 to 1.4.
What what are the big variables I guess, the youre considering it.
Making that range.
Yes, so on the DNS side of the business. If there's a couple fueling station orders that we would expect to get in the east and if they come in a certain timeframe, we'll be able to recognize revenue on them on in the fourth quarter. So that would be one of the.
Movie up for the full year to closer to the higher end of the range I'm also there's.
A handful of industrial gas opportunities in the west that similarly, if we get if we're able to close them between now and the middle of August we're going to be able to recognize some of that revenue sooner rather than later and those types of opportunities frankly are not win or lose opportunities, it's really timing. So.
We feel very confident that they are ours.
For the taking we've been notified that their ours, but they're just not at the point of having the PEO and the terms and conditions completely sorted out.
On the NC side of the business for cryo the swing factor there would be if we got another small scale LNG terminal those tend to allow us to recognize a piece of the revenue in the shorter term and then across a 12 or 16 month period. The full revenue on an example, like that would be if we receive notice.
To proceed on Eagles, Jacksonville, LNG facility that would help drive toward the higher end of the range and then on the NCCN sand side, what we're hearing in the market in from our customers is everybody tenant expecting the weakness to continue for at least for six months in many are seeing for 12.
What we see on any type of rebound there would be in the fourth quarter. If there's some the shut ins being brought on line that would be worthy equipment will go versus newbuilds, but we have built none of that into the win.
For so thats just color for you the NCCN fans, we left it at the current weak demand levels.
Okay. That's helpful. Thanks, very much infant.
Thank you Sir our next question comes from JB Lowe with Citi. Your line is open.
So given some numbers at your Investor day around free cash flow expectations for.
For this year.
Wondering if you could give any update what are you guys thinking in terms of free cash in 2020, and then longer term do you guys have a target for any sort of free cash flow metrics in terms of let's say free cash flow conversion from EBITDA or anything like that would be helpful.
So we generally look at free cash flow as a percent of revenue and we've historically said our target is to run at 10% of revenue, but that's going to increase from a medium term perspective that should be in the low teens easily as an ongoing metric in particular, given a lot of the activities we've done around the working.
Capital components in how we how we approach the market with inventory as well as some of the back office activities.
In terms of the 2020 outlook you can take the second quarter on as a pretty good proxy for what we expect in Q3 in Q4 Theres some upside to that I just based on some activity that we are aware of on the supply base.
Well as continuing to rationalize inventory that we had to increase at the end of the first quarter around ensuring that we had appropriate medical auction related tanks available on in that that increase at the end of the first quarter was.
Specifically to medical oxygen was about 13 million, but across the total business from a safety stock perspective total of about $20 million on so you can kind of use that to to walk yourself through the next two quarters.
Thanks.
And then another question just on.
The aren't on facility you are building on the southeast.
Any ideas on on.
Or any color on look a payback is for that investment and I know you said there are on the other greenfield aren't.
Opportunities, but are there any other like similarly sized investments be an expansion somewhere.
Across some of your other facilities.
And and what could be to the potential payback.
Targets for those.
So the the on paper payback for the southeast U.S. repair facility is just about I'm 20 month.
And I expect that to be shorter given the last couple of weeks of long term agreement discussions and the extremely positive response, we've gotten from our major customers that were looking for an alternative to their current repair a provider in the southeast.
In terms of other similar size investments, there and opportunity for us to expand our India location entry cities. So we own the land at the Jason to our current building and what we're finding is that there's a lot of addressable market available to us if we can make in India.
Until we started to dip our toe in the water around that on certain tanks also on certain air coolers and I'm, we're evaluating some of the other products existing products that we would want to take from North America to be able to make their which gives us.
More cost competitiveness for project in that region, but also a ton of access to projects in India that the government itself really wants to have foreign investment, but they want to also has the ability to have on Indian nationals be able to be employed on it locally so were really well positioned for.
That and that would be like a 5 million dollar investment and we'll make that decision heading into on 2021, so that would be 2021 capex.
Great. Thanks, Joel Thanks, that's it for me talk you guys.
Thanks, Don.
Yeah, and our next question comes from Patrick Bowman with JP Morgan. Your line is now open.
Hi, Good morning, Joe Thanks for taking my questions Maureen.
On Big LNG, just a question. So this this year.
The guidance includes 100 million from I think how could you passed business lines I think that's what it's from what do you see the contribution to earnings for the year.
Then for next year.
You mentioned.
500 million of orders that you could see for some foods do you see these potentially contributing to earnings at all in 2021.
So in 2020 Unity helps you pass gives us around 80 to 90 cents EPS in total for the year.
In 2021, they would really depend on the timing around when those projects moved as I'd I think I would say the highest confidence I have.
In terms of the earliest one would be plaquemines and if we get that in the first half of 2020 that will contribute revenue and earnings between 21 on and coupling.
First quarter Calcs she passed.
On revenue and earnings it would look extremely similar to 2020.
What.
Okay. So Chuck is there's still some revenue less next year, what's that amount.
That's about $24 million in the first quarter next year.
Okay.
Got it.
That's helpful. And then did you rank ordered the ones you're more confident in terms of projects going to fit you might have said earlier in the color.
Right got it.
Yeah, No I'm confident in Plaquemines stage three for senior at Phase, one and also tool or ins Driftwood phase one project.
In terms of the timing I think Plaquemines goes first on but.
Related to sheer insular in what they want to.
Discussed publicly on their projects and the timing related to that.
Understood and non.
Last question for me is just on free cash flow like sorry, if I missed this but could you provide updated guidance on free cash flow through the year.
We did not provide specific updated guidance on it but you can take the second quarter as a good proxy for Q3 in Q4 and tech on a little bit more just as we drive down inventory.
Okay, great. Thanks, I appreciate that thank you.
Thank you Sir our next question comes from Ben Nolan Stifel. Your line is how open.
Thanks, I appreciate the time guys.
Good quarter. Congratulations the same my my first question goes a little bit Joe you talked to sort of how you're thinking about the potential margins.
Her 2021, I know the Investor day.
You'd you'd sort of given.
I don't know.
Preliminary guidance or something that you'd hoped to get to $1.7 billion or revenue.
In 2021, obviously without.
The guide just it was curious how comfortable you are that but whether or not I guess, you think you that can be attainable.
Based on what you're seeing at the moment.
So without big LNG in 2021, we won't get to 1.7 now I would say from our initial look at 2021 again without a fish here, we do see kind of the mid single digit organic growth for us in.
That's fairly widespread with the exception of since and we continue to see that depressed heading into into next year, but we will be at or above what we originally said from a margin perspective as a percent of sales both gross margin in operating income. So I'm I'm pleased with the progress on that regardless of the topline not being able to get to the.
At 1.7.
Okay very helpful.
And then as my follow up it's going to maybe dig in a little bit more on on some of the LNG stations stuff obviously.
China Europe, India, you guys have been pretty successful on there and those regions. There from all we're seeing is a lot of other development in places like Brazil in Indonesia.
Some other places Jersey can maybe.
Draw the landscape and also the competitive environment, where do you guys said with respect to everybody else, it's trying to correct them out.
So for the LNG fueling stations are the first half of the year 12 them. We're in China, We had six in India and rest were in Europe, such kind of give you a sense of that that's a fairly typical spread in terms of the geography that we're seeing activity in.
We are heavily involved in quoting multiple LNG stations in particular in Brazil on and other central South in Latin American locations are we in terms of the competitive positioning I'm going to answer your question hopefully I answered with what you're actually trying to I'm trying to ask but if not feel free to ask ask again we.
Our certainly I would see a leader I'm on the LNG fueling station side in terms of equipment content, but also in terms of the ability to kind of go from design to equipment to fully installation a fully installing these designs and E.
All that in Gibraltar, when we worked closely with shell on that project and we're starting to see many more of those types of opportunities that it's not just an equipment sale, but a full solution and I do think tier to your comment that places like Indonesia. Please like Vietnam as they start to build out there LNG in.
Infrastructure. These are the next geographic opportunities in regions for us.
Okay now that did answer my question I appreciate it thanks Joe.
Thank you.
Thank you and next question comes from Walter Liptak with Seaport. Your line is relevant.
Hi, Thanks, Good morning, Joel and.
Great quarter I wanted to ask about hydrogen go back to that and I wonder with the the market doing better than you expected. What your appetite is at this point for M&A and I think M&A in general.
At what point do you think you you might start looking for deals again.
So we're always looking for.
What we've been doing is really targeting a very disciplined approach to where these opportunities might be on certain aspects of hydrogen are very appealing to us.
Yet as I commented earlier to someone else's question Theres very few available opportunities and so we are actively working with some of our customers with a joint venture opportunities joint technology development opportunities and so that's really where I think the opportunity on hydrogen side exists investments type of thing.
We also have not strayed from our desire to purchase a cryogenic pump company in there's very few few pure plays in the world of that on and we're in discussions regarding the potential purchase of one of them, which wouldn't close for.
A long period of time and were in preliminary discussions on that but those are really the areas that we would focusing on and we're not looking for packing on scale. We're really looking for these very targeted technologies and products that continue to expand our addressable market by rounding out you can see Indiana.
Great. Thank you.
Thank you. Our next question comes from Craig Shere were two brothers.
Michelle open.
Good morning, Thanks for taking the questions. Thanks, Craig.
Joel to start was I wonder if you can opine on a couple industry data points. We've noticed a first as NFC is plans the shift from custom built LNG import terminals to using I guess mass open c. ISO container filling.
That can be delivered an awful lot of the ports with normal cargo ships and equipment handling.
And the second data point going notice was.
Large still LNG quality control issues.
Only gorgons train two is having a delayed restart through two thousands of heat exchanger Crocs. What do you think of these things in terms of the opportunities that they present for for chart.
So I would start with the is the NFI example, and say there's definitely a trend in the industry is to move toward more modularization and standardization and and if he has always been a front runner in their space in terms of moving toward these types of applications. So we are.
Working very closely with our partners and our customers around continuing to shorten the duration of construction on whether it's small scale or whether its storage as you described.
The typically a small scale terminal take 16 18 months and we've had request from customers can you get that down to 910 months and that comes through the standardization as was the offering of a full package, which offers us a great opportunity to step in onto more more of these types of applications. So we're excited about.
That movement, we're well positioned and you'll hear us talk.
And on in particular around like venture Globals projects, where we're making we make 18 cold boxes in their standard we get better every time, we make it and were able to pass that cost savings through to our customer and that's really going to continue to fuel the industry.
Big LNG or the large scale in particular Gorgon, let me start by saying those are not our heat exchangers I'm. So pleased to be able to say, who say that but a quality is the number one most important aspect in particular on brazed aluminum heat exchangers, and you've heard us talk over the last couple of years a.
Around.
Innovations that we put in place on ours, including smartly or technology, which detects atmospheric weeks ahead of the actual week itself happening and not only around the sumitomo situation, where they've lost their certification. There's these are critical to the safety of the people at these sites and so there's a.
Good opportunity for us to be able to step in and help not only with the repair, but also with the replacement and for us being able to have a ready package to go into these types of replacements will accelerate that for the customers.
Great and I, just maybe some of this dovetails.
First question really related to some LNG opportunities.
But can you speak.
The ability of both hydrogen and LNG to coexist and grow.
Yes, so it goes back to my comment around there.
The ultimate answer and this is not one single fueling source. This is going to be a hybrid and as a result of these various different infrastructures being built they will be forced to coexist, but just the elements alone are able to work together and you'll see that in storage you you see that even just in in the short version of you know how.
LNG works in a typical peak shaving for coal applications, those don't necessarily coexist together, but they're in the same infrastructure and in the same grid and we're seeing more and more of that a great example is one utility company that recently stated that they're going to do hydrogen storage combined.
With solar and wind at their location I think it was in California or something like that so these these elements don't have to be singular on their own and I think you'll start to see a lot more hybrid solutions coming into play and that's really what you're seeing in biogas bio methane I could have called it and micro scale LNG. So.
You can these things go together, well and you're seeing a lot of innovation around the compounding of them together.
I just I guess was I was trying to get out is as as renewables and hydrogen pick up or through the five years.
Do you still see LNG market overall continuing to grow.
Absolutely I mean I might.
Range on that and I continue to see as being a critical part of future.
Great. Thank you.
Correct.
Thank you Sir our next question comes from to them all done off with Raymond James Your line is now open.
Thanks for taking my question, you mentioned, India as one of the.
Most locked down disrupted markets right now of course, it is South America, where the pandemic is the most visible in the Lockdowns are generally that the most severe.
What has been the impact from Europe, Latin American customer perspective on.
Some of the end markets you talked about lot like.
Mike Biogas.
So we've been able to.
Leverage the medical oxygen side of the business and so our south American customers have actually been placing quite a bit of orders related to oxygen, which has allowed consistency in in the order intake side of things, but with respect to bio gas some LNG fueling stations and things like that.
Had we have definitely seen where there were projects that we're supposed to come at the end of June early July those being pushed out in what we're hearing is that's really kind of a six to eight week push out but that will depend on.
How things roll out with Covidien, what time, what timing relates to the reopening of the countries.
Okay. That's helpful.
In Q1 as I recall all of the directly.
Kobe to related.
Products were 6% of revenue what was that number in Q2, and where would you expect that in the second half a year.
Yes, so in Q2 it was about 80.
8% or so eight nine person.
So as a significantly higher if you look at just the total mix in the second half of the year you know if I'm looking at July July is looking very similar to June if not a little bit higher so I would expect that the second half looks more similar to the second quarter than it does to the first quarter, so still a higher percentage of the total.
Thanks, very much and stuff.
Thank you and next question comes from Barry Haimes Sage asset management. Your line is now open.
Thanks, very much and congrats on a great quarter.
Hello question on Big LNG, and Chile, you mentioned the three projects that you saw had the best shot for if I D.
Next year and the question is we all know we need them in the medium or long run, but in the short run the markets to a very soft so what do you think it is.
It needs to change to get those projects over the hump to get the off takers to commit.
What is it that makes you think we will actually have if I do some 21. Thanks.
I think you're continuing to see a shift to more open market, but related pricing on LNG in particular with respect to contracts I think theres, a well underway on the creative side versus traditional off taking and that's going to continue to drive on those.
Movement toward S. I'd. So this is less around okay, I need specific off take but now you're seeing this open exchange happening.
Globally and also recently as I mentioned on on India with the first gas trading exchange that they had a additionally, as infrastructure continues to be built in these smaller geographies or more localized geographies.
You can't have infrastructure without having gas. So that's something that will continue to drive that was really goes to the supply demand differential and as the demand for LNG grows and less supply is available that will help facilitate this so I'm whether its six months nine month 12 months what.
We're hearing from our customers is that these projects are continuing to take forward in conversations with end users.
Are progressing even at virtually.
Great appreciate the color thanks drill thank Barry.
Thank you I'm not showing any further questions at this time I would now like to turn the call back over to Jim of ankle for closing remarks.
This concludes today's conference call. Thank you for participating you may not disconnect.
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