Q3 2020 Select Energy Services Inc Earnings Call
Greetings and welcome to the select energy services third quarter earnings Conference call. At this time, all participants are they listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star.
Zero on your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host Chris George. Please go ahead.
Thank you operator, and good morning, everyone. We appreciate you joining us for the select energy Services' conference call and webcast to review, our financial and operational results for the third quarter of 2020 with me today are Hollywood, Donnie, our President and Chief Executive Officer, Nics like a senior Vice President Chief Financial Officer.
Before I turn the call over I have a few housekeeping items to cover a replay of today's call will be available by webcast accessible from our website at select energy Dotcom. There will also be a recorded telephonic replay available until November 18th 2020.
Access information for this replay is also included in yesterday's earnings release.
Please note that the information reported on this call speaks only as of today November 4th 2020, and therefore time sensitive information may no longer be accurate as of the time of the replay listening or transcript reading.
In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views of flex management. However, various risks uncertainties and contingencies could cause our actual results performance or achievements to differ materially from.
Those expressed in the statements made by management.
The listener is encouraged to read our annual report on form 10-K for the year ended December 31, 2019, our subsequent quarterly reports on form 10-Q, and our current reports on form 8-K to understand those risks uncertainties and contingencies.
Also please refer to our third quarter earnings announcement released yesterday for reconciliations of non-GAAP financial measures and now I would like to turn the call over to our president and CEO Almadani.
Thanks, Chris Good morning, everyone and thanks for joining us today.
2020 continues to have its challenges, but we've made good progress as the market bottomed in the second quarter over the course of the third quarter. Most economies began the slow path to reopening, resulting in increasing all demand and steadying oil prices, which put our customers back to work.
Given the steep downward trajectory in Q2 and the notable month over month improvement in the third quarter traditional quarterly activity comparisons are less meaningful this quarter, which has led to an unusually wide range of reported sequential activity metrics across various industry sources, including some data showing frac crew counts being up well.
Others reported a decline in well completions.
What is clear is that month over month demand for our services increased over the course of the quarter, resulting in solid 10% revenue growth during Q3.
If we look at our segment results activity steadily increased over the course of the third quarter for our water services segment. This improvement however wasn't quite enough to overcome the slope of Q2 decline, particularly when combined with continued pricing pressures, resulting in relatively flat revenues.
We believe that current pricing dislocations are being driven by significant distress across the competitive landscape and we expect market dynamics to stabilize over the next few quarters as the market turns out, particularly if recent federal support programs are exhausted.
On a brighter note a recovery in activity in your Bakken pipelines drove increased water infrastructure segment revenues and our oilfield chemicals segment delivered significant growth with revenues increasing by 45%.
Importantly, the operating leverage as these businesses combined with the cost savings measures, we've implemented across the company allowed us to deliver 58% incremental gross margins in Q3.
We also continue to strengthen our balance sheet generating 19 million of free cash flow during the third quarter and this takes our total year to date free cash flow to 117 million, increasing our total cash position to $185 million at the end of the third quarter.
As we look forward, it's always a challenge to predict the impact of potential Q4 seasonality, but we're continuing to see activity increase in October and early November before an anticipated slowdown around the holidays in late November December.
As we look further towards 2021, we currently anticipate continued activity improvements and growth and the average Brac count next year off of Q3 levels.
While there are certainly remains a fair amount of near term uncertainty from COVID-19 pandemic risk at this early stage.
Many third party forecasts appear to be indicating a flattish U.S. production outlook in 2021 relative to current level, which is fairly consistent with our overall customer conversations today.
By our estimates this outlook would likely require crude oil around 40 to $45 and would require somewhere between 150 to 175 Frac crews on average during 2021.
These activity levels would support modest improvements in revenues for us on a year over year basis, even after consideration of the pre downturn strength of Q1 of this year. Additionally, given the cost savings measures. We've implemented over the course of the last six months, we are well positioned to deliver solid incremental margins and 2021 as well.
All in all even in a flat production environment next year, we're confident our business can steadily grow revenues and margins over the next 12 months.
As I referenced earlier pricing in some of our service lines, particularly in our water services segment remains challenged today, but we believe we will benefit from an improving competitive landscape in the quarters ahead.
We've already seen and expect to continue to see many of our smaller competitors struggled to survive with a number of key regional and even multi regional players having shuttered in recent months.
The timing of the improvement in the competitive landscape could be impacted by supplemental federal support programs, but we're fairly confident the landscape looks much clearer over the course of 2021, which should support improved pricing.
Looking at our customers, we've seen consolidation in the upstream space continue with a number of multibillion dollar mergers and acquisitions already announced.
This has been consistent with our expectations and we expect this trend to continue as these consolidators, we'll be able to drive the industry towards a more efficient sustainable and scalable shale development model okay.
Ultimately this will have an effect on the services industry as consolidation has historically led to near term Capex reductions. We believe this capital efficiency is what the industry needs and we're positioned well with the right customers that will likely be the consolidators.
Our initiatives around technology, and full lifecycle water and chemicals management will not only provide more efficient safer and cost effective solutions for our customers, but will also help support them in the pursuit of their long term EPS SG goals and initiatives.
Our core strategy remains centered on continuing to provide premier solutions to our customers.
Protecting our strong balance sheet and liquidity and maintaining the flexibility to capitalize on the significant opportunities. We expect will be available to us and I. Appreciate my team's continued focus on all of these areas thus far through this downturn.
We will continue to assess opportunities to grow organically evaluate investments in technology and pursue accretive acquisitions that support our strategy.
While we remain committed to disciplined and patient growth Im optimistic that we will find and execute on attractive opportunities.
With that I'll hand, it over to Nick to walk through our third quarter financial performance in more detail.
Thank you Holly and good morning, everyone.
The third quarter was no doubt a difficult one to our relentless focus on efficiency and customer service led to improving fundamentals. Despite these headwinds the.
The strong 58% incremental gross margins Holly reference Tom prep contrasts well with the 20% Decrementals, we realized in the second quarter was especially robust operating leverage scene in the water infrastructure and chemical segments. We.
We generated our 11th consecutive quarter of positive free cash flow and build a solid works EPS of $185 million in cash on hand.
Even with an improving environment, we continue to progress on our cost savings target our.
Our SGN a decline another 1.7 million quarter over quarter to just under $16 million.
However, I would note that this includes $1.1 million of non ordinary course, bad debt accruals and half a million dollars of other costs primarily related to the settlement of legacy legal claims related to previously acquired businesses.
We expect to push us DNA lower EPS under $15 million in the fourth quarter, while we maintained tight reins on expenses, even as business returns.
Our $117 million of year to date free cash flow has exceeded the full year target. We provided at the beginning of the year before the emergence of COVID-19 generated the sharp downturn.
While much of this has of course been driven by rapidly throttling back spending I believe it demonstrates our ability to effectively run a capex light business, the nimble and decisive on our cost cuts and stay disciplined in a difficult collections environment cash.
Cash flow and liquidity are core to our financial philosophy, and a key differentiator in today's environment.
Turning to our results in more detail select generated total revenue of $101 million in the third quarter up 10% from $92 million in the second quarter with September as the highest month grew.
Gross margins before depreciation and amortization increased to 6.9% in the third quarter from 1.9% in the second.
Due to the high operating leverage of our Bakken pipeline system, and chemicals manufacturing capacity as well as the nonrecurrence of severance and yard closure costs from the second quarter.
Adjusted EBITDA improved by $3.7 million to negative $4.7 million in the third quarter.
Adjusted EBITDA during the quarter included adjustments for 2.2 million of non cash compensation expense $1.6 million of tax audit accruals relating to previously acquired businesses.
$1.4 million of noncash loss on sale of assets and $1.2 million of other nonrecurring costs. I'd note. However that the third quarter was also impacted by $1.5 million of sales tax audit accruals for periods dating back to 2015 and $1.1 million of non ordinary course bad debt expense that were not included in these adjustments.
We had a net loss for the third quarter of $36 million versus a net loss of $53 million in the second quarter due to improved margins lower SDMA and a lack of impairments during the third quarter.
The water services segments revenues decreased slightly to $55 million in the third quarter and 56 million in the second tracking relatively closely to completions. The segment generated gross profit before depreciation and amortization of $1.7 million in the third quarter compared to $1.8 million in the second with segment gross margins essentially flat sequentially at approach.
Definitely 3% this.
This segment remains challenged thing extremely competitive pricing as well as regional volatility will likely face some seasonal pressures further into the fourth quarter that said, we expect to hold revenue roughly flat on slightly higher margins in the fourth quarter.
The water infrastructure segment saw a modestly higher higher third quarter revenue of $16 million from 15 million in the second.
Gross profit before DNA, however, greatly outperformed the revenue uptick moving from $1.4 million in the second quarter to $3.3 million in the third.
Significantly benefited by the return of volumes to our Bakken pipeline system gross margin before DNA increased from 9.3% during the second quarter to 20.7% in the third.
With pipeline volumes trending higher throughout the third quarter, we forecast this trend carrying into Q4 and anticipate segment revenues of more than $20 million with relatively stable low twentys gross margins for the fourth quarter.
The oilfield chemicals segment made the strongest recovery of all three segments with revenue rebounding, 45% quarter over quarter from $21 million in the second quarter to $31 million in the third.
Gross margin before DNA improved from negative 6.8% in the second quarter to positive 6.6 in the third quarter.
Gross profit before DNA improved to $2 million from negative $1.4 million in the second quarter.
The segment benefited from increased market share and activity in both our completions chemicals and WCS businesses we.
We expect modestly higher revenue and mid to high single digit margins for the fourth quarter.
Below the line, we accrued a slight tax benefit during the third quarter, while depreciation and amortization declined to $24 million.
We expect to see DNA continue to decline modestly in the coming quarters, giving them in meaningful reductions in capex spend this year.
We continue to have zero bank debt and enjoy a net cash position of $185 million as of September thirtyth.
Our success in generating free cash flow has exceeded expectations. This year, we are likely to face a slight working capital headwind in the fourth quarter that could limit our ability to further improve on the $117 million of year to date free cash flow during Q4.
Despite the many challenges we have a strong financial position at a time of considerable market dislocation.
We believe this position provides us with unique opportunities, we will evaluate those while preserving the strength.
With that ill turn it over to the operator, and we'll take your questions before Holly wraps up with some concluding remarks operator. Thank.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad a confirmation total indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your head.
Before pressing the star keys.
Our first question comes from JB Lowe with Citi. Please go ahead.
Hey, good morning, everyone.
JV.
A question on I mean, I think the Fourq you guys make sense.
Hopefully, we can get back to breakeven EBITDA next quarter, but I was more curious about what you guys.
We're looking out into 2021 and the two questions I had were what do you what do you consider to be decent incrementals.
For the activity increases you laid out in your prepared remarks, what do you think what do you know what do you think a reasonable incremental would be on that activity.
And then to go.
Given the activity increases that that we expect.
What do you think working capital could do in 2021.
Sure I'll start maybe on the Incrementals than Nic Ken can weigh in on working capital, but as we think about some of the changes obviously that we've made across the business from a cost structure I think earlier in the recovery will see potentially higher.
Incrementals than the normal, but as you think about it in general across the course of next year JV I think looking at our historical Incrementals, which is now 30% to 40% depending on the service lines, we have a little more torque operational led.
Leverage in our chemicals business and our infrastructure business, particularly if we see some of the volumes across our pipeline.
That that clearly will make a difference so that product mix concept on the on the infrastructure water services, that's really a little bit of the bogey and that.
Pricing is going to be a fairly meaningful driver.
On on their incremental as we alluded to in the script and such so that's where we've seen the most pricing pressure given the competitive landscape and depending on how long it takes for that to I'll say normalized and clear out so we'll get back to some more rational pricing.
That one's a little bit harder harder to predict but we are fairly confident with what we see happening in the competitive landscape over the course of 2021 that that does resolve itself.
I'm working capital Nick why don't you hit on that or JV.
We didnt give much of a view on 2021 like like most of the industry as well but.
But to the extent the 2021 is better paradoxically, that's that's going to hold back our cash flow and working capital will build.
But we'll certainly be reviewing our customers' budgets and commentary over the next few months and having discussions with them and.
Try to understand that better before we can give kind of a concrete number there on working capital for 2021, but regardless with our 185 million cash on hand, we certainly feel good about where we are in.
Can handle any kind of upside that leads to a working capital drag there.
Okay great.
My second question was just on specifically on your permanent infrastructure.
In the Permian just on how those volumes or how you expect expect those volumes to trend in fourq and into 2021, both on the.
Your next step the new Mexico line and also the the GR acquisition marketing.
Sure, we probably look at those somewhat together just because the GR system feeds.
The new infrastructure that we've put in place so it's a little hard to break them apart too much but what I would say is our Q3 utilization was pretty similar to Q2 and were expecting.
Probably an uptick in that in the Permian in Q4, and then would when you look at just our outlook on 2021, and maintaining production flat and the activity that that would require.
We would expect to actually see some even continued improvement there.
On that system and clearly it's one of those as having.
The customer base, we have there will be the driver.
As we as we look forward.
All right. Thanks, so much guys.
Thanks.
Next question is Ian Macpherson with Simmons. Please go ahead.
Good morning, Ali and Nick.
Good morning.
Your patience with capital allocation and just harvesting your free cash flow has been.
Has been wise, obviously until now as valuations have continued to.
Be pressured and I know you get it.
In both years small of your shareholders and analysts about redeploying capital into the business or how you think about M&A and.
Your cash balance relative to market cap is rarely been.
More disciplined than it is now so with your operator landscape consolidating and you said you think it probably takes some time, maybe a few quarters for your water services business to to find a more rational footing.
The smaller players clean up a little bit.
Are you content to remain patient and sit on cash or do you think that there could be a narrowing window to do something transformational with your portfolio.
At this point in time.
Yeah, No and I appreciate the fact that you highlighted that patients because its hard at times.
When there is so much pressure, but you'll you'll continue continue to hear that mantra pharma I would say, we look at ways to deploy that capital and at least a couple of buckets Theres, obviously organic and then there is through acquisitions.
On the organic front I think we continue to find multiple.
Multiple opportunities some of that is around technology, where we can invest in technologies that help with emissions technologies that help with water reuse.
Frac efficiency, they're all pretty small, but we have several that we're looking at that I am optimistic about that.
I can be constructive for us.
We've actually initiated a project in the Permian for our recycling reuse facility again relatively small, but pretty strategic it's with one of our key customers.
To help them on their recycling goals. It allows us to potentially serve some other operators in the area. This particular opportunity is underpinned by a contract. So there are lot of singles out there that.
I think in the next quarter or two we'll find some success in delivering good projects that have the right return metrics. When we think on the M&A front, we still stay active and making sure we understand what the opportunities are and and again there. The key is going to be making sure. We deliver something that this is a.
Accretive and.
Delivers value so that'll that'll stay on the radar, but I would say certainly that doesn't it's not the only way we can create value. There are these smaller organic opportunities that we're continuing to execute on I'd add that returning capital to shareholders remains a core priority for us it's just.
The current market and the dislocation we see.
We're pursuing a more comprehensive evaluation of what the opportunities are but.
Certainly shareholder returns remain core to our long term vision.
Thats great. Thank you both for that.
Just last one for me one on the water services side.
It sounds like.
Averaging correct me, if I misinterpreted as it sounds like.
Pricing has more has close to bottom, but it's it maybe is a bleeding weve had.
Headwind still into Q4 that may maybe will stabilize by the time, we get to Q1, so that if.
If your outlook for total market activity and volumes.
Next year proves proves accurate than you would expect your revenue for water services to be pretty we're pretty well correlated with activity is that the right way to think about it.
I think Thats fair I.
I guess the way I would think about it and as that.
You're right we have found the bottom on pricing. We're just we're at a point that we're not going to go lower in our customer base understands that and.
There are people that can bid subsidized labor and they can do that for a bit longer but thats going to go away. So I think the way to think about our services Biz water services business is as you described it one nuance I would note is that the.
Our water services business had fairly strong representation in the second quarter and for a good part of the third quarter from some of the Gassier basin.
And we do expect those to slow down a bit more going.
Going into the fourth quarter, just because they they deploy their capital fairly ratably over the first part of the year. So the seasonality we will get.
In that basin will be no I'd say more like historical levels.
Versus being muted like we're expecting and some of the Oilier basins. So that does change your starting point a bit for for water services.
But at least from a go forward perspective, tying it to activity Frac crews in particular is a good way to think about it.
Great. Thanks for the insights appreciate it.
Sure.
Next question, Kurt Hallead with RBC. Please go ahead.
Hey, good morning.
Thanks.
Hey, Thanks, Thanks for all that great color and perspective on your views for not only next quarter, but going into next year. So.
So I guess holley from where I sit right kind of look at it.
The outlook that you provide.
Gave us the context around oil production holding flat for us and what that could mean for potential average number of frac crews operating throughout the course of the year and I guess, what what I could use maybe a little bit more.
Context around would be you're still going to be down in terms of overall frac activity on a year on year basis.
For next year right. So it's hard to kind of get my head around how water solutions water services could be up.
Let's say 21 versus 20, so I know you talked about how revenue should be up on a year on year basis.
Spoken a little bit more context around that I would guess it'd be more like Kevin.
And what by the by water services. So maybe you can help me calibrate that.
Sure and part of it hurt is that I know we've struggled as we've been trying to compare second quarter to third quarter activity levels.
It gets.
Challenged as you have the volatility that we saw but if you think about it the average Frac crew count in 2020 is Paul it's below 150, yes, probably in that 100 340 range. So when you look at Twentytwenty, one and have 150 to 175 average than that.
How you start to see that ability for.
Water services revenues to grow and then the other thing I would build then there is the pricing pressure started pretty heavily in Q2, it's running its way through Q4 and were optimistic I don't know if it's next summer, but certainly the back half of 2021 would expect pricing.
To be more normalized and that will also help the top line.
Okay, all right. Thanks.
That's helpful context.
So I appreciate that for sure.
Okay, and then just just for point of clarity here to make sure that.
Paul.
With the correct message based on fourth quarter. So Nick you expect EBITDA to be positive in the fourth quarter given your guide audience.
Yes, we do and we can we can walk through those segments, a little more but I think if you take our guidance on a segment basis.
Along with the EPS DNA.
That's that's likely where you'll end up.
Okay, all right Thats, great Thats It for me. Thank you.
Once again, if you would like to ask a question. Please press star one on your telephone keypad. Our next question comes from Thomas Curran with B. Riley. Please go ahead.
Good morning.
Morning, Tom.
On pricing for water services across your offerings, how much is average pricing down from its 2019 high and then.
Of that division six segments, where is pricing proving the most resilient and fragile respectively.
Yes, it definitely does.
Range across the service lines that I think the 20% to 30% is probably the right perspective, when you think about the degradation.
That we've seen I would say it does become a little bit regional.
After that as we think about what what held in better than than others. Clearly things like are you find our chemicals business, our infrastructure business, our margins aren't as impacted by pricing adjustments, just because our cost structure water sources raw materials tend to move with it but obviously on the services side are.
Cost structure labor and some of the fixed cost that we have make that a little more challenging to manage to to the to the margin.
Line, but I think as you're looking at the world at 20% to 30%.
Reduction is is the right lens to view it from.
As far as the Hanes and.
Alan go ahead.
I think the kind of the services element that we hit on have been more challenged than they can.
Chemicals and infrastructure.
And within it.
Which which segments would you highlight as as having been hit.
The most in the least.
I would say then.
Fairly non discriminatory it his.
It's.
When certain of our service lines, we do find ourselves you still have some smaller regional competitors that we're up against and unfortunately when activity levels fall to the level that they have it allows that that layer essentially of service provider to set the price.
And with federal funding programs and the like it is just led to something that frankly is we've not seen before and there's plenty of work that we walk away from in the sense that we aren't even close.
Then we find our core customers, who know that we're going to be here, we're going to provide the level of service that they require and they're essentially I'll say paying a premium to the predatory type pricing level and that's that's where again it while it's impacted pretty much all of our service lines.
It's not something we suspect or expect to sustain.
Okay and then following up on on Ians question about your capital allocation priorities and decision making process.
When it comes to how your acquisition opportunity set is evolving would you be open to and already expecting.
To participate.
Seen auctions or liquidations when when some of these struggling smaller private players.
Start to go under.
Is that is that a means of picking up assets.
That you're interested in anticipating and then.
What are your criteria.
[music].
Moving forward from here with with with the cash war chest, where it is.
For deciding to become more aggressive with share repurchases.
Sure I'll start with looking at auctions and things like that just stepping back Tom oftentimes. The first companies to go are those that have older worn out equipment. So certainly our hope is most of that finds its way out of the market it scrapped.
Because that will help manage the supply demand dynamics I'd say, we are aware when these these auctions do occur just to make sure. We take the review the guys in the field, we'll look at these but but also thinking through our needs.
Our equipment fleet today, as we look forward, while there'll be some small investments that are required along the way, we're pretty well equipped to manage and meet the needs of a 150 Frac crew market 175 starts to put a little more strain on our fleet, but.
We're not looking at needing to add a tremendous amount of capital for next year. So with that we're we'll be very selective.
And again a lot of the assets that are coming to market are probably not the assets that are going to be needed to serve sort of the future needs of customers.
As we think more broadly on the capital allocation as Nick said returning.
Value to our shareholders and we have multiple ways clearly of doing that is investing and do accretive value.
Additive grew.
Growth if it's buybacks its dividends all of these things are on the table that we continue to assess and try to determine the best means of being able to deliver that value to shareholders.
Thanks for fielding my questions.
Thank you.
Next question comes from Sean Meakim with Jpmorgan. Please go ahead.
Thank you Hey, good morning.
Morning.
So higher water services and the volume question into next year.
We've seen pressure pumpers experience much lower revenue per fleet in threeq and into Fourq use.
Yes. These are taking advantage of lower sand cost to self source, thanks to cheap spot pricing in the same markets, obviously water and sand sourcing to different markets, but are you seeing shifts in behavior. Among your customers in terms of how their sourcing water is that impacting how you're performing in terms of volumes versus the broader completions market.
Not not really Sean what I would say on the water sourcing side, what didnt change in Q3, and we'll probably start to shift back in Q4 is that our customers because their activity levels went down as much as they did they weren't using as much.
Produced water they were using other brackish sources that we typically would would provide so in some ways.
As the market sell our water sourcing volumes were impacted as much keep in mind that the smaller and lower margin piece and what we what we do but what what did change is the type of water being used so that's a trend we expect to go back the other way.
So higher volumes of produced water, which again I think lends itself to our level of service our treatment capabilities. The more complex chemistry, we can apply to that I think that probably the trend more more to watch.
Okay. Thank you for that and.
And then coming back to your margin question for services.
Appreciate thats very thats experience most pricing pressure.
It's also historically the lower operating leverage business labor is the biggest component of Cogs in that.
As more of a variable cost for you.
You are working to take costs out, but if we're looking ahead, new you're dropping at a low single digit gross margin for the business you previously Pete say mid Twentys in 2018.
How do you think about normalized gross margins for the business and as you look at the past the where we are here to there how.
How much of that is volume driven versus pricing.
Yes, great question and I wish we had a more I'll say precise quantitative answer to it but it but it's absolutely. Both so I think in the near term to your point when we add business, yes, we need to add labor, but we don't have to add another yard. So there is operating leverage across our.
Across that business now.
Not as strong obviously as chemicals and infrastructure, but it does exist, but the pricing will be the bigger lever likely.
As we as we work our way through through 2021.
And if you wouldn't mind just to follow up on that if we think about.
Fixed versus variable costs are you able to maybe give us a rough breakdown across.
The business segments, the relative scale it could be helpful for people.
Maybe the easier way to answer that.
As Sean has more back to the incremental that you find that on the water services. Those incrementals are probably in that range of 30 to 40 to water services is going to be at the low end of that range, whereas our infrastructure in our chemicals or at the higher end of that range.
Got it very good thank you.
Sure.
I would like to turn the floor over to management for closing comments.
Thanks, and first I want to start with a thank you to the group are taking time to listen in this morning recognize it it was a pretty chaotic morning, Ana and a lot of information for people to digest, maybe no conclusions, but certainly information and that makes all our our job a little bit harder. So maybe I'll just close with this that.
As we indicated nobody is immune to what's going on in the oil field right now, but what I remain confident about is that oil and gas is going to play a critical role in powering economies around the world and to do that we will see an improvement in activity from from where we sit today and while I wish I had more visibility on.
On the timing and the cadence of that improvement what I can say is that select.
Select continues to be unique in terms of when you think about our market leading position our full fluids lifecycle offering and the fact that this has proven to be a cash flow generating business and that's what led to the debt free balance sheet that we have today and all of that is going to position us well as activity levels due to improved so again, thanks for joining us.
Today and have a good day.
This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.