Q4 2020 Solaris Oilfield Infrastructure Inc Earnings Call
Good day, and welcome to the Solaris for quarter.
For the 20 earnings conference call and webcast.
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I would now like to turn the conference over to Yvonne Fletcher.
Senior Vice President Finance and Investor Relations. Please go ahead ma'am.
Thanks, Rocco good morning, and welcome to the Solaris for fourth quarter on 'twenty.
On today's conference call I'm joined today by our chairman and CEO, they'll start low and our president and CFO Kyle Ramachandran before we begin I'd like to remind you of our standard cautionary remarks regarding the forward looking nature on some of the statements that we will make today such forward looking statements may include comments regarding future financial results reflect.
On a number of known and unknown risks.
Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.
I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance.
The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP reconciliation.
Reconciliations to comparable GAAP measures are available in our earnings release, which is posted on our website at Solaris oilfield dot com under the news.
I'll now turn the call over to our chairman and CEO Bill.
Thank you you've on and good morning, and thanks, everyone for joining us today.
2020 was without a doubt the most challenging year in our company's history and I am proud of how the Solaris team managed through it.
'twenty one appears to start off with an interesting twist and want to make sure that on.
All of your families and friends are safe following last week's unprecedented.
On the resulting in loss of power and water for many members of our community while much infrastructure is operational again, the full impact for this weather event are still not completely known as many people wait to repair damage to homes and property and many still do not have access to clean running water. We've overcome so much over the last several years and we will work for our employees customers and.
On a cold days to earn insurer a quick return to normal.
Our team reacted swiftly in 2022 U S completion activity came close to a halt earlier in the year and then quickly ramp back up during the back half for the year, we got leaner adapted to evolving work environments continue to innovate and most importantly, we continued to Brian.
The highest level of service quality to our customers and did so safely as a result, we produced another year of positive free cash flow maintain a debt free balance sheet and continued to pay our shareholders for steady dividend.
Completions activity in the lower 48 during the fourth quarter benefited from improved commodity prices, we saw a W. T.
However from the mid <unk> per barrel to close to $50 and a subdued frac holiday that we typically experienced between Thanksgiving and the end of the year Solaris deployed 42 systems on a fully utilized basis during the fourth quarter, a 24% sequential increase we generated a 23% sequential increase in revenue to over 25 million.
Adjusted EBITDA increased 55% sequentially to approximately $5 million, we generated our eighth consecutive quarterly.
Positive free cash flow and we paid our ninth consecutive quarterly dividend.
Ended the year with $60 million of cash and no debt.
So far on the first quarter of 2021.
Prices have continued to climb supporting continued completion activity and increases in the rig count as we look at the remainder of the year activity levels will be driven by multiple factors, including the ultimate pace of economic recovery potential regulatory challenge changes and the resulting supply demand balance in oil and gas we expect continued financial.
I'm on for most public company operators, despite fluctuation in commodity prices as they continue prioritizing balance sheets and dividends as well as digest recent M&A activity.
The U S shale industry continues to mature from consolidation to the continued pursuit of operational excellence our industry is focused on continuing to safely produce reliable.
Liable and economical energy for our country in many areas of the world with this maturation, we see increases in efficiency as a way for Solaris to bring value to its customers for.
Data optimization to lowering carbon footprint optimizing operational efficiency. We're excited about many of the technologies being utilized by our customers today.
Leanne.
Manufacturing is at the core of any mature industry and U S shale development and began with transitioning from single well drilling and completions to multi well pads. Then came the transition from plug and perf completions done in sequence for zipper, Fracs and zipper Fracs, we perform operations on two well bores in parallel perforating, one wellbore, while fracturing the other wellbore.
And then alternating stage by stage now we're seeing the next step change some of Fracs during summer Frac operations, where fracturing two separate wellbore at the same time. The net result of this evolution is more stages completed per day more sand pump per day and significantly reduce non pumping our idle time.
It had been on a number of.
<unk> recently and have helped our customers achieve record levels of sand throughput per day.
While subtlety, most likely won't work on every pad and for every operator, we are seeing an increasing number of operators try that.
We believe our technology is well positioned to benefit should this trend continue as having a large reliable and buffer of sand chemical and water supply.
These jobs capabilities become even more important when two wells are at stake.
As operators look to reduce their overall carbon footprint, we've seen an increase in electric Frac fleets. As a reminder, our equipment has always been 100% electric and for several years, we've integrated directly with electric frac fleets tying into the same power used by the pump trucks eliminating.
On the delivery for generators on diesel fuel, reducing emissions noise and further improving overall reliability and cost.
The interest rates push for increased reliability efficiency and lower cost.
As a direct tie to our sustainability goals sustainability to Solaris means being equally committed to all facets of ESG. This includes not.
And the lower cost and carbon footprint on the environmental side, but also continuing to improve solaris social aspects, such as improving affordable energy and access and giving back to the community as last week's extreme weather event has shown access to reliable and affordable energy is a basic requirement for society to flourish and only a balance of multiple energy.
Im just going to ensure that governance is equally important for us is over 18% of our company is held by insiders, which creates a strong alignment with our fellow shareholders I Hope we show on good capital stewardship to our investors through our capital discipline and strong support of shareholder returns, including through our dividend throughout this past cycle I look forward to continued engagement with.
Types of stakeholders on our sustainability progress.
I'll turn it over to Kyle next to expand further on what we're working on to help further these goals.
Thanks, Bill and good morning, everyone from our beginning our focus has always been on improving operations on the low pressure side of a well site, where sand water and chemicals are stored.
We saw bottleneck.
Bottlenecks, there seven years ago, which created the catalysts to start soliris over the course of the last seven years, we've continued to identify additional challenges and opportunities for Solaris to innovate today I'd like to introduce our latest disruptive innovation.
Our engineering team has designed and our manufacturing team has built a.
A patent pending technology that extends our traditional equipment from a storage solution to a hydrated delivery system, replacing a traditional blender as we know it.
The industry is imprudent blenders over the years, but the basic design and function Hasnt changed in 40 plus years, we're reducing both both the physical.
<unk> and human footprint through innovative design and automation freeing up space on location and driving costs down for our customers.
At a high level, we have built the first true sand to mixing system that.
It's directly under our traditional six pack of sand silos.
The unit will immediately combined water.
Sand and chemicals and deliver a pressurized slurry to the frac missile, eliminating the traditional blender with problematic San screws in hydraulics.
All of our equipment is all electric and operating either automatically <unk> remotely in.
In addition shoot our routes it has multiple redundancies to ensure reliability and maximum.
Okay.
The new delivery system will also further reduce fugitive dust on location as sand is immediately mixed with water depths on location has become an increasing focus for the industry, particularly due to the increasing amount of sand pumped per day during time of Fracs and the industry's continued move to regional sands, which at times had been founded.
Higher levels of stupidity and potential dust.
In our traditional setup, our auto Hopper technology also eliminates the need for a person stationed at the Blender Hopper.
We have completed initial testing of the delivery system at a sand mine and we expect to begin field trials with one of our key customers in the coming weeks, we've not yet determined.
<unk> final commercial model for this new technology, but we thought it was important to show you some of what we've been working on and towards.
We will be highlighting the newest edition to our full suite of innovative equipment gearing Solaris technology 2021 a two day open house in early March in Midland that'll be outdoors and allow for plenty of opportunity.
A D to social distance and stay safe please reach out to us if youre interested in attending.
With that I'll now hand, it over to Ivan for a more detailed financial review.
Thanks, Kyle to recap some of our numbers during the fourth quarter, we generated over $25 million of revenue adjusted EBITDA of nearly $5 million and positive free cash.
<unk> approximately $4 million, we averaged 42 fully utilized systems deployed to customers, which represents a 24% sequential increase total.
Total revenue increased 23% sequentially driven by an increase in activity as well as an increase in last mile services, which as a reminder has a large trucking revenue component.
It can be multiples higher than the rental contribution from a typical system the contribute similar margins on a dollar basis.
Over the course of the quarter, we deployed a total of 85 proppant systems, which work with varying degrees of utilization in the fourth quarter. Our calculation at 42 fully utilized systems reflects a number of equivalent systems that generated.
<unk> revenue every day in the quarter, which we believe is the best measure for modeling purposes.
For full year 2020, we generated revenue of $103 million and adjusted EBITDA of nearly $26 million on an average of 45 fully utilized systems in response to the industry downturn, we reduced capital expenditures for two for the year to about.
Hum.
Share to $35 million spent in 2019, our capex in 2021 predominantly towards the final enhancements to our existing systems as well as some of the new product development as Kyle highlighted.
Operating cash flow was approximately $44 million and after total capital expenditures of approximately $5 million, our free cash flow.
Positive $39 million for the year.
We returned a total of approximately $46 million to shareholders in 2020 $19 million on dividends, which was flat with the prior year, despite the downturn and nearly $27 million and share repurchases earlier in the year.
We ended the year with approximately $60 million on cash which.
Low with a pound slightly from $61 million on third quarter, following the fourth quarter dividend payment of $4 8 million.
Turning to our outlook for.
Whereas the systems deployed in January were up approximately 15% from fourth quarter 2020 levels as noted by other North American oil and gas service companies last week.
Weather event will have an impact on first quarter financials.
Many completion jobs in the Texas based on where initially delayed by a week and we are now seeing that flip another weekend on cases as bottlenecks on the supply chain continued to get worked out.
Assuming a return to normal activity levels and then next week, we expect our activity to be up in the 10.
10% to 20 per cent range in the first quarter.
Total SG&A costs for the fourth quarter were approximately $4 $3 million inclusive of noncash stock based compensation for the first quarter of 2021, we expect total SG&A to be between $4 $5 million to $5 million inclusive of the normally quarterly expensing of.
Noncash stock compensation.
For full year 2021, we expect our capital spending to be in the range of $5 million to $10 million compared to $5 million in 2020.
We expect spending to be similarly focused on system enhancement software development and new technology.
Looking into 2021, we are excited about our prospects.
Back to the company in an industry, we made investments during the downturn and are entering 2021 with an enhanced product offering we've shown capital disciplined by maintaining our commitment to our dividend through cycle, while maintaining a debt free balance sheet and a strong cash balance we have evaluated many M&A opportunities, but have not yet found the right fit that matches both our strategic.
Turn thresholds, we will continue to opportunistically.
Opportunistically and thoughtfully evaluate both organic and inorganic growth opportunities and we remain committed to returning cash to shareholders with that we would be happy to take your questions.
Thank you we will now begin the question answer session to ask a question you may postpone memorial day.
You touched on flow.
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Your question. Please press Star then two.
Today's first question comes from George O'leary with T. P. H and company. Please go ahead.
Good morning, Good morning, California, Nevada.
Alright, good morning.
On that day, the new technology rollout.
For places around into the blender from the low side. It seems like size is fairly important here and you guys.
And found a way to make this thing smaller if it fits underneath those silos I wonder if you could talk a little bit more about kind of what this looks like and what the.
He.
It came on with the idea that to displace that blender and.
Yeah.
I know you haven't done the field trials, yet the thoughts are on reliability given the blender can often be one of the most problematic components on the on the well site.
Well I think your last sentence George was exactly what threw us evaluating what is one.
For the most problematic unreliable pieces of equipment on the well site, that's sort of how the company started in listing jobs and being out there.
At the time, you'll see a backup blenders sitting on the parking lot next door as close as possible because you know what's going to be a problem.
What we did was sort of took a blank look at our system how it fits what.
Together and created a blender system that replaces the belt. So the two most unreliable pieces or the blender and about systems and so we are we put the day blender as mixing times between the sets of silos, replacing that.
<unk> and allowing fluid flow to for that minimum.
What works for movement and the way the pumps are set up do you you've taken away the rotating piece of the Thunder screw all those delivery mechanisms, where reliability is of problems and we replace that with with another set up then that's all we'll say on details on it yet, but and that's the way it's worked and it's so far.
We arrived on obviously, you know, we're going to need to put millions and millions and millions of pounds of sand through it to ensure that it's there but all the work we've done on it. So far is very promising yeah, one other point on our footprint.
At this time on Frac trend is is an interesting on from a number perspective the footprint.
For our work challenges exist in the sense that.
Operators don't want to expand their their footprints more money right. So you lose some of the efficiency in the channel Frac.
But you've got more equipment out there you've got more pumping horsepower and so what we've been able to do is continue to compress the footprint between water sand chemicals and now this mixing system.
To further allow more pumps to get in and to service those Halifax.
Got it that's very helpful. Thank you both and then sticking with that final frac topics on the Fracs and dual tracks closely and increasing the share of overall completions pie.
And if you thought about how many wells you're systems are on where you're seeing time on frac, six or 12 months ago versus where you sit today you know could you could you frame that in the broad brush strokes for us.
It's up you know one of the things we always talk about is there's multiple different approaches to sign on fracs. So I don't think anyone.
Ironed out what the standard setup looks like you know one of the challenges is certain pads on three or five or seven wells I'm not nice clean even numbers like for an eight that don't drive nearly as much.
Benefit when you look at the time of Frac. So, it's it's starting to gain more and more momentum we've seen a couple.
That's really for writers, who previously had never done them try them. This year. So it's definitely something that's gaining momentum but from a quantification standpoint, I don't think we have enough data points to say that X percent of our work is on time on fracs, because it does tend to flow where well be on one pad with a customer where it has some effect.
Our next pad it may not be.
Okay.
Okay Fair enough. That's that's that's helpful. And then just thinking about the trajectory of the U S frac spread count across the year.
February weather related issues that go on.
On the U S, but most acutely in Texas aside.
We assumed commodity price is kind of hanging on.
Where they are seem to be two schools of thought one that frac spread count rise up really quickly early on a year and then just kind of flattens out and his guys are chasing flat exit to exit production. This year and then another school of thought that next year, there's going to be some gross on the table. So on the back half you have to start.
Anything to add.
To achieve that growth in 2022, I guess, what do you see and what are you hearing from customers. How do you think about that kind of medium term frac spread count beyond just the next quarter.
Well I think it weighted kind of look at it from a high level budgets mcelligott, operator budgets, we do see a continued.
Our ramps and activity this year at least capital spending on the margin when we look at Frac fleets, It's got multiple dynamics, where you've got efficiencies that that go against sort of on the growth in capital spending, but you know I think when most for putting their budgets together they they certainly werent thinking about $60 oil and probably not $3.
The increase so I think the commodity is very constructive.
There's just a ton of pent up demand that's going to support the overall supply demand.
[noise] component on on the commodity so I mean, I think we feel excited about the rest of the year there will be as we.
GAAP mentioned in prepared remarks operators will be disciplined, but we feel like there there is some green shoots out there.
Alright, I will turn it back over thanks, guys.
Thanks Ross.
And our next question today comes from Jonathan for Cowen. Please go ahead.
Hey, good morning.
For corn.
So.
Along that same line of questioning I guess I'm curious with what's the commodity price being a little bit more constructive have you had.
<unk> works with your customers.
Different than initial discussions.
For and perhaps November and December of as you plan for the 2021 year.
I think it's a net increase I mean, I think we've seen folks more interested I think it's it's a little bit on spread between the private and the publics, but even even the large guys are looking at this price deck.
With mandatory 22 completion plan may be moving up for the third and fourth quarter of 2021 on all really depends on what happens for the pricing here.
There is an increase.
Obviously gas prices, where they are and maybe ending the season with.
Very low inventories.
We'll be constructive on the on the gas only drilling as.
Well.
Thanks, Bill and then.
One on on the guidance for activity for the first quarter up 10% to 20% with January tracking up 15% is the thought that the.
March exit is equivalent.
Equivalent to where we were in January or.
Anywhere and any way you can help me think about those bookends of 10% to 20%.
Bookings are really driven by the the last 10 days or so we were out in Midland.
I don't know 10 days back before the storm hit Houston, and then we started to see things slow down and that type of seed persisted.
Is there.
It's not as easy as just turning everything back on on the supply chain does take a bit of time to ramp the sand mines. Many of them had limits on how much gas they can consume the dry sand. So we'll see some tightness there so the supply chain is a bit tight.
Titan trucking, probably isn't going to have some pockets of.
Of challenges here ramping back up so I think that's sort of the range. We provided guidance historically when we've had these weather events.
Our business really has not been impacted nearly as much as you can see on say a more stage count driven business, but our business has grown in the last mile piece as we've talked about for many.
<unk> orders and so that business, obviously is driven on a on a tonnes pumped metrics. So when we've got jobs that are down for a week you know obviously, there's there's not a whole lot of tons being pumped. So I think that's sort of why we're providing that the range.
Had the weather that not happen I think we talked about January.
<unk>, 15% and we feel like that.
Quarters.
Weather aside evolving very well, so I think that our guidance would have looked a little bit different if we hadn't seen that weather event. So again, we're still early on and trying to figure it all out but that's why we provided the range.
Yeah.
That's that's helpful. Kyle and then.
For being a last one for me is just on your cash flow outlook for the year on I guess.
Cash after the dividend. So you gave us a $5 million to $10 million of Capex or is the thought that you'll adjust your capex level such that you can remain.
On cash generative or at least cash neutral in 2021 or.
How are you thinking about that.
I think it ultimately depends on the success and capitals news capital spending is worse wing is going to be I think we're we're not managing necessarily of that cash for managing to weather.
We have a product that we want to spend money on.
And so we have started to ramp up spending on some of these new developments and so that's the swing greater than probably anything else at this point in time.
Okay. Thanks, I'll turn it back.
And our next question today comes.
For the women's and girls with Stifel. Please go ahead.
Hi, Thanks, good morning, everybody.
Just curious on a similar vein when we think about the new technology and.
And I think you've got a cap on it.
10 million this year, how much of that is targeted that's developing.
For the new technology, and how much you sort of maintenance levels.
Last year was five and we spent a little bit on day technology. So the technology, that's being rolled out here in March.
A lot of the capital was spent last year. So you can think about.
The five level, having a mix of both.
But I think when we think about flat this year year over year most of that will be in the non growth perspectives for the the increment from the five to 10, I think is where the gross.
Great. Thank you and then.
There is there was always one customer that came out and sort of talked about the benefit.
Dialogues as far as sand mitigation recently.
When you think about your.
Your market share your pricing structure.
Has there been much change there.
As.
Things have evolved and maybe along those same line, where do you think about this new technology.
Do you think it.
Captures more revenue at the well site, which clearly does but do you think it affects your share going forward.
It's too early to tell on how that impacts share I think we haven't I would share with the electric frac fleets today, I think thats, a real target market for the new blender.
On.
It fits so well in that setup and minimize the footprint, but I think looking for.
Uh huh.
<unk> share in economics on the wheel.
Pricing has been relatively muted volume.
So.
Hopefully we've done a really good job with our customer.
Because <unk> did.
And on a level that we're not.
Moving pricing up and down as much as some more commoditized products have.
Kept it pretty steady so I don't suspect that we're going to try to create.
Create a whole lot of price price.
Price increases throughout the year I think we've got plenty of capacity.
Mers.
And we want to put it to work on want to provide a good job for the customer we want them to be there with us.
The next downturn whenever that is hopefully its 2040.
But we'll see.
Okay. Thank you.
Yeah.
And our next question today comes from Ian Macpherson with Simmons. Please go ahead.
Thanks, Good morning, everyone.
I also wanted to ask about your new.
New blending system I would imagine there could be some friction points, whereas your you know whenever you're displacing an incumbent.
The pressure pumper is have a per capital intensive.
Fleet.
Set up and so I wonder how are you.
So you're obviously, you're well aligned on the electric fleet side and this seems to be a problem solver for more congested.
Simultaneous well sites, but where do you see your natural sort of alliance and friction points. So as you as you look to penetrate with us.
Let's start on maybe what kind of finished but if you go back.
Seven years ago every silo displaced a piece of capital equipment that a proper one so.
We've seen the evolution of providing better equipment more reliable assay for equipment on the wealth side that actually add some value. So we think there is a value add there we as we mentioned we haven't.
Fully define the business model on the revenue model.
Structure of that yet with our customers and we're gonna be working for that but.
I think we believe that.
Fundamentally equipment that saves people saves energy saves real improves reliability. It will have a place in that.
On the chain of fracking.
And I think we spent the last.
On the having lots of discussions with operators and pumper is around this technology.
On a year ago. The cadence was that looks really interesting and this is mainly for the bumpers that looks really interesting, but I've got a lot of lenders on my own that I'm going to be focusing on getting worked over the last year. Those lenders are continuing to work in.
Last year like anything else, it's incurred a lot of maintenance and sort of maintenance capital keep it going and so as we've rolled this out and giving people the update of here. It is we've actually built it this isn't theoretical.
And here are the capabilities of it and they're seeing their business evolved with more and more sand being consumed and the need to condense footprint.
On the people are much more interested in seeing the benefits in figuring out how they can work well with us on the commercial model will be worked out in due course, but I think it's a innovative piece of technology in the industry is recognizing that innovation is key to success.
Very interesting thank you both.
I think for kind of I wanted to ask you a follow up also.
Regarding.
The outlook for your margin Incrementals.
We continue to ramp higher during the last cycle from.
17 into mid 19 when revenues for growing.
Pretty consistently.
Sure.
Cycle EBITDA Incrementals for north of 50% and then as we've been coming off the bottom in the past couple of quarters, we've seen them, 33% to 35% I think.
Irrespective or separate from the new technology on what that might do to the business, but just on on the current business.
Do you think the opportunity to get back into.
30% EBITDA margins as we get some more momentum behind the business.
Because it is a plausible.
Aspiration.
Yeah. Thanks Ian.
The business has evolved and so when we looked at the 17 to 18 sort of time period, we didn't do any last mile work the last mile business.
Generally speaking has call it 10% to 12% margin because of the large trucking component. So I think it's hard to really look at where we are today and say that on an EBITDA percentage basis. We would look like we did back then because the business has evolved and we're doing more things. So I think that becomes.
This challenge, but one of the things I wouldn't hit on is we've got a really lean cost structure, we figured out ways too.
Did do maintenance and remote.
Sort of insights into our operations that allow us to run the business more intelligently with.
Fewer people required to do the same amount of work.
I think we're making those kind of investments but the.
Peak over peak EBITDA margins are challenging because the business is just evolved.
Yes that makes sense.
I was going to ask one more if theres time. This has already been teased in Q&A, a little bit, but the 2% to 20% activity increase.
Kris.
One could you pro forma that for us excluding the recent weather impacts would it had been five or 10 points higher or would you take a stab at that.
Well I think what we talked about is January was up 15%.
And so.
From a pro forma I think we're still trying to sort out what the weather impact will be because it's not.
Not quite done yet to be perfectly Frank okay.
We'll follow up later on in the quarter on that.
Thank you gentlemen.
And our next question today comes from J B Lowe with Citi. Please go ahead.
Hey, good morning, Bill Kyle on.
Hope you guys are doing right now.
Just quickly.
On the I mean, I know that you guys are pretty careful about messaging.
Your technology.
Initiatives to the street, so it's good to hear that.
On the new piece that you guys have coming on I'm, just wondering when youre going to customers on when you were talking to customers about about this potential new new technology.
What was the pitch was it wasn't on a downtime reduction effort was it.
Was it more strictly on the footprint side, but what's kind of like the picture. If you could put some numbers around what types of like downtime.
A reduction.
Potential this thing could have when you're talking to your customers that would be helpful.
Well, we're not pitching numbers at this point I mean this is an idea. This is Doug. This is mechanically much more sound in the old way of doing things, we've removed a bunch of pieces of equipment in the process that our reliability challenges and so that among itself helps it does shrink footprint.
An important driver, but it's not as important I think is having something that removes people that's more automated and is much more reliable.
Really.
Those benefits are pretty outstanding when you put up but when you sort of look through it and obviously, we have a lot more data together on what that does on the walls.
And back.
That said plan lean manufacturing unit, just logical if you'd look at what what's going on today, where.
Loading silos, putting them on balance and delivering it into a hopper that then has conveyed.
Conveyors that moving into a tub, we're just kind of eliminating a lot of the steps on the pitches basically why are we doing all of this and let's do.
Back to the proficient and reliable way and so I think it resonates well.
Okay, I'll look forward to hearing more about that.
The next one is just on the M&A front I know you guys don't necessarily want to discuss exactly what your youre looking at but.
Maybe just a sense of of which direction, you're kind of looking at in terms of potential.
No more physicians as it is it more well site equipment is it is it more on the software side.
You mentioned that last mile is becoming a bigger pieces is that something that you guys would look to expand into just wondering if you could talk about that a little bit.
I think it's all of the above and it has we're clearly selective on what we look at and it needs to be at the.
On a price or something we can build ourselves or recreate.
But it's it's all of the above we like to improve.
The low pressure side of the wells that activity, we'd like to improve our ability to manage the logistics and supply support for that piece of that and all of that wrapped up into into how do you do that whether it's acquiring additional technologies.
The write through others acquiring additional businesses in skill sets for from other companies. It makes sense tuck it into the platform, but we're we're still they need to have the right return profile before they do anything okay.
Okay, Great and then last one for me is just on the chemical systems any update there how does this how does the chemical system.
No kind of come.
Allergies with or does it come on with the new piece of technology, just any update on that front would be great. Yes.
Yeah, No I think it does combine well.
The notion that we're running all of this remotely ties well into the chemical system as well as the delivery system. So I think they did go well together and just for an update.
<unk> had a couple as we have had for a number of quarters working for customers again continue to really like the value proposition one little piece I'll add them in.
It was I think picked up maybe in the 10-K.
But we built a couple of water Siloed last year, when we acquired the business in 2014 there were.
For one set of three water silos, and they've kind of been on the back fence for most of the history of the company, but probably 12 to 18 months ago, we put put them back out and we built a couple of last year and so it's again condensing footprint, providing a hydrostatic head to the to the well site that allows you to use your pumping.
A few more efficiently.
So that's something that we're we've got our eyes on and so again, we've always talked about water sand chemicals, and now blending them all and so that's kind of interesting to watch as well.
Okay great.
Clarify on that line and when we say built we really mean converted so what you'll see in the in our case, we have 165.
Capacitors now and two sets of waters Islands and unfortunate Kent.
Okay interesting alright.
Alright, thanks for the time.
Our next question today comes from Thomas Curran with B.
Securities. Please go ahead.
Good morning.
Good morning, Ryan.
Are there any aspects of this new.
Standing system that should enable or create the potential to leverage Solaris lens in new ways.
Yeah.
Absolutely I mean day, the data support and what we deliver on how you manage that is all all in the same platform. So the Solaris lens is monitoring and tracking activity now at the.
Blend level and feedback for the Densitometer and ways to ensure that we're getting accurate blending all of that is coming through the same day to platform.
Great and then turning to the competitive landscape with recent changes or trends would you highlight on the private side have you seen private.
Blender flow on box rivals, especially smaller ones start to reactivate or market more assets pursue consolidation in pursuit of critical mass.
What would you highlight that you've seen happening on that side.
I mean honestly hasn't been a ton I'm not seeing really a lot of consolidation we.
Saw one provider go through their chapter 11 process.
The innovations that we're seeing people are continuing to try and get more and more sand per truckload I think that becomes that continues to become a.
On that continues to be a factor of how you drive trucking efficiency, how do you turn truck.
We saw quickly that continues to be a theme.
And we've seen people used pricing continues pricing in different ways.
Anecdotally, we picked up some work because another provider got more aggressive with pricing, which was in some ways constructive for us to see in the marketplace, but our economics.
<unk>.
Do not require us to drive up pricing did it to make a good return. So we have seen a little bit on the margin.
Interesting that's helpful. Thanks for taking my questions.
And our next question today comes from Chris Cooley with Wells Fargo. Please go ahead.
Thanks good.
And that just one more question on how are the new blender interacts with the chemical systems will you need to have a chemical silo for this to work or will it work with conventional systems as well.
No it won't work for conventional systems as well.
Okay got it and then.
Some of the efficiencies around eliminating.
Good morning, well, making the oilfield safer and more condensed are obviated when you go to a more traditional chemical system.
Got it Okay, and then do you expect to invest more in chemical systems this year as well.
Capex budget as you know not much higher he didn't invest much in it last year just curious it looks like.
On that to grow at all.
No I mean, I think we were well supplied today for kind of our current level of activity, we would have to see a pretty significant increase in the adoption rate before we deploy any additional capital line.
Okay. That's helpful and if I can just sneak one more in the.
The growth of plus 10 to 20 per.
<unk> this quarter can you maybe describe how that's looking across state and this is the vast majority of that growth on the Permian is at low spread out just curious for some color there.
I think it's pretty well distributed I think if based on the commodity right. So we're seeing oil and gas performed well. So when we look at you know East, Texas, Louisiana the northeast.
Those those basins are performing well, but yes, I mean, the Permian has been our largest basin for a very long time and it continues to be and so we are benefiting from the growth that that has picked up there as well.
Great. Thank you.
Our next question comes from Samantha Hoh with Evercore.
Please go ahead.
Hey, guys. Good morning quick question, just about the private operators.
Are you seeing any discernible trends in terms of their aggressiveness.
On the oil Lee verses the gas stations.
And then I also wanted to just.
C adult could elaborate on his comments.
So the spread between life and private operators on potentially the micro guys getting more involved in <unk>.
Well I think Theres theres there, it's all anecdotal information at this point on what People's plans are for the course I think that the commodity price is certainly maybe maybe maybe has.
We're a little quicker than sort of people thought it would and so it's raised some eyebrows on some of the big guys that have really had plans to be you know very quiet this year of steady steady maybe not quite the right word but steady.
And that there may be incrementally here he may make some sense to add add something toward the last half of the year vs. In 2021.
Got out of it we have seen a.
Quicker increase in the privates activity than the bigger operators I think that's just general speed. It reaction time, and how quick some of the small and very active mid size folks react to pricing and do it quickly and so we've seen.
I think there for that but it is it's got that it's it's reacting to the gas market in anticipations of that it's reacting to the oil market across the board and on and obviously all none of our customers are exactly alike, and they all react to different things differently.
Okay and then the other question I had had to do with Jordan.
Okay.
Some of your your profit trailers into water and I'm curious if the new lenders require existing profit just seems to be converted as well.
I guess deep more intensely I'm just kind of curious what to expect during this trial period.
For a sense of how.
I'm not going to run them is there you know on digital technologies built into the trials and that you can actually see the blenders working on and analyze it.
Remotely as youre running through the trial.
There's no sort of expectations in terms of being able to actually get this new blender system to be converted to revenue.
Long desk essentially be for our year end.
I want to address lots of like we hope it will convert to revenue, but the system is designed to replace and be in a position where on a current belts are the belts that are between the silos and so it will change the utilization obviously are the silos themselves there's no.
You actually needs to be made whatsoever. We've we've designed it to fit neatly within the way. This is Charlotte weighted current silos or unloaded on to that felt though on load right into a blender, which eliminates a desk pointed out.
On the spear point on the sand.
The way it fits there was no capital required to change the silos whatsoever.
Change that will be using a little bit less of our equipment and future. This was designed with all of the sensing technology and all the day to delivery technology and feedbacks with the equipment to run it through the same platform that we're currently running at today as well, which you can run on the day.
Or wherever.
Along with that the tracking mechanism and the data that we gather with the Solaris lens on our integration with Amazon Web services platform to allow our customers to track and see that data kind of parse it and do the research and studying that they want to do with what happened in that particular wellbore.
Data there still will be unchanged in fact with significantly enhanced because theres a lot more day to day and being dumped into that into that storage.
That sounds really great congratulations guys.
Good day, ladies and gentlemen, this concludes the call.
Net interest session I'd like to turn the conference back over to Mr Zone.
Good morning.
Thank you Rocco I'd like to finish by thanking all of our employees and partners for your perseverance adaptability. This year. It clearly didn't and those 'twenty 'twenty. One has started off with with its own challenges. The results on the company it wouldn't be possible without without the team both inside and outside Solaris has emerged from this year.
Year, and a very strong position to help continue to have our customers drive innovation on their well sites. We know at times. It certainly feels like oil and gas is extremely unpopular with the media and political landscape. We all know that were critical to the world sustainability oil and gas not only enables.
New technologies, such as renewable energy to even be possible, but our continued push as an industry to doctors drive efficiency and.
Movements in our environmental positions directly helps our customers lower the cost and carbon footprint of oil and gas.
It helps make energy more affordable affordable and accessible to more people.
Around the world I'm proud of the role that Solaris plays on that thank you all and stay safe have a great day.
Thank you Sir This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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