Q4 2020 Trican Well Service Ltd Earnings Call
Good morning, ladies and gentlemen, welcome to the Tri can well service fourth quarter 2020 earnings results conference call and webcast as a reminder.
This conference call is being recorded I would now like to turn the meeting over to Mr. Brad Fedora, President and Chief Executive Officer of try Ken well services L. T. D. Please go ahead Mr for Dara.
Thank you very much good morning, ladies and gentlemen, I would like to thank you for attending the year end conference call for try kind of well services.
Today, we're going to provide you with the financial update and then I'll make some comments on the current operating conditions.
Before we do that it. Please refer you to our website, where you'll find our investor presentation on page two of that you will find the legal disclaimer and I ask you to please read that in conjunction with this call I'll now turn the call over to class, who is our newly appointed interim CFO and he will provide you with the financial summary.
Good morning, Thanks, Brad.
Before we begin I'd like to point out that this conference call may contain forward looking statements and other information based on current expectations. Our results for the company certain material factors or assumptions were applied in drawing the conclusion or making a projection as reflected in the forward looking information section of our annual 2020 MD&A.
A number of business risks and uncertainties could cause the actual results to differ materially from these forward looking statements for.
Financial outlook. Some of these risks and uncertainties are further amplified due to the current the global health crisis caused by the COVID-19 pandemic. Please refer to our 2020 annual information form and the business risks section of our MD&A for the year ended December 31, 2020 for a more complete description of business risks and uncertainties facing true.
Ken.
This conference call refers to several common industry terms of certain non-GAAP measures, which are more fully described in our annual 2020 MD&A.
Annual results were released and are available on SEDAR.
By historic standards industry activity in the Western Canadian sedimentary basin has remained at cyclical lows. The average western Canadian rig count was 89 drilling rigs, which compares to 130 for Q4 2019 and 52 in Q3 2020, the recovery in the queue for rig counts rig counts over Q3 led to sequential.
Improvements in almost all financial categories.
The fracturing operations activity was more consistent through the quarter and remained relatively steady with typical December slowdowns. During the holiday period. The company operated an average of five fracturing crews utilization level of 60%, which compares to eight crews at 71% for Q4 of 2019 the <unk>.
Right the lower crew counts Lori utilization of lower average pricing strong operational performance and efficiencies allowed us to generate reasonable margins in the context of the current economic climate.
Cement and coil continue the show steady improvement through the quarter with both service lines, achieving noticeable improvements in activity and revenue levels as the quarter progressed. These improvements allowed us to increase our crew counts two of Q4 exit level of 17 cement crews in six of coiled tubing crews the.
The significant efficiencies achieved in our business at the end of the March 2020, combined with efficiencies already being implemented in advance of the COVID-19 events have resulted in a much more resilient business the cost structure, despite year over year industry activity reductions at our corresponding year over year revenue reductions of $60 million, our adjusted EBITDA was $14 five.
The $5 million similar to Q4 2019 levels of $14 6 million, which is a testament to the efficiency gains made by the company.
Q4, 2020, adjusted EBITDA was negatively affected by of cash stock compensation expense of $1 9 million, which fluctuates with the Companys movement in share price and fluid end expenditures of $1 2 million the Canadian emergency wage and rent subsidies contributed $4 9 million to EBITDA during the quarter.
The fourth quarter earnings were negative $25 million, which includes an impairment charge on specific assets of $22 million or about eight in the half cents per share ex.
Excluding the impact of the impairment charge the company's net loss improved significantly relative to the queue for 2019 loss of $20 9 million as the positive effects of optimizing both the company's asset base and operating cost structure are starting to be realized.
The impairment charge recognized was largely comprised of equipment in which the company does not expect to activate again, we have been successful in selling surplus equipment over the past several years at reasonable prices and will market. This equivalent for sale as well the company's strong financial position means we can continue to be disciplined as we look for opportunities to sell these assets.
The company's business generated strong operating cash flow of approximately $23 million in the quarter, including $9 million from working capital. The strong operating cash flow combined with $4 million cash generate generation for the monetization of stranded balance sheet capital continues to add to try accounts already strong financial position.
Try kind of exited the year with $22 million of cash and no draw on bank debt. Additionally, the company is positive noncash working capital of approximately $40 million.
Since the start of the year of financial position has continued to improve as we have agreements in place to sell seven $5 million of businesses and assets that the company was unlikely to use for future cash flow generation, our strong cash position and available credit lines continue to provide the company with significant liquidity to weather. This current market uncertainty and will allow us to maintain.
Our equipment in good working conditions allow for keeping our powder dry to make opportunistic investments.
Our Q4 2020 capital expenditures remained modest at $4 2 million, we were able to invest in 10, new dual fuel upgrade kits for our fracturing pumps <unk> and our trailing fracturing pumper with the new tier four dual fuel engine. These investments are part of the tricast commitment to becoming an ESG leader in the WCS, the oilfield services industry, well providing suite.
<unk> technical capabilities to our customers.
In 2020, our capital expenditures approximated a little more than 3% of revenue and our 2021 sustaining capital plans will remain similarly disciplined.
Current sustaining capital is estimated in the range of 2% to 4% of revenue for 2021, preserving our balance sheet flexibility remains of top priority for the company and we will only invest in projects that provide long term efficiencies and quick paybacks, while working with our customers to meet their ESG commitments.
During the fourth quarter, we invested for $5 million or two of NCI D program. Although the company continues to view share repurchase is of good long term investment opportunity for the use of any excess capital. We will always evaluate opportunities that will offer the best long term investment for the company I will now turn the call over to Brad who providing comments on operating conditions and strategic outlook. Thanks.
Yes.
So.
Certainly the market has improved considerably.
When we think about the summer Q3 was with the with.
With the benefit of hindsight was definitely I think the low.
Over the last five six years, even in the Q4 activity significantly increased across all of our business lines, especially when you compare them to Q3.
We continue to be really active with our core customers.
The rig count has grown from a low of 20 at the beginning of July until his highest of 185 sometime in Q1 and so the certainly the activity in the outlook has greatly improved in the last six months.
Reising, Unfortunately has not improved nearly as much as I would of wood.
Predicted when we had actually predicted the price increase mid Q1, and we Havent seen net pricing was quite stable in Q4 versus Q3, but didn't actually increase as activities started to ramp up and I would of I do expect that we will see a price increase in the second half of 2021.
And the fact, we're messaging with our customers quite directly that.
Certainly we're price debt sub economic levels and that regardless of sort of activity levels for the second half of 2021 net we are going to have to put in a price increase just to make the business sustainable.
And as everybody knows it's the highest fixed cost business and so all of those price increases with the exception of the inflation that we have to absorb and we have absorbed since the beginning of the year all of that price increase will well generally go to straight to EBITDA to earnings but.
Certainly the price increase is required.
To make to make this business even remotely economics so.
We've averaged in Q4, we average about five Frac crews, we ran about 190000 horsepower at.
At the peak and we average about.
Just over 100000 horsepower through the quarter.
We ran 16 primary cementing crews and file five coil crews the Ms.
<unk> of our work I think in fact, almost 90% of our work as is generally the montney in the deep basin.
And we.
I would have said in the past most of that work with of Ben.
Both dry gas and liquids rich gas, but well.
When we look at Q4 actually two of the five Frac spreads that we were running were focused on while now that oil is not southwest Saskatchewan, our southeast, Alberta hits, its duvernay and Montney oil.
And so certainly when we look at the oil price increases we're excited about the revpar of the Eagle the activity, that's going to happen and for the rest of 2021.
When we when we think about the year going forward, we would expect at about 30% of our work would be would be sort of oil focused the rest would be both liquids rich and dry gas, but over 90% of our revenue is sort of in the northwest.
Part of Alberta, and northeast B C.
Profit, where we're still seeing proppant per well increase.
Our customers are very focused on how much proppant, they're placing on a per meter basis in the horizontal sections of our wells and we're seeing about a 50 50 split between Ottawa White, which is sourced out of.
The northeast the U S and domestic sandwiches, which is sourced throughout the throughout Alberta.
We did we did a really good job, reducing our cost of the company has been focused on reducing its cost now for about three years and we're at the stage now where we think we have our costs.
To a level that we're happy with going forward and our costs will stay fixed at these levels, even as we add more racking and cementing crews.
Just to put this in context, we're quite vocal but the backbone of our both our G&A and our fixed costs would be half of what they were even just two years ago. So when we think about our costs going forward. We're.
We're happy to leave them as is we can add revenue and of course all of that contribution margin of fuel margin from the incremental revenue will go well go straight to the bottom line.
So when we think about the outlook for the remainder of 2021 well.
Had a great we had a great start to Q1, our customers were busy right after Christmas, which allowed us to have a really good a really good January and it really busy February.
We generally expect that the market is going to continue like this into the second half of the year.
Our Q2 bookings to date are better than they've been in years.
<unk>.
It's nice to see especially year over year.
Q2 that we won't take a big EBITDA loss.
Actually we hope that EBITDA will be relatively flat in Q2 of this year.
And it's just.
It just a reflection of the fact that all of our customers are getting back to work, they're doing they're doing a much better job level loading level loading of work throughout the year, taking advantage of the warmer weather.
And just generally just generally increasing their activity is as the as the year unfolds.
We had very cold weather in.
In Q1 to date, especially in particularly in February So I just want to thank all of our fields. The field staff did great work through this through that cold snap, we didn't have any operational issues no equipment issues no supply chain issues, just due to planning and so everybody here here at Tri Ken did a great job and it is going.
Be reflected in our financial results in Q1.
Were still below last year's rig count, but we did peak at sort of in the sort of 185 rigs in Western Canada and were not we didn't see all of that activity from the fracking perspective, yet in Q1, and so we do think there'll be a good inventory of wells to be completed in the second half of.
This year and in the Q2 as well so.
We did add we did add a sixth crew to the company are six Frac crew to the company. So we average about <unk> in Q4, we added an additional frac cute Frac crew in Q1, and we expect that we're going to run with six frac crews and about 17% to 20 cement crews for the for the remainder of 2021, we don't.
We expect to add any incremental frac crews.
And lessors of significant increase in activity.
We don't have great visibility into the second half of the year, but certainly our customer conversations of indicated that the work is it going.
Is it going to continue to be active.
They're starting to look at their budgets and they are starting to add wells here and there. It is still very Martin Montney and deep basin focused northwest, Alberta, and northeast B C.
So we're expecting the remainder of the year to be generally.
Busy not necessarily reflective of the Q1 activity, but certainly much easier than we saw Q3 and Q4 of 2020.
Sure.
Our margins, we've done a great job of reducing costs.
Haven't seen the price increases that we were hoping for but we've actually been able to to provide decent margins just due to the efficiencies that we've that we've built into the company over the last few years and we expect that to continue.
We've done a great job of supply chain, we've done a great job in the field getting getting proppant placed in a short period of time most of our work now if not almost all of it is 24 hours. We've achieved pump times of 23 out of 24 hours in certain locations. So certainly I think.
Our customers are happy with the efficiencies, we've achieved and it's helping to reduce there.
Their well costs and we continue to focus on that and we continue to invest in not only systems and people, but equipment that will help us achieve these ongoing efficiencies as as the activity in the basin heats up.
We haven't seen a lot of inflation in the system, yet we I mean, we obviously diesel things like diesel third party trucking go up immediately with oil price increases we have seen logistics charges.
As the activity increases with with respect with respect to sand and we are seeing third party cost starting to creep up.
As well just as the as the rig count has gone from a low of 20 last summer to over 180 in Q1, and certainly any time you have of cold snap that does increase your cost, but generally I think we've done a pretty good job on our suppliers of Theyre also working on their efficiencies and we've done a pretty good job to keep our costs can.
<unk> to make sure that our customers well costs haven't haven't increased as even nearly of proportionate to the activity increase we did set of Canadian record in Q4 in December and we pumped over 4300 tons of sand.
Two days in a row on an old vintage of location.
Which is which is unbelievable it's over 100 truckloads of sand in the 24 hour period. So we're really happy with that.
Of our people in the field did a fantastic job and certainly anytime you can deliver that type of service to your customers they take notice of that.
And we expect more more of that type of performance in 2021, and certainly our customers are are rewarding us for that.
We have made we have started to think about the.
In the market from a perspective of the ESG I think we can all agree that ESG is going to become the more powerful force not just in the oil and gas industry, but across the economy and we think about we know what our customers need to fulfill their ESG commitments and their targets and we started to make investments into technology.
<unk>, particularly engine technology to help them reduce emissions and get their costs down.
And like Clos was mentioning we did we did take delivery of the first what's called the tier four engine in Canada, and what that does is it.
Displaces DS.
Diesel consumption and uses natural gas to to run the engine and of course of the significance of that is it's greatly reduced cost and greatly reduced emissions. So anytime you can run you can run engines on natural gas versus diesel.
It's a win not only not only for for us for more cost perspective, but certainly for the public from an emissions perspective, and it's always nice to use natural gas at source locally.
And so we're using that gas that comes right off the pad to run to run our equipment and you will see further investments into the type of technology, whether it's tier for technology to displace diesel with natural gas or idle reduction technology.
Safer chemicals of more flexible chemicals that allow our customers to use more produced water versus freshwater.
We're looking at every every angle and not just from an environmental perspective, when you think about ESG, we often talk too much about the E of not about the estimate jee and so certainly when you think when we think about our diversity policies and our relationships with indigenous bands for our Western Canada, we're attacking all of those fronts to make sure of that.
Not only are customers are for filling their ESG targets, but but try Canada as well, we set our own internal targets and we're going to continue to focus on this.
In all categories being E. The environmental social and the governance to ensure that we're fulfilling the expectations of our employees and our and our investors.
Very just before I wrap up we have very very limited capital plans at this time.
That will continue to evolve as year goes on but we're certainly from a capital perspective, we think about investments in technology debt, not only reduce costs and emissions, but make make our customers' costs lower and well continue to look at anything and everything I think of a lot of people have heard about electric fracking.
And the it's taken a lot of press in the U S. It's probably not that applicable in Canada, just in Canada, just due to the logistics issues.
But certainly when you think about electric electric of course is generally source for natural gas you run of turbine of natural gas of generates electricity and that electricity runs of the frac pumps, we've sort of taken the approach that we're probably a ways off from an electric from the fully.
The electric Frac pump anytime soon and we're looking more like the tier four engines that run off natural gas directly.
Well, we're achieving the same emissions reductions of the same cost reductions and so I think so far of customers had been very happy and well continue to invest.
The explore those areas too.
Provide better service for our customers.
And.
B a better corporate citizen.
We continue to be active in the <unk> in our and our share buyback certainly at these prices, we're not nearly as active as we were well.
We currently trade at about <unk> tangible book value and so.
We're more opportunistic at these price levels.
But certainly that will stay in place and the probably be likely be a permanent part of our capital spend going forward and we'll take well take our opportunities where we find them from a from a pricing perspective.
So we're not as active as we were but we know it as well as part of our capital spend going forward.
Well.
We're really happy with our balance sheet.
When we get asked a lot of questions about sort of what's next.
And our answer is we're still exploring our all of our the opportunities that are available to us and you know we're fortunate to be in a position, where we can look at anything and everything and it's just making sure that we spend our money in a way that provides a return for our shareholders.
Grows our Roes, our company's presence in the market.
And you know well.
Well continue to evaluate the opportunities in front of us, but certainly won't make any decisions unless we're assured that we're going to get of financial return for for the company out of our shareholders. So I think I'll wrap up the call and well turn over the call to the operator for questions.
Thank you we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad.
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Our first question comes from Keith Mckey of RBC. Please go ahead.
Yes.
Hi, good morning, and thanks for taking my questions.
Just maybe first to start off on on pricing mentioned.
Maybe speak a an improvement in the second half now do you think that for the price price improvement you'd asked for or get well.
Would be enough to cover of the inflation that you've also talked about or be more then.
The more than that amount or less than that amount of what year would you kind of say.
Yes.
Yes.
The.
For the inflation, we have experienced in Q1 in particular.
It is significant because it is sort of 1% to 2% of of revenue and EBITDA.
Given where pricing is today, we just don't have the room to absorb that type of cost increase on our end and so yes, but I think our customers have been really understanding with having us.
Letting us pass on some of that those costs going forward, but so certainly when we think about price increases we do break it down into cost recovery and then just a general.
The price increase for.
For our margins and so the answer is the.
The the price increases that we're contemplating for the second half would be would be in excess of of inflation.
Got it Okay. That's helpful and just on the the dual fuel and pricing of of that versus non U.
Do you get a significant to a noticeable increase for for that type of equipment versus the non non dual appeal or is it.
Or is it most of these days because you're only really running your dual deal.
Yeah.
There is sort of.
$1 1 million horsepower operating in Canada today industry wide.
In the about half of that horsepower is dual fuel.
Both ours and our competitors were fortunate enough to have the largest dual fuel fleet in Canada, but there is typically is not enough dual fuel equipment for our customers' requirements and so it is priced at a premium it certainly isn't price that the premium you would expect given the shortage of the equipment in the.
Basin, but yeah, we do we do charge, we do charge a premium for the dual fuel.
Engines and pumps.
Got it okay and one more just on pricing again has there been any any concessions at all with respect to anything like standby fees or or little terms before you get the pricing increases that work or have you not really had much of that much of those conversations yet.
Yeah I mean.
I think you clearly understand how this works and certainly before you you just put in across the board price increase you start to get back some of the things that you've given up and that would be.
Throw ins or are adding services that don't get charged or even standby fees are not passing through all of your third party costs and so we've already started to recover some of that and be less I guess less forgiving.
On what we're prepared to provide our customers without charge.
That has already started to happen in <unk>.
Our customers understand that we need to do this.
There hasnt been an adversarial.
Communication with our customer base they on the day.
I understand that we need to recover some of these costs going forward and that pricing has gotten to a level that just isn't remotely sustainable. So yes, we have started to recover some of those sort of off the invoice items.
And then for the second half of this year well not only recover some of those items, but we would expect.
The top line price increase as well.
Okay fair enough. Thanks, thanks, very much for the color.
Thank you.
Our next question comes from coal per area of Stifel. Please go ahead.
Good morning, everyone.
Just on the upgrade Capex you'd said it was limited by the are you willing to share any of the detail just more specifics on the approximate timing and the amount of that spending.
No we're still we're still evaluating.
Any upgrades that we make to our fleet.
And when we have something more definitive if we have something more definitive we'll we'll let our shareholders know at that time, but theres nothing.
Theres nothing to pass on at the state.
Okay got it that's fair.
And as well lots of detail around ESG strategy in the release I guess my cash question would be how are you thinking about something like perhaps the formalized ESG report.
Yes, we would expect to have our sustainability report out in 2021.
In the second half of this year then well.
With all of these at all.
Well put out of a report.
It'll be general in nature, and well build on it from from that going forward.
Okay got it thanks.
Some good detail on how you're thinking about the organic investments return hurdles et cetera are you willing to share anything about how youre thinking about potential M&A in the current market.
Yeah, I think we.
We do look at consolidation opportunities both within within our sector and other oilfield service lines.
We understand the investors are looking for bigger bigger companies they want to see cost synergies across the basin.
But we want to make sure that anything that we do is a we think about it sort of from a three tiered approach.
Is it a significant business.
Again, it can it add significant revenue and EBITDA to our business centers is it something that we can we can add value to like do we have the knowledge to to not only to run the company, but can we also grow it.
So when you think about that when we think about those three things.
We will make sure that if we do in fact transact it'll it'll be thoughtful and.
There'll be a clear line of sight as to how we're going to add value to the business.
Okay, Great. That's helpful. Thanks, I'll turn it back.
Our next question comes from Waqar Syed of ATB capital markets. Please go ahead.
Thank you.
Morning.
So first question.
In the cementing and quite a tubing business what day.
Are you seeing in terms of pricing in the first quarter ends of the similar to Frac, saying are better or worse.
Yes.
I guess, you would say, it's similar to fracking and that we haven't seen price increases yet.
But it's better than fracturing in the sense that it didn't get as beat up as as fracturing pricing debt.
And so when we look at the debt.
The profit in those two divisions of the bottom line in those two divisions are certainly performing much better than the fracturing division is just because the pricing didn't just didn't get nearly as low or didn't trend down as low as fracturing prices have and so we expect price increases in cement in coil, but.
Probably not to the same extent that we're expecting in.
In the fracturing division.
And in this of fracturing side for the second half pricing has there been any any negotiation has done that gives you this level of confidence net.
Pricing could be higher or is it still too early to have anything actually signed up.
Yes, nothing ever really get signed up but we do have ongoing discussions with our core customers.
And I guess the discussions to date would indicate that.
We we are going to be able to pass on some price increases and like I said I think our customers have been really understanding and they understand that pricing levels of having gotten two two to the point, where they're just not sustainable and they do need to go up and it's not as simple as that though because.
When we talk about price increases with our customers. We also talk about operating efficiencies and so the commitment we're making to them as well continue to look for efficiencies to reduce their costs and the even just reduce our time on location and so we're able to charge more for our services, but the overall well cost may not increase.
Yes, yes.
You mentioned at the talked about input cost inflation that you've experienced and you've been able to maybe pass some of that to the customer and some you've absorbed so should we assume debt gross profit margins in the first quarter would be lower or the kind of steadily you could maintain the maybe improve it.
In the first quarter versus the fourth quarter.
Yes.
Hi, Waqar.
The margin should maintain the be pretty similar of course in Canada you get the.
And CPP resets in Q1.
So I think that grinds on your costs in a people intensive business a little bit in Q1, but just on higher activity higher revenue levels right. So you get the flex on your more of your fixed costs and G&A structure.
Right, Okay and then.
Given the comment made debt EBITDA would be should be flat Q1 versus Q2 was it you meant flat to always well did.
Did you mean, the second quarter, the should be breakeven type of EBITDA yeah.
Thanks for clarifying that so yes, we're not expecting Q2 EBITDA to be consistent with Q1.
That would be great, but it's not going to happen, but yes, youre right. When we say, we expect our EBITDA to be sort of zero ish in Q2 opposed to of loss that we've had in prior years.
Okay.
And then in terms of maintenance Capex.
But clearly the per fleet in pumping what is it running at.
The annualized basis.
Go ahead no go ahead, yeah per crude to break it down.
Like we're looking at it more holistically with all of the service lines in that 2% to 4% of car were three 3% and actually sub 3% in 2020, when you take out a little bit of the growth stuff we did.
So maintenance capital of the kind of look on a per fleet basis right now, we're probably running two to $2 5 million.
I'm not sure we can sustain that it's probably going to start to creep up a little bit, but we wouldn't be as much of the American competitors, which are probably $4 million to $5 million per crew I think normalized you would be looking more 3 million ish for.
For for crude.
Yes.
Okay.
Okay.
Great Thats all for me. Thank you very much.
Thanks.
Our next question comes from John Gibson of BMO capital markets. Please go ahead.
Alright, thanks for taking my call.
<unk>.
Just we've seen quite of bit of consolidation of the Canadian E&P space I'm. Just wondering how you expect this to impact for ICANN here as we go forward throughout the year.
Generally view consolidation is positive for us.
As the companies get bigger and more sophisticated they're planning gets more transparent and long term.
And the ESG push that you you find with the larger companies. We think we can play into the those requests very well and are probably better positioned than our competitors to provide to provide our customers with with services and technology that fulfill their ESG targets. So.
Yes, we welcome and are excited about the about the consolidation in our customer space.
And certainly our work is all deep base of the Montney focused and so the high grading those assets and making them more economic it well.
Well do nothing but encourage further spending and so yes, we view the consolidation is positive for us.
Okay great.
Not to harp too much on the pricing increase I mean, I'm guessing just wondering what has changed in terms of market dynamics relative to the pick up we saw the start 'twenty one 'twenty 'twenty. One that gives you confidence that you can implement the price increase in the back half of the year.
Well.
It's a number of of factors, but certainly when you think about when you think about where we've got two over the last five six years. It's just been of continued erosion of pricing and at the same time of <unk>.
Continued increase in operating efficiencies and so I think we just we've reached the level now that it's quite active we're having to reinvest in our equipment.
We have an ageing fleet and there hasnt been any investments in the Canadian fracturing fleet now in.
Five years.
And so now it's sort of when we think about the ESG targets and the ESG requirements of our customers and we have to make we start at the start making investments in whether its from a maintenance capital of our high grading high grading our assets and we're just not in a position to do that at today's pricing and so as.
If our customers want continued.
Continued.
High quality service with <unk>.
Continued investigation into new technologies, and how to get better operating efficiencies. We just can't do that at these pricing levels and so we've we've discussed these these issues with our customers and they seem to understand that so.
It's not complicated they know that pricing has just gotten to the level that it just isn't sustainable.
It's one thing when you are running less than 100 drilling rigs in Canada, maybe those conversations are tougher to have but.
Certainly with <unk> seen a giant increase in commodity prices, both on the oil and the gas side and so our customers cash flows of at greatly increased.
It's time for us to two <unk>.
Share in some of that upside and make sure that our fleet is going to meet their needs on a go forward basis, but the deal that requires investment or can make that investment we need to we need to have a price increase.
Okay, Great last one for me just wondering if you have any early indications for wage wage subsidy guidance for the year.
I'm going to hand disorder to class and Rob.
We're looking at similar level of tier two.
Probably slightly down from Q for John and the Q.
Q2 will come off a little bit more because I think it expires sort of mid June ish. So.
The slow trail off.
For Q4 levels.
Okay great.
The color I'll turn it back.
Okay.
Once again, if you have a question. Please press Star then one.
Our next question comes from Alex Squires of brand Securities. Please go ahead.
Good morning can you hear me all right.
Yes.
I wanted to find out.
You anticipated getting any of the fracking business on the LNG project.
Yes.
Just.
Thanks for that actually it's a good reminder, that LNG the construction of our LNG facilities has continued.
Over these last few years and certainly has continued through through 2020, even with Covid.
There is there are thousands of people on location every day sort of diligently working working on that project and we're expecting that to start exporting gas in late 2020 for 2025, and so yeah. It's even though it is sort of for years away. Our customers are starting to think about how theyre going to for.
Fill their production needs and so you are seeing you are seeing the customers that are involved in that LNG project in the maybe associated with providing gas starting to think about the the runway on how theyre going to get there and so we're not seeing a lot of what you would call direct LNG activity today.
But certainly some of the larger companies and the participants in the LNG project are starting to plan over the next few years.
And the answer is yes, we would expect well.
Would expect to be in active service provider to those to those companies as they ramp up their activity leading into 2025, where we are.
We're going to be having significant natural gas exports.
But it would likely not be end of 'twenty till about 2023 to 2025.
I would say, it's not of 2021 item.
It's not on our activity board for this year, you certainly couldnt directly correlate back to the LNG, but I think when you start thinking about 2022 and 2023, yes, certainly there is a focus on making sure that they have the production base required to sustain.
Whats fairly significant exports and it's on a daily basis as we all know so.
Yeah, certainly next year, I think they're going to be more directly directing activity to ensuring that there is the the is the reserve base and the production base to <unk>.
Fulfill there to fulfill the requirements. So it's starting in <unk>.
<unk> definitely starting in 2022.
Okay. Thank you.
Okay.
Yeah.
This concludes the question and answer session I would like to turn the conference back over to Mr. Fedora for any closing remarks.
Thank you everyone for joining the call the management team here of trike and will be available throughout the day and so of years any further questions. Please don't hesitate the email or call us and well get back to you as soon as we can thanks again.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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Yes.
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Okay.
Sure.
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Well.
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