Q4 2020 Natural Gas Services Group Inc Earnings Call
Yeah.
Good morning, ladies and gentlemen, and welcome to the natural gas service group fourth quarter 2020 earnings call.
At this time, all participants are in listen only mode.
Operator assistance is available at any time during this conference by pressing Star Zero and you.
For a call leaders for today's call are Alicia Dada.
IR coordinator.
And Steve Taylor, Chairman, President and CEO.
I would now like to turn the call over to MS. Donna you may begin.
Thank you Paul and good morning listeners. Please allow me a moment to read the following forward looking statement prior to commencing our earnings call.
Except for the historical information contained herein. The statements on this mornings conference call are for it looking and are made pursuant to the safe Harbor provisions as outlined on the private Securities Litigation Reform Act of 1095.
Forward looking statements as you may know involve known and unknown risks and uncertainties, which may cause natural gas services groups actual results and future periods to differ materially from forecasted results.
Those risks include among other things for lots of market share through competition and otherwise.
Introduction of competing technologies by other companies and new governmental safety health or environmental regulations, which could require and natural gas services group to make significant capital expenditures.
The forward looking statements include and conference call for made as of the date of this call and natural gas services undertakes no obligation to publicly update such forward looking statements to reflect subsequent events or circumstances.
Important factors that could cause actual results to differ materially from the expectations reflected in the forward. Looking statements include but are not limited to you and factors described in our recent press release and also under the caption risk factors and the companies and their report on form 10-K filed with the Securities and Exchange Commission.
And all that stated I will now turn the call over to Stephen Taylor, who is president chairman and CEO of natural gas, Sir Francis Group Steve.
Okay.
Thank you Alicia and Paul Good morning, and welcome to natural gas services group's fourth quarter and full year 2020 earnings review.
And it's part of the time makes up this morning, Thank you for joining us.
We released our fourth quarter 2002, and our results. This morning and plan to file our annual report on form 10-K for the.
The 12 months ended December 31, 2020, with the U S Securities and Exchange Commission on Wednesday afternoon.
2020, as well and the rear view mirror.
And I don't know many oilfield operators that we're sorry to see it go.
However.
As mentioned on a release this morning, given the pandemic the economic shutdown and the most precipitous decline and oilfield activity.
And my 40, plus year oilfield career and.
He is not only survive posted solid results.
Before discussing our detailed financial and operating results from 2020, and a few high level comments are on order.
And as I consistently indicated on the unprecedented challenges of the past year protecting our balance sheet and liquidity position has always been our top priority and.
Especially in the most challenging of operating environments.
And 2020, we did just that.
Our cash position grew and our overall financial position is amongst the strongest in the industry and historically strong for Ngls.
Our cash balance increased from just under $12 million at year end 2019 to nearly $29 million at the end of 2020 and.
And increase of nearly 150%.
On a year over year basis, our operating cash flow increased nearly 11% to $32 $6 million.
This means that for every $2 of revenue, we generated approximately $1 of operating cash flow.
We accomplished both in spite of lower overall revenues.
While sales were impacted by the pandemic and customer decisions to defer purchases our rental revenues were robust increasing 37% compared to 2019, even with the slide and oilfield activity.
Okay.
And it's clear that the global and domestic energy markets will improve as economies reopen and demand for energy expands.
Commodity prices are beginning to signal the need for more capital spending and production growth.
Such signals and resulted in immediate acceleration on activity.
We believe 2021 will provide growth opportunities throughout the year.
Including the continuation of our penetration of the larger horsepower markets.
That said it is important to recognize that the impact of the coronavirus pandemic is not entirely gone and.
<unk> continues to all for both how we work as well as workflow from our customers.
While the market continues to move forward as vaccines become more ubiquitous the impact of the pandemic on the oilfield, while somewhat reduced will likely linger throughout most of the year.
Resulting in continued challenges and costs throughout the business, especially related to our working environment as well as service and safety.
And I am proud of how well the and just team accepted and continues to adapt to the challenges of a year of Covid.
As we look more specifically at our operations and the fourth quarter 2020.
While sales and service revenues declined in the quarter, our rental revenues are solid and grew on a year over year basis and where.
Were only modestly affected this quarter.
Total adjusted gross margins came in at 48% and adjusted EBITDA was 33% of revenue.
Although not unusual and especially now and downturns, we experienced a high degree of volatility and compressor sales.
The significant decline in sales and the second half of 2020 was larger.
Largely the result of a serious reduction on our customers capital spending budgets.
And and unwillingness to commit capital and a time of unprecedented certainty.
For sales for slowly recovering it will take time for capital programs to be rekindled.
We're beginning to see more inquiries regarding compression purchases and expect that trend to slowly continue in the coming months of course for sales may have slowed.
<unk> still require compression assets on existing projects, which supports our rental business, which remain firm and the fourth quarter.
With that overview, let's review the fourth quarter and for year results from the year just completed.
Okay.
And yes reported total revenue of $17 million for the fourth quarter 2020, compared to revenue of $19 $7 million from the same for 2019, a 14% decrease.
Sales and rental revenues, both declined with a 58% decrease and sales revenues, but only a 4% decrease and rentals.
We did experienced a 33% increase from service and maintenance activities when compared to the same quarter of 2019.
Sequentially total revenue increased by 8% sales.
Sales revenues more than tripled and a 210% increase.
Sequentially and service and maintenance increased by 62%, while rental revenue slightly decreased for lesser 1%.
And the comparative year to day periods, our total revenues decreased approximately $10 $4 million for 13% exclusively due to a drop in sales and service and maintenance revenues.
Conversely rental revenues increased by over 7%.
Total adjusted gross margin for the three months ended December 31, 2020, slightly decreased to $7 8 million from $7 $9 million or 1%.
Compared to the same period ended December 31 and 2019.
Adjusted gross margin, which does not include depreciation or various noncash nonrecurring items.
As a percentage of revenue for the three months ended December 31, and 2020 was 46% of revenue and appreciable increase from 40% of revenue for the same period and 2019.
Sequentially adjusted gross margin for the fourth quarter 2020, slightly decreased from $7 9 million to $7 $8 million approximately 1% for.
From the prior quarter.
This was driven by lower rental revenues and margins and higher costs, and our fabrication business, but and.
On an appreciable increase and our aftermarket product line, which includes parts sales and rebuild activities.
Adjusted gross margin as a percentage of revenue was 46 for CIT and this quarter compared to 50% and and the prior quarter.
Selling general and administrative expenses were $3 $2 million and the fourth quarter 2020, a year over year increase from approximately $498000 and increase of approximately $739000 sequentially on a decrease from 2% or $160000.
And when compared to year to day periods.
The year over year increase was driven by increased insurance premiums for liability insurance.
Directors and officers insurance and long term incentive compensation accruals for the sequential increase was related to the same compensation accruals.
For the full year SG&A expenses decreased due to a decrease and deferred compensation expense and expenses related to long term incentive compensation.
Non until you and the inventory write offs and fleet equipment.
And rental equivalents retirements adjusted operating income for the fourth quarter 2020.
And reflected a loss of $1 8 million compared to a <unk> and.
And $882000 loss and the fourth quarter of 2019.
The adjusted operating losses. This quarter was primarily due to higher depreciation expenses on our large horsepower equipment and higher SG&A expenses.
Sequentially adjusted operating income decreased $822000, primarily due to higher SG&A expenses.
Adjusted operating loss for the full year 2020 was $3 $1 million compared to income of $156000 and 2019 due to lower gross margin dollars related to lower sales.
Absorbed fabrication cost lower service and maintenance revenues and higher depreciation expenses.
And yes reported a net loss of $1 $9 million from the fourth quarter 2020, compared to a net loss of $1 $7 million from the fourth quarter 2019, and net loss on the third quarter of this year of $562000.
The decline in net income for the year over year comparative periods is primarily attributable to the decline and total revenue.
A higher level of and absorb costs on our fabrication facilities and.
And an increase in depreciation and SG&A expenses, but was somewhat mitigated by higher overall gross margins.
Sequentially higher SG&A and inventory adjustment of $184000 and.
And fleet rental equivalent retirements totaling $291000 contributed the majority of the increase and losses.
In spite of the Yo Yo effect, just mentioned and quarterly comparisons when comparing full year net income and <unk> reported a positive net income of $1 $8 million in 2020, and play and an income tax benefit of $4 $8 million.
This compares to an adjusted net loss of $318000 and 2019.
Okay.
And also on earnings per diluted share was <unk> 13 for the fourth quarter 2019, which compares to a loss per share for since last quarter and a 14 cents loss. This current quarter.
Earnings per share for the full year 2020.
Was it positive 14th.
Compared to a loss of $1 six and 2019.
EBITDA.
Which is earnings before interest taxes, depreciation and amortization.
And our adjusted EBITDA, which also includes the noncash effects of goodwill inventory write offs on fleet retirements.
For the three months ended.
December 31, and 2020 was $4 $8 million down from $5 $2 million and the fourth quarter 2019 and.
8% decline.
Sequentially EBITDA decreased $800000 from $5 6 million to $4 $8 million.
Adjusted EBITDA for the full year ended December 31, and 2020 was $22 $7 million.
And compared to $24 million and decrease of 6% for the full year 2019.
Total sales revenues, which includes compressors flares and aftermarket sales.
Decreased $2 $3 million from the fourth quarter of 2019.
For $1 $7 million for the fourth quarter 2020.
The decline is almost exclusively attributable to a lack of compressor sales.
Sequentially sales revenue increased to $1 $7 million from $536000.
These gains were driven by increased activity and flare sales and aftermarket activity puts and <unk> part sales and retail services.
We did not have any compressor sales this quarter and our fabrication facilities continued to build new rental compressor units flares and overhaul really used for penni rail contracts.
On a full year comparative basis sales revenues for the year ended December 31, 2020 were $5 $7 million, a decrease from $19 $8 million and 2019.
Okay.
The extreme dislocation, we experienced on our compressor sales business for not unusual and the fact that a downturn always going to decrease and capital equipment sales.
It was unusual that the severity of the decline happened on one year.
This was not surprisingly due to the knock on effects of Covid induced demand destruction.
And the simultaneous and abrupt drop in activity gives the precipitous decline in crude oil prices.
We have however seen a recent increase in sales inquiries and hope that this translates into an increased level of sales this year.
Our sales backlog as of December 20th.
On December 31, 2020 was one seven and $5 million compared to $1 $7 million last quarter.
Year over year total sales gross margin declined from $358000 and the fourth quarter of 2019 to $48000 and the current quarter.
With sequential gross margins, increasing from a negative 460000 and the.
Third quarter 2020 to a positive $48000 and the current quarter.
For the full year 2020, total sales gross margins decreased from $3 $7 million and 2019 to $554000 loss day.
And year to date losses for primarily due to lower sales revenue levels.
And the higher level of Unabsorbed costs due to underutilized compression fabrication facilities.
These zones on cost derived from the other underutilized nature of our.
Pat facilities with the excess capacity due to the severe contraction and the need for capital equipment and the industry.
The overall strength of our rental and business had been exceptional over the past year.
Rental revenues and the fourth quarter of 2019 were $15 $3 million.
Prior to the current quarter of $14 $7 million.
This is only a 4% decrease over a year that was unprecedented and Ah severity.
Sequentially rental revenues were off less than 1%, but on a full year comparative basis rental revenues increased 7% from <unk> $56 $7 million to $60 8 million.
Compared to the fourth quarter 2019, our average rental rates on a per unit basis increased 7%.
Down 1% on average per horsepower basis.
The slight decrease in per horsepower rates is not uncommon as larger horsepower equipment cost less per horsepower, which translates into lower rental rates per horsepower.
Sequentially rental rate for essentially flat.
Our average active unit increased to 225 horsepower per unit and 8% year over year increase.
Rental gross margins this quarter were 51% of rental revenue and a decrease from our third quarter 2020 rental gross margins of 55% and an increase from last years fourth quarter a 47%.
We are on margins this quarter were impacted by a large amount of scheduled maintenance on it.
Full year comparative basis rental margins increased from 51% to 53%.
Fleet size at the end of December 2020 totaled 2200.
And 'twenty for compressors or almost 439000 horsepower.
As of December 31, 2020, 42% of our utilized horsepower is classified as large horsepower machines, which we designate as units that exceed 400 horsepower per skid.
Over the past 12 months, we've added 42, new fleet units totaling 23000 horsepower with 89% of those units classified on our large horsepower category.
We added 11 years for the fleet during the fourth quarter.
And the fourth quarter 2020, we retired 216 units totaling a little over 21000 horsepower or an average of 98 horsepower per unit.
198 units are 92% of the total units were classified as small horsepower.
That is scheduled less and 125 horsepower per unit.
The average age of these units was over 14 and a half years.
And we are within six months of the exploration of their book lives.
And non cash expense and impacts our net income was $291000 or approximately $2300 per unit.
Our horsepower utilization was 66% and the fourth quarter and unit based utilization was 58% as of December 31 and 2020.
This reflects an increase of 200 to 300 basis points from Q3 2020.
In 2020, we spent a total of $15 $3 million on capital expenditures with 13 million of that dedicated rental equipment.
Last year at this time I had projected we would likely spend approximately $15 million and capex on rental equipment.
So we were pretty accurate on that respect.
Looking ahead to the full year 2020, we're projected capital spend on rental equipment of approximately $15 million to $20 million.
We'll have another $2 million to $3 million allocated for service vehicles.
Moving to the balance sheet, our total bank debt was $417000 and timber 31, 2020, but we have since retired that debt.
Our cash balance remains strong at $28 $9 million per.
<unk> line of credit is set to expire.
Tomorrow March 31, and we are in the process of negotiating a replacement facility that should be in place for mid April.
What we believe will be favorable terms and we continue to possess ample liquidity for any conceivable scenario we might encounter.
We generated positive net cash flow from operating activities and this quarter of for $7 million.
Our operating cash flow and 2019 was $29 4 million and increased to $32 $7 million and 2020.
This is Ed and 11% increase and operating cash flow. Despite a 13% decrease in revenues.
Our conversion rate of revenue and operating cash flow and 2019 was 38%.
And increased to 48% and 2020.
Simply put for every revenue every dollar of revenue generated and G. S converted half of it to operating cash flow.
There are not many companies and the office space that have a recurring rental revenue stream and no debt on the balance sheet cash reserves and the bank.
For the strong cash flow yield for trading at a meaningful discount tangible book value.
Before we open the call to questions I want to thank the entire Ags team for the remarkable effort during the past year and as we have entered and.
And to the new year, the challenges presented over the course of 2020 around pressed and it unexpected and.
And frankly unfriendly.
And every member of our team respond to the call to be flexible adaptable and to focus on providing the best service possible for our customers.
As a result, while it wasn't always easier pretty we continue to build customer relationships through exceptional service and care for our customers and each other.
We exit 2020, with a strong balance sheet low customers and the best team on the compression business.
We're looking forward to the balance in 2020, one and something that resembles a more normal world and the opportunities ahead of US we continue to see new opportunities and larger horsepower market with both existing and prospective customers and.
Industry, leading liquidity position provides us with the flexibility to swiftly respond to prospects to grow our company, both intrinsically and through other strategic opportunities.
Paul that's the end of my prepared remarks. So if you would please open the phone line for questions.
Ladies and gentlemen at this time, we will conduct a question and answer session. If you would like to state. A question. Please press star one on your phone now and you replaced and the Q and the order received you compress and pound one at any time to remove yourself from the queue.
And our first question comes from Rob Brown from Lake Street capital.
Your line is open.
Yes.
Hi, Steve.
Hey, Rob how are you.
And how are you.
And just wanted to get a little more color on the group.
And the pipeline and you talked about increasing your Capex spending next year, maybe where are you seeing kind of demand growth.
Have you seen orders and yet.
Yes.
And Sir.
Well you know the Capex 15 to 20, so we spent and that.
As for rental.
Compression equipment, and we spent 13 last year. So it's it's modestly up its not.
Not not a whole lot, but where.
And we're seeing probably more of a backend loaded year on some of it some day some of the projected capex.
We've already identified.
As our equipment being needed and then the other balance of it.
We felt confident we will develop throughout the year. So we think thats a pretty good number and.
Probably be right in there, but it's a mix of.
Committed projects and then some some future expectations.
Okay, Great and then on the on the high horsepower and market that can peer.
Ladies group getting prior orders.
Out of those and I'll start on the floor.
And what are those.
Is that in terms of generating cash flow.
And you're kind of breaking up just a little but you're.
And you're talking about the Vms that were on standby.
Doug was talking about cash.
And you can get high horsepower units and thank you for.
<unk> had ordered and you're pulling guidance put out and I just wonder.
The sales growth.
Oh, yes.
No there Ben.
And the process some being built right now, but then the others will be received probably.
Through third quarter, maybe first part of fourth quarter. They were they were spaced out to.
Based on customer requirements and then there's.
Theres, a little bit of spec and some of that but.
No there some of them are have gone out but I.
I would guess probably at least have them.
Still are still need to be built and will be.
Placed out throughout the next couple of quarters.
Okay.
Okay. Thank you I'll turn it on.
Okay. Thanks, Rob.
Our next question comes from Tate Sullivan, the Maxim group.
Your line is open.
Hey, good morning, Hey, Steve.
Thanks for the update as always and just on the average horsepower for rented compressors. I think you said it was 225 and for Q and then just going forward and.
Where can that go taken on a whole quarter on those smaller horsepower retired units.
You are planning to build already.
Well I think it will just increase.
If you go back.
Yes, and I was going to look and I didn't.
Yes, probably three or four years ago, our average horsepower was close to about half that.
So it will go up for a couple of reasons number one the continued.
Penetration and strategic direction with the large horsepower that we're taking and then over time.
Some of the smaller stuff will be.
Retired two.
And if it comes off contracts and the future.
Or.
We otherwise dispose of it so both of those.
Factors will increase the average.
Average horsepower over time I don't know if it'll go.
And as fast but.
It's up about 8% I think is around 200 and.
And five or 208 horsepower about a year ago. So it's not a real real fast line, but.
We certainly expect it to continue up.
And and service and maintenance margin and can you comment a little bit on how compressors and Eric with the weather in Texas and February and does that usually imply more services and maintenance works for your.
Force Majeure on your units Sir can you just give a backdrop on.
And so it wasn't so much.
Yeah.
Of course winter time as always.
Little more of a.
Expensive time to operate and just causes.
It's colder.
And stays down longer and stuff like that but.
Looking at the the.
Very severe weather at least for Texas, we had and in February we actually came out of that are pretty good there were no force matures and we didn't declare Andy and none of them are declared on us.
But we were able to keep the vast majority of our equipment running now and you know and that was through no small feat of our guys and the field because it's.
The problem is wondering when a big unit.
Some of these you know 50 and higher horsepower units go down and if theyre down very long they just kept cold and.
Yes.
Warm and up and.
A unit that big either from the block itself or getting the oil moving you know with a little less viscosity and and everything else take some takes some time and some effort and some brain.
But our guys did a great job I don't think.
And thank we had.
More than out of numerous units out there probably more than four or five that were down and really probably more than 24 hours at any given time so.
We've got all of that stuff monitored by chronic waste. So we know right when something happens and and in this case, where you have cold weather it.
It pays dividends and that you're able to get out there quicker than if it was just you know somebody just found on the day. So we did.
We did a lot better from what we can tell them.
Some.
Some competitors and these areas and you know I think the customers recognize that too, but I certainly want to.
Yeah, I'll give a shout out to our guys on the field because that's not an easy job when it's that cold out there.
Thanks, and those are.
For service professionals are they is it extra costs when they have that extra overtime or is it included and the service contracts for the units are really it's it was normal for the winter since it was only for a five units you much but.
It's extra overtime, but it's that's an expense and we absorbed because we.
You'll give a fixed rate contract on on.
On our equipment, so and lessors.
And I'm sort of.
Externally induced or customer induced mechanical issue.
Debt that comes to us.
So we will have you will see a little higher.
Labor expenses on some of that stuff.
But you know it.
It it balances out throughout the year summer times are little easier and and things like that so you always have a little higher expenses on wintertime. This is extraordinary obviously, but yeah.
Yeah, we got and got through it and pretty good shape and and like I mentioned, you know the customers recognize.
The effort.
Our guys and the company expanded keep them online.
Great. Thank you and just last one for me you mentioned that the sales mix and the fourth quarter.
Do you have sales backlog currently or how can you say how quickly might that come back into the mix.
And you talk about well you are moving.
Our our compressor sales backlog was about the same and.
And Q3 as in Q4.
And now since we didn't have any compressor sales in Q4, that's cash.
Makes sense, great and added and either.
And we've seen a higher level of inquiries from the sales standpoint now.
And generally that will translate into higher level of actual sales down the road now it's hard to.
Hard to say, how how long that takes you on a quarter or two but we're somewhat encouraged by that we'll build out. This one this $1 $7 million it and take long to build that out probably the next quarter and and hopefully be able to replace and some more of that and there. This is the first time and.
And our history, we've had two quarters of no compressor sales now again.
On the aftermarket parts and rebuilds.
And flares picked up quite a bit and the fourth quarter and.
And.
Helped tremendously cover.
Compressor sales, but a pretty unprecedented that you got two quarters without any compressors sales compressors and now we built some rail and compressors, obviously, but any sales compression go on so we think with the with the oil price being up.
And people getting a little more confidence and.
And their own.
Economics and and.
You know quality of projects, we think that that'll be.
Continually increasing throughout the year, so I would.
Hesitating Lee forecast that.
Our sales should be higher this year and they were last year.
Alright, Thank you very much.
Okay. Thanks day.
Uh huh.
As a reminder, if you do have a question. Please press star one on your Touchtone keypad.
And we have a question from Seth Barkett and individual investor.
Your line is open.
Hi, Steve.
Congratulations on NAV congrats.
Congrats on navigating a pretty challenging year, you guys did a nice job.
Yeah. Thanks I appreciate it.
A few questions from me and one.
And I guess Theres, a comment and the question here in the press release.
On the balance sheet I did not see the federal income tax receivable the $11 million. There I think it was captured.
Current asset total, but I didn't see it broken out.
Anywhere on the balance sheet. So just.
I wanted to point that out and then also ask the question any any update there on on when that might be received.
No no we.
Yeah check on it periodically but.
You know you typically get no answer so as you know, it's just it's and the Qs somewhere I would yes.
And certainly think it would be.
This year, but we don't we don't have any indication from them you know and fact that $4 million, we got last year's kind of.
Sales in one day is a surprise on what I can tell you it's come and so.
It's has filed its and there will weigh on the government to get around to it.
Got it.
Thanks for that update and then.
As it relates to your small horsepower.
And maybe even to some extent your medium horsepower units that are either underutilized or not being utilized at all.
Is there any opportunity to I.
And I guess.
Here in 2020, one as we see.
Strength in oil prices and potentially more.
Activity and oil fields, you see and opportunity.
And you sell any of that underutilized, who are non utilized small and medium horsepower equipment.
Well.
Yeah, and we've commented in the past and I was on.
Small horsepower that we intend to.
You know more and more so each each year and to a medium to large horsepower organization and and deemphasize and small horsepower and and certainly some of that was driven.
The fleet retirement.
<unk>, we did this quarter and and a couple of we've done in the past have been predominantly lower horsepower.
You know from an opportunity opportunistic standpoint.
It's hard to.
Say and some of this stuff and we every once in a while we've talked to people that might be interested and things like that but when you're in a depressed.
Market.
People want to.
Yeah, I guess I could say.
To be correct, you know don't want to give you the value you deserve you know but you.
Realistically they want to steal it.
And we're not we're not looking at that we still make money with it still contributes still still okay with it but but we you know we do look for opportunities and.
We've talked to people that were on swaps so.
Hopefully maybe with.
The whole industry parking up a little bit.
This year, we'll see a little more of it.
From the point and you know if you got a small horsepower guy that runs on small horsepower fleet and maybe he's looking to grow.
They've had just as much trouble if not more.
Actually probably more than us and these and these kind of markets so they're not.
Well place to go out and buy.
By something.
We don't have to sell it.
Obviously, we're we're good cash wise, so we're gonna be prudent about it but you know if opportunities come up we'll we'll pursue them and see what they look like.
Got it thanks for that color and then the last question for me.
The company is sitting on a strong cash position.
Yeah, hopefully more cash will be generated here in 2021, possibly <unk>.
Election of that $11 million tax receivable.
You guys.
M C.
Yourselves potentially buying back any stock obviously on the stock is pretty inexpensive here.
You're trading at roughly 40 cents on the dollar.
I would I would think there would be and opportunity here to really.
Drive shareholder value by making.
Some investment and the stock any and.
And your discussions there internally about maybe.
Allocating $2 million towards that effort.
Yeah Yeah.
We we will this year, we've got and we've.
Free authorize the.
The amount of.
Buyback, we had originally put in and I think we originally.
And 282019, so 2019 and things around August September you know, we had an initial authorization. There obviously not much was done with that because they were ran into 2020 head on.
We didn't want Dewey and 2020 Covid.
The first.
Quarter, two you didn't know what was going to go on.
And.
Got you know certainly solid footing and it came out of the year. Good. So yeah, we still got the authorization there and.
I don't want everyone on guarantee anything but.
As far as the capital allocation tool goes we think that's a that's a.
A good one to use and you're looking on that pretty seriously.
Great glad to hear that Steve and again, congrats on being really successful and how you navigate and last year and thank you guys have done a nice job.
Okay I appreciate it Seth.
Our next question comes from Greg Weaver from and Victor capital.
Your line is open.
Hi, Good morning, Steve Thanks for taking the question.
Hi.
Could you talk a little bit about the rental rates and the price concessions that you gave last year I mean does that roll off over time or you know you go back and renegotiate obviously with oil.
Yeah, you know everybody gave some and that.
For second quarter about March April when you always.
Going down.
Overnight.
Essentially.
And then we put a time limit on the majority of them, yes or.
And note negotiate that and yeah, we're in the process of going back through those and gas.
And those back up to those and those are the the.
The rates they were before.
And we.
Many of the customers that even before the downturn, we saw coming into 2020 oil was around.
40% to $45 and of course it dropped.
Yeah, you know the.
Futures and went below zero, but you know the physical commodity was down around.
15, and $20 something like that.
So we remind them that you know now we're up for at least a $15 $20 to the good on that stuff and they're.
And we're looking to get some of that back now.
Funny deal not unusual, but a funny deal.
And.
And your approach or buy and all of a sudden they think that Oh, my gosh, you're raising prices on me when actually you were trying to get your price back.
But we were lucky enough that we didn't.
Have to give concessions, we didnt number one we didn't have to give.
Debilitating concessions and number two we didn't have to do it across the board to a lot of customers, So we and and in fact.
Most of our large horsepower stayed intact from the point of.
Being contracted on a long term. So we actually came into nobody wants to know 2020, but who actually came into it.
Pretty well protected from a contract standpoint, but but we are going back and.
I'm trying to get some of that back and you know and and maybe even a little more for Ken.
Right I was just trying to wrap my head around if I look at fiscal 'twenty rental revenue right. It was down some but some of that impact that I'm, assuming by some of these price concessions and that hopefully would come back.
Well not just that but you know we had equipment come back. So there was no concession on that you know we went to zero.
And so some of that debt.
And that's probably the biggest impact youre seeing because I'm now rental revenue year over year was up 7%, but in the quarters. When you look at it. We did you lose utilization you know kind of a trough in the middle of the year and start coming back up.
So we've still got.
A little lower utilization and then that.
And we had about a year ago.
And so you won't ever get that back. That's just that's just revenue that was lost people just shut in wells.
Alright, and how about on that topic in terms of some standby equipment any color there in terms of trends and things coming back on line is that mostly all back.
No, it's not mostly all back, but it's coming back we're seeing.
More.
And as mentioned before more confidence from the operator.
And.
You know the crude price and what's going forward and things like that and you know and the.
Just as important as the price itself as the operators confidence that's going on hold because nobody's going to go out and do something for price.
Price holds a $60 per quarter and goes back down I think people are getting a little more confident and that in fact this margin for Saudi has come out and said they still want to hold.
Production lower for the next quarter or two so seems like everybody is playing the same game right now that on.
And that doesn't mean, it doesn't change and a quarter as we've seen it do too many times the last two or three years, but.
I think the confidence confidence is coming back and.
Yes, we will see more and more equipment come off standby and go back to full rate.
Okay, Great and just last one for me and your press release talking about your liquidity you mentioned it gives you the flexibility to swiftly respond to price two prospects to grow our company, both intrinsically and through other strategic opportunities any.
Color on the other strategic opportunities.
Well yeah we've.
We're always approached and yeah, not just us for other people and you know with people want to sell something and you know companies are.
Or or our business opportunities and stuff like that.
So I would look at those now we don't execute on.
Any of them and I was going to say hardly anybody any because typically.
And they're selling the company, it's you know.
There's a reason they're selling it and that's been the case, you know quite a bit last two or three years.
But we always look I mean, there's one up last month that we you know we backed off we didn't really look at it beyond the initial glance.
As you know the fleet and fit ours.
And you know Theres always some issue out there on that stuff as you know it is equipment itself for the for the financials of the business.
But we you know, we're usually a recipient and the industry of anybody trying to get a recipient of information on people trying to buy or even you know.
Privately contacted on on some deals. So we're always looking at them and you know that's I guess, that's you know right now it's kind of a.
A catch all if something comes up.
Yeah, we've got the liquidity to do it.
Understood totally appreciate your discipline.
So thank you much and keep up the good work.
Okay. Thanks, Greg.
And we have no further questions in queue at this time.
Okay. Paul Thanks, Thanks, everyone for joining me on this call.
Appreciate your time this morning, and look forward to visiting with you again next quarter.
Goodbye.
Okay.
This concludes today's conference call. Thank you for attending.
Yeah.
And the host has ended this call goodbye.