Q1 2021 National Energy Services Reunited Corp Earnings Call
<unk> financial measures can be found on our press release, which is on our website.
Also as noted on our press release the company is still reviewing the potential impact of the recent SEC guidance on accounting for warrants issued by <unk>.
Certain GAAP financial information that could be subject to adjustment will not be discussed on the call. Today. This information will be provided upon the filing of our quarterly report with the SEC.
Finally feel free to contact us after the call with any additional questions. You may have our investor relations contact information is available on our website now I'll hand, the call over to <unk>.
Thanks, Chris.
Thank you from participating in this conference call.
I am very pleased with our sustained momentum and solid start of the year.
We continued to solidify our position organically and Inorganically in line with our strategy.
We grew 7% year on year, while the market contracted by around 25%.
Maintain flat sequentially. Despite the usual slow start that was evident by our peer average dropped Q on Q of 5% to 6%.
We had a solid free cash flow of $37 million on the back of good collection this quarter, which gives me a very positive indication of the year as expected.
I would like to thank our team on the feed for their dedication and perseverance and efforts to achieve those outstanding results.
Despite the evolving COVID-19 situation.
Middle East is now seeing the effect of the weak tube and.
And continue to be an SME lockdown mood watching carefully what is happening in neighboring countries like India.
We have maintained our 100% capacity of operations. Despite several countries in the region, putting specific quarantine requirement, which have certainly made the logistics are very complex exercise.
Our crisis management team continues to be running the show on a day to day basis, and we don't foresee it changing until we have a solid vaccination and ease of movement.
Some countries are progressing very well with clear mandated vaccine to people entering the premises.
In operations.
Abu Dhabi is a very good example, where our client provided the vaccine for everyone.
<unk>.
On the macro sites on the long term middle East continues to cement its place as the pivotal figure and the oil and gas landscape.
No one can compete with the lowest cost producers.
In addition to the global pressure and speed to move out of fossil fuel and the acceleration of the renewables for power infrastructure. The region has an unmatched reserve.
And the biggest demand market next door in Asia.
The growth market in Asia, largely insulated from the dynamics you see here in the Western Hemisphere and will depend on hydrocarbons from many years to come.
Especially as gas continue to replace coal as the cleaner fuel.
Yes.
The drive for the region is to concentrate on diversifying and growing the renewable a massive increase in gas production need the local demand.
While investing in oil production to meet the global demand.
From our point of view, our existing core business have an inbuilt recession proof baseline growth, which I don't believe the larger market appreciate its magnitude.
This will continue for decades, and our aim has always been to turbocharge the growth with accretive strategies as the partner of choice to all our customers.
On the short term, we have been saying now for over a year that the oil market will tighten on the account of U S shale effect.
Nothing of discoveries.
And lack of investment in exploration to offset the natural declines of existing field globally.
The pandemic delay the onset of this demand Titan Inc.
And yes. It also may have structurally changed the demand longer term, but this has only delayed the inevitable as yet we don't see alternatives covering for the declines we see in the oil and gas supply.
As an immediate effect, we already see our activity now starting to increase and I see double digit activity growth in the second half of the year.
I believe all our peers are also saying the same.
Although demand from key markets like India may get affected by the second with debt I believe we are now firmly in an early stage of an upcycle, which is here to stay for a while.
Also with a lot of major advocating reduced investment in oil and gas project or actively talking about exiting markets or even the space altogether. It gives more responsibility on the nrc's two remains the reliable supplier to the word.
Enhanced all roads lead to the middle East.
Again, if you want security of supplies and long term stability.
Therefore, the middle east gaining back debt position as the swing producer.
Our customers are very wise and are already making the right moves to ensure they are able to meet this demand we have.
Net.
We have seen this coming and have planned accordingly by front loading our capital needs actually started planning since the second half of last year.
We also have worked with our strategic suppliers to get first in line on some of the long lead time hardware.
Including pre ordering some items with manufacturers to hold them on inventory, which grew in the equipment to accelerate our deliveries to catch this growth in edge too.
We have been evaluating our needs this quarter and deciding to order more equipment and products for the second half and early 2022.
We need to maintain a buffer of resources and be first to act when our customers need us.
Again as the most reliable partner.
The focus now specifically on some of our operations.
I wanted to talk about Libya.
Libbey as all of you know has gone through a lot of turmoil over the last 10 years and lately has achieved a breakthrough and amicable political situation that no one has ever dreamed off.
Which in turn gives the country a good stepping stone for growth.
Let me add a lot of potential and production has dropped to almost 20% of its existing capabilities at.
At the start the first million barrel is what they call the easier task.
Then to get back to its full potential you need a lot of rigs and massive rigorous and workover activities.
We have been investing heavily since the beginning and now we have a solid based on both the east and the west enabling us to service all of the clients.
We are adding product line and enhancing our facilities to ensure we can reliably answered all our customer needs.
In addition, we have an almost 100% national talented team with many years of experience under their belt.
They know the customers and the NOC and continued to be very close to them as we were since the beginning and the most difficult times.
We need to provide technology and answer product to swiftly increased the production.
Yes.
Now, let me move and talk about the technologies and segments.
Here I have to specifically mentioned our progress on DNA this quarter.
We have done very well by growing both wireline and slick line operations on.
And I'm very happy to say that we did the same amount of revenue for both this quarter as we did in the whole year prior to the merger.
We have deployed new tools to target markets have several managed to acquire several operating on while on slick unit at a fraction of the price during the severe downturn last year in the U S.
It is a continuation of our drive to efficiently use our capex dollar and leverage opportunistic purchases as and when they come along.
On drilling we are making great progress operationally.
In Kuwait, we have introduced new agitators as part of our downhole tools offering achieving record performance improvement, resulting in significant market share gain and our fishing services.
This quarter, we announced our partnership with Phoenix technology for <unk> and Motors.
And I'm glad to report that we have already run these motors in jobs designed and planned by us and the job have significantly outperformed existing established players and broke RFP records for those sections.
Actually we broke existing records on 60% of the run which is an impressive achievement.
To give you. An example, we drilled the section and 30 hours instead of the field average of almost 60 hours, which means we saved declined more than a day and such a small section of the web.
We continue to work on identifying key markets and get assigned rigs, where we can demonstrate clear differentiation.
In addition, we recently announced our partnership with beyond and we formed a new JV to operate and implement that market, leading managed pressure drilling technology not only in our core mineral operation, but also in other countries in Asia and Africa.
With contract awarded already in both Malaysia, and Ivory Coast, we will be able to demonstrate better reliability.
Better drilling performance.
Better cost of ownership.
Beyond <unk> patented technologies that offer customers, a more compact and practical full MPD package that takes less time to rig up rig down and it's easier to operate saving time and money for customers.
As a result, it has become the leader in MPD market in the U S and Canada.
Unlike many players in the MBT specific spectrum beyond on the technologies included in the NPD packages from API Monogram Rcd's debt outperformed the competition by margins up to three times to specialized state of the art MPD control and design software.
Another technology, we are very proud of being an early investor and we believe is a game changer is skynet take pressure control who were recently feature on the cover of GPT.
You may recall kinetic or key boss has invented the device, which merges next generation materials used in this space programs with military technology to address blow out prevention.
Essentially it acts as an air bag for the drilling operations.
They have just completed the test on their drilling and coil <unk>, which has significant consequence on how our customer can safely conduct their operations.
As you know blow outs like deepwater horizon have significant negative environmental impact.
And this device pretty much eliminate that possibility.
And we are taking the lead and implementing it in the region.
We have now is set on the ground, which is shortly going to be qualified and tested.
<unk> success from the making.
As you know our performance has been achieved by continuing to focus on our execution capabilities.
The elimination for the region.
Being the flagship Mina National champion and our customer Centricity.
We are working relentlessly to provide a strong platform of technologies to enable our industry to produce efficiently and sustainably.
Part of our ESG impact effort is our early investment in <unk>.
Thurman harvesting, which we believe is a very forward looking idea on how to harness the thermal capabilities of the flex our produced gas to provide electricity.
We hope a pilot of this technology within a year and implemented in the region.
We have also made considerable progress on firming up on our water specific opportunities on a brown to run a pilot and technology demonstrator with one of our main customers.
We are also in the final stage towards an offering in the missing detection space.
Shall be announcing on investment in partnership with debt effect shortly.
This is something which will hit the ground running and we hope to run these technologies immediately.
Lastly, I want to convey that subsequent to our recent announcement on our acquisition in Kuwait, we have successfully closed the transaction.
On our effectively running the operations as we speak.
I want to take this opportunity potentially from a product and his team working round the clock with us to help grow this business.
These are accretive contracts from day, one and given our strength in cement and coil businesses. We can ramp up this operations significantly in a very.
Three short period of time.
Secondly, the drilling fluids product line, which was a very small offering for us now graduates to a sizeable part of the business in Kuwait and formed a baseline for our growth in the region.
Kuwait is a big story for us as an anchor country that has significant reserves with a savvy NOC.
We grew organically securing several contracts in drilling cementing testing and now with this force multiplier acquisition, we will have a substantial role to play and be part of the vision to transform the oil and gas sector.
Overall as you have noticed and as promised we have announced and closed on two major transaction and approximately one year in the midst of the pandemic.
We have largely handle these internal resources to keep the cost in check more important we demonstrated our ability to agree on terms and execute the needs with our own cash generated from operations debt ability with even enhanced going forward as we will generate more cash and we will have the <unk>.
Capacity for more technology, and then a accretive deal.
On that note I'd like to pass the call back to Chris to talk about the financials in detail.
Yes.
Thank you Sherif.
Turning to our preliminary results, we've reported quarterly revenue of $212 million. This represents an increase of 7% over the prior year quarter and flat over the fourth quarter.
The year over year quarterly increase was primarily driven from the growth of the unconventional product line and new contracts in Kuwait and the UAE. These.
These offset lower activity in other markets and other service lines related to the impact of COVID-19, which had little effect on our operations in the first quarter of last year.
Adjusted EBITDA in the first quarter was $50 million or 24% of revenue. This represents a decrease from 26% from the prior year quarter and the prior quarter.
EBITDA adjustments of $2 million for the quarter are mainly for integration costs associated with last year's acquisition transaction costs associated with our recent acquisition and other restructuring activities.
As we highlighted on our last call. We continued to incur significant COVID-19 related labor and supply chain inefficiencies and costs, we are carrying incremental labor costs in anticipation of the expected market recovery.
However, an ASR will be positioned to react immediately to new customer requests while our competitors are delayed ramping up their operations.
As is our practice, we do not reflect any of these COVID-19 related or other items in EBITDA or EPS add back.
Moving to our segments our production segment revenue for the first quarter was $137 million growing 3% over the.
Same period last year and 1% over the prior quarter.
Adjusted EBITDA margins for the production group were 27% on the first quarter down 2% sequentially due to the increased proportion of pass through revenue from hydraulic fracturing operations.
Separately, our drilling and evaluation segment revenue of $76 million in the first quarter was up 15% compared to the same quarter last year, but down 2% sequentially.
The increase over the prior year quarter is primarily related to higher drilling revenue in Saudi Arabia.
Adjusted EBITDA margins of 24% from the first quarter were up from 22% in the prior year quarter, but down from 25% last quarter due to varying activity levels and product line mix.
Depreciation and amortization increased to $31 $8 million on the first quarter compared to $31 million in the fourth quarter of last year.
The prior quarter had a benefit from a fixed asset valuation adjustment from the final purchase accounting of last year's acquisition.
We expect DNA to continue in the $32 million range next quarter before the impact of the recent acquisition.
Interest expense in the first quarter was $3 2 million down slightly from $3 4 million in the prior quarter.
Our adjusted tax rate this quarter, which includes the impact of the noted EBITDA adjustments and any potential impact of a change in warrant accounting was 12, 1%.
Excluding the benefit of the release of a reserve on prior year taxes, the adjusted tax rate would've been approximately 20%, which we expect to continue to improve upon going forward.
Adjusted net income and EPS, which includes the impact of the noted EBITDA adjustments and any potential impact of a change in warrant accounting with $13 6 million and <unk> 15 per diluted share.
Switching to free cash flow, we are extremely pleased with our record cash flow generate this quarter of $36 7 million.
Up from $32 8 million last quarter and negative $13 6 million in the prior year quarter.
The sequential free cash flow improvement was accomplishment, mainly due to another quarter of strong collections and lower capital spending.
We continue to improve on our days to invoice, while most customers have returned to normal payment practices in.
In addition, we were able to collect retention payments earlier than expected and that boosted overall collections.
Overall DSO improved by 16 days over the prior quarter level, a strong accomplishment by the whole mess or organization.
Additional actions are in process to lower DSO, even further during the year.
Capital expenditures in the first quarter were $11 million down from $14 million in the fourth quarter. This reduction was due to the lower new Capex orders placed in 2020 and improved utilization.
In 2021, we continue to expect capital expenditures to be flat with 2020 levels to support planned growth and pay for existing commitments.
Free cash flow in 2021 should significantly increase over 2020 due to flat planned flat to planned capex continuous improvement on fleet utilization and improved DSO.
Also another positive net debt decreased to $302 million at the end of the first quarter compared to $323 million at the end of the fourth quarter.
The sequential decline is primarily from higher cash balances from improved free cash flow and net debt payments.
As of March 31, 2021, our net debt to adjusted EBITDA ratio was one six flat from $1 six last quarter and should reduce to our target level of approximately 154 lower in future quarters.
Also we remained in full compliance with our primary credit facility financial covenants in the first quarter.
In conclusion in Q1, we put the company on an even stronger financial footing with our strong free cash flow generation and are better prepared for the expected upcoming market growth and additional inorganic opportunities.
With this I'd like to pass back to Sri for his final comments. Thanks.
Thanks, Chris.
In conclusion, I would like to leave you with key takeaways.
We are focused to be the trusted and reliable partner to our customers and have the capacity and resources to tackle debt needs, while managing the pandemic and restrictions.
Two we are already seeing activity starting to pick up and I'm confident that we'll have very strong second half.
Three ESG impact segment is progressing well with our water flaring and methane detection efforts.
Fourth we will continue to produce free cash flow and will invest in new partnerships and accretive M&A.
And on that note I'd like to pass back the call to the operator for your questions Christy.
Thank you.
It is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad.
Using a speakerphone please pick up your handset will provide the best on quality.
Again, ladies and gentlemen, if you do have a question or comment. Please press star one on your telephone.
Keith.
And our first question comes from David Anderson with Barclays. Please go ahead.
Thanks, Good morning sure it for you.
Good morning, Dave Thanks.
So maybe I'll just start from kind of a bigger picture question to start with operations on the middle East are heavily dependent upon a lot of labor from southeast Asian countries.
<unk>, India and as as you noted at the top there's a lot of COVID-19 issue still in those areas I'm just wondering.
As we look out into the back part of the year and we're all kind of seen this to this ramp up is there any concern that this situation could delay anything is that is that a concern for you at all in terms of.
The labor situation and how that could play out to the middle East.
So as an industry, you're absolutely right some of the some of the players will get affected especially the ones that are dependent.
Or they have a very small percentage of localization day.
Will that get affected, especially with the restrictions being put today on <unk>.
Travel I think for us.
Being again very national and have very high percentage of nationalization workforce, we will not see any of the issues that the others will.
I would say in some specific countries.
Where you still have a high percentage the industry overall will get affected and we might get affected accordingly, because of some of the delays for example of rig readiness. So in some countries. Yes, you might not have a rig crew for example, if the current grew with our.
Being there now already 47% to eight months.
And they will not be able to get a crew change.
Definitely there is a lot of things going on to replace some of those people, but yes, youre absolutely right. If the situation gets aggravated you might get some delays of those rigs.
You were talking about sort of the balance between natural gas and crude oil in the region.
Zinc on over the last 10 years, I guess, you could share that kind of starting some of the neighbors have really shifted spending and activity towards natural gas and if I'm not mistake I think around 60% of the onshore rig count in Saudi is actually.
Directed towards natural gas not sure. It is today, but just wondering kind of bigger picture the oil market tightening clearly looking to recapture share day.
Do you expect this mix to shift back to more of the oil side do you expect the majority of tenders now to focus on the oil side or does that not actually change because of their capacity situation.
I think you are upset derived in the second half of your question, it's not going to change I think.
<unk> they have the capacity again to put oil to the market, let's say if the market gets even tighter and they need to put more than 6 million barrel. Yes. They will you will have some short term shifts of some of the rigs going to the oil to get some of this production, but overall I mean their vision is.
To really get the guys in the different countries to be the main fuel for their internal demand and always remember that most of this in the countries are done for internal consumption. The only one that has huge capacity to export as Qatar, but the majority of the rest is really using it for internal consumption.
So this is not going to change and you saw for example, the.
The Saudi leadership are very clear on.
Moving to renewable and gas force, all internal consumption and really sparing the production the oil production import export.
And then my last question if I could just squeeze one more in you talked about kind of a pre ordering equipment in front of us kind of what youre seeing is a ramp up and want to make sure that you've got the capacity while others don't.
We've seen the last couple of years it seems like you've been growing and everybody else has been sort of treading water.
Just wondering if you can just kind of give us on overall sense of the capacity situation over there I guess, if youre preordering equipment, you must be thinking that the capacity situation is pretty tight.
It's kind of kind of look at a little bit different types of capacity, but just from your standpoint and your product lines.
Could this market really tightened really quickly in the back part of the year. It just seems like you are the only one who's really been spending any money over there.
I would say there is still excess capacity overall right what would happen is the readiness of this capacity. So if I want to be a bit more specific today I know that the market is going to get tight on some of the product line for example readiness.
Of course drilling fleet.
When you have all this rigorous activity that is going to sharply increase on people I'm not planning for it some people as well have issues with spare parts order equipment. They did not prepare.
They did not sorry repair.
During the pandemic.
This equipment. Despite the fact they are physically there, but they are not ready to answer some of the jobs the jobs as well are getting a bit complicated where the client needs higher specs longer reach bigger pipe.
Some of this activity this equipment on not ready in each country, and Thats, where im saying, we front loaded our capex. We looked at this last year, we are obviously.
Explained it in the prepared remarks, we looked at the opportunity to buy some of the equipment. So we bought actually several of those equipment at the fraction of its price 20 cents of the dollar.
On board slick line equipment wireline equipment.
Some of the high pressure equipment and we shipped all of this to the middle East and we have that ready green tagged as I call it ready to be deployed so.
It is very important that I think some of the some of the smaller companies.
We're not yet we will not be ready at all for this increased already I see them turning down jobs on.
We will be able to capture some of their work and some of the others as well some of the other like I would say competitors.
They have issue with cash right. So either they have a restructuring or something like that so they are not capable of putting capex as we can right. So and I think this is where the client looks at who has a buffer when the make a call and ask for this so today you don't see that visibility.
But I am quite confident that this is going to happen and it's due and that's why we are preparing force specific market to have specific equipment for what they think they will need and then we'll be able to capture that before the others.
Opportunities. Thank you sure.
Thank you Sir.
Well go next question comes from George O'leary with Keybanc capital. Please go ahead.
Good morning, Shar good morning, Chris.
Good morning, gentlemen.
Just curious for a little more color on the shape of revenue throughout the year Q1, 'twenty one cannot much more resilient than out of your competitors and then our expectations, which was great to see but wondering if you could bifurcate a little debt between production and the DNA segment.
Our our business between production on Danny.
In addition to that.
As I said, the urge to is going to be very strong and obviously some of the countries would want to see some of their wiglet on production activity, increasing I would say that demand of some of the production segment will increase and even with the growth of the diianni, you're still going to get.
Growth or higher growth, even in the production segment because of that.
On your second part of the question I would say H two over each one is going to be significant and as I mentioned, you're going to get the little increase in queue too, but really you would see the real increase in each too and one of the reason a balance people have to remember that during Q too you have the month of Ramadan, which we on in now.
And then you have the holidays so.
Usually comes a bit of a slower activity due to that so I would say you're going to see real ramp up in age too, where obviously as well declines wants to see clarity of the demand and clarity of the situation of the pandemic in the European opening and then did the board that I mean, you see most of the countries now.
Talking about the first of July complete.
Complete opening tourism is back.
You see there is still locked down.
There is still restriction some countries that did not open at all and didn't you cannot even entered them like for example.
So what I would say you're going to see a significant itch to over H, one and that's why I call it almost double digit.
Growth for ourselves in my opinion itch to over H one revenue.
I do not like on the on your question I have something.
No that was great Sharif and then just drilling into the partnership is Phoenix, a day and pun fully intended there can you. It seems like now you're on a good position to compete with the largest players there and I think back to a conversation you and I had a few years ago first met in person in Houston.
And that was kind of one of the areas. You guys are really looking to press forward into and get more exposure to it in the middle East does this.
Do all you guys need to do to compete against the Big boys so to speak in that Middle East market on the high end of the direction on drilling market.
And 83 to 84.
Our versus versus the average of 42 right. So basically they doubled.
RFP of that section, which is basically you can drill debt section in 50% of the time. So if that section takes you to day two days order to order for.
For example, the example, I put debt is 60 hours, we do within 30 hours. That's day day on a half if the rig count is spread right in the middle East cost you around 45 to $55000 a day day on a half a significant right. So you're talking about 70 to $80000 and if the price is the same or equivalent on the already saved this volume.
And Thats, where we see how can we grow on this part we have a full blown technology roadmap on the drilling to ensure that we have all those factors. So we can have high spec motors working on a on a regular.
We are working on <unk> et cetera, and this is when I would say I have solid portfolio and now I can tell you, yes, I can compete with the big boys for the entire drilling portfolio, but to date, we are only specifically targeting that part of the market.
How can we were part of it is one of the provider now if you do the same thing on the dueling fluids and then show it to the neighboring countries. Then you start to gain share on that.
One 5 billion dollar market that today, we don't even touch right. So this drilling fluids is very good business that we just started now.
<unk>.
Thanks curious I'll turn it back over.
Oh, that's gonna be nine day, ladies and gentlemen, if you would like to ask a question. Please press star one on your telephone.
Our next question comes from he's on a Lady with P. T. I T. Please go ahead.
Good morning.
When are you going on.
B E N G from last quarter, you talked about plans to convert the infield water into drinkable water as well as verbal sulcate from water. So you can use lower quality water for drilling spring up higher quality and quality of water for drinking I remember your you mentioned I think you were.
In conversation with three customers and but you know.
They may pull the trigger on a project before the end of the year I wanted to see if you could provide some color on on how many customers you're speaking with if that's still the plan it's from.
The timeline in touch.
Thank you God, yes, absolutely very exciting on what the water, especially the freshwater part.
And we are.
In the finance stage of designing.
The pilot.
Sending it and we will have a day.
The pilot in four to six weeks I would say in the country.
And we will be able to see the benefit and the results of that.
Facility.
One of our major customers and then definitely this will be a showcase if it works exactly as we said it will work being able to remove the solids being able to.
And I would say tested extreme condition. So.
They're working on some patterns, they're working on some new technology and yeah, we've become an investor. So we put money so severe like venture Cup. So we put money.
On with other investors and they are going to work on the idea they will come to work on the technology. They are going to test the technology and then they have an ESP than they have in E&P and then we commercialize it so as a small company usually this cycle can take up to two to three years at a small company and is small.
And very talented people like we have with the ice we are targeting one year. So 12 months for that ESP. So basically we put the investment that will be call forwarded on additional investments and then the product will come in a year's time for us to be able to take it on pilot tested whether you've got a pilot directly in middle east or.
Pilot tested first thing in the U S. Then transfer it to them in the east that's yet to be seen but.
Today, Igor we have around four O five of those that we are working on and then again, that's our R&D and that's what I always explain that's our philosophy of open platform. So we target with very innovative.
People and we give them money to drive to start a new project or neutral on a new idea and that's how we that's how we see how it would work and then take that outside we have summit way of one of them that we've been investing now more than a year and but it because it's heavy and electronics I don't see.
This for example until next year.
Why we don't announce about it right, but we are working on that that's our R&D on and that's how we do it.
Well I appreciate the color I'll turn it back.
Thank you.
Okay. Our next question comes from attending.
Attending like well free day. Please go ahead.
<unk>.
Thanks, Good morning, one to follow up on the on convention opportunity and really just track Rodley I think before where there was more focus on this was ramping up there was one on conventional fleet in Saudi and then maybe another quasi on conventional cost conventional in Qatar on maybe rotating between a few countries what operations looked like now and.
Now that we're getting through the pandemic somewhat here slowly, but surely what's the ambition to grow that part of the business for on furniture.
Thankfully so.
Let me just emphasize we have to day two fleets in Saudi Arabia, So we have and they are working.
Actively between Jafar, a basin and the Salt Galore and again, what Saudi has been really if by an error in developing those fields and state of the art what they have done. So we are working with them. We are in discussion as I explained earlier.
With three other customers and other countries to start.
Frack business in those countries.
The discussion is very active.
We are I would ambition is to land two of those before you then.
So a day.
They explained before what our aim is to have Fortunately in.
In the country in those countries before year end and my expectation is we're going to have one in each one on one in each day right. So that's exactly and then obviously you're going to see read revenue and I would say in the second half of the year.
The clients majority of the a lot of clients that are working around the clock around those activities.
You have to again differentiate in the middle east between unconventional and the convention do they do frock in the middle East, but they do not track what you know in the U S. Whatever you have the only that style of multi pads 50, 60 stage per well, it's only done today injure for a visit the rest is really.
Much smaller footprint, but you have a lot of rocks you have fraction on man.
Very long time.
They have tight formation you saw the announcement of.
With his excellency and would add knock and total and the export the day to day exported the first unconventional gas from beyond but it was announced definitely they have a huge program and you a for the unconventional you have unconventional everywhere, but I think the the main activity.
Or the matured activity is always going to be in book overseas in Saudi because of the size and then you would see more and more coming. So we are we are in very very I would say good shape to announce.
Hopefully the awards of those frocks before you on.
That that's very helpful I'm moving to the back half and the double digit activity increase that you anticipate it was helpful to hear about the equipment readiness. There was helpful to hear about the split between P. S O b.
Just wondering in terms of your market share assumptions it sounds like you're still going to be able to outmaneuver some of the smaller competitors that or maybe cash strapped.
It was on understanding though that through the pandemic you were able to also maybe outmaneuver some of the larger competitors just because of travel restrictions.
Do you anticipate those larger competitors, perhaps re establishing some some share on the back half of this year or.
Is it still very much on nesters for the taking just given your <unk> and equipment readiness.
So obviously very careful about everybody and we.
I would say we have a lot of respect to every coupla deserve we have.
I would say.
That we have a path of our growth on our market share I don't see this hampering or slowing down in the near future.
Part of it is what the explained that we understand the customer extremely well we have kind of.
I would say.
Visible.
Activity, what's coming in the second half, we prepare dose equipment, we prepared the people.
Honestly speaking I don't think anybody else is so there is a lot of constrained on the smaller guys for cash strapped or profitability et cetera.
And some of it you have to really I would I would call it bite the bullet and again be socially responsible.
Especially with the pandemic not to release the people to make sure that you have your crew ready make sure as well you you take care of them and their family et cetera, and this will pay out right. So we we have readiness and a lot of the countries, where I see our small competitors not ready.
Again, the cash strapped people are some of the competitors are even the international on one some of them have some issues with the capex deployment.
I don't see I'm, not saying that the big guys are not ready they are obviously, but I don't see them being able to take part of our growth ordered that we are forecasting I see that we are going to have the market share gain that we are planning and I see that we are very confident that we can.
Have the second half with double digit on the first half.
The path is clear and I would say that we will make our numbers.
That's totally fair one more housekeeping, what if I can read that in here for Chris It looks like very few charges on credits this quarter, obviously versus last quarter and it was largely due to the transaction costs. It looks like in this quarter I know, we had previously talked about logistics costs associated with pandemic and how you in.
<unk> those are numbers and not wanting to adjust those out but Chris.
Are those those charges on costs still very much there and do you anticipate the goes to moderate through the year and do you have any visibility into sort of the pace at which those heightened cost moderate for Ya.
Hello.
The costs are there <unk>.
<unk> said that the real key of having the revenue growth that will absorb them.
Would improve the employee utilization that's really the key.
So it's just getting to leverage back on those employee costs the costs will stay because they're not going away. They just need to be utilized.
Okay. Thanks, I appreciate the time.
<unk>.
Yeah, I mean, if I if I just may maybe the compliment with Christmas Day said I mean, if you look at our the way we structured our the whole thing of the CMT and crisis management team et cetera is we just said that this is part of the business and you just have to live with it you see what I mean so.
PCR desk, you're you're extra people you're.
Restriction on travel your airport issue is the day for example, I just give you. An example that if you want to go to.
One of the countries. They are requiring you if you come from a certain you have to stay in another country from 14 days.
This all these people go to that other countries stay there from 14 days and then after that day, what they call day out from the green country than they would be able to travel to the other one.
And all of this is part of our business if I look at our transaction on cost which would take out.
Call out that's all due to the nature of acquisition and then a lawyer fees.
Some of the exit of some people look for example, if we do some restructuring and then all the stuff that we call out like the the preparation for socks, and et cetera et cetera. That's the only cost we call out because that's basically it should stop and going forward you should not have down right. So.
I mean, I would say you might see for a while because we are very active in M&A. So you would see dot net.
But definitely the.
Chris explained the pandemic on all the stuff I cannot call. This out because this might stapler I don't know along but definitely as we said the CMT and the way we operate we keep it the same way because we don't know how this will last when it's going to stop how it's going to work out.
We are obviously working very hard with the Vaccinating our people, but we do this with the government in with the clients and with the customers and the different jurisdiction right. So trying.
Trying to.
Right on the source of upside potentially for you as we move through here I know you don't you don't call. It out and appreciate that you don't call it out but.
Understand that there is a pandemic related costs that's in there.
I just I just didn't know if it was gonna be a source of upside potentially from Oregon is moving forward.
Yeah I'm in honestly.
That is and I wouldn't call it on up so I mean.
Yeah, it might be but I have to as well.
Be quite Frank that you have as well as we save some calls because nobody struggling except a couple of people right. So there is as well as some cost avoidance working on on.
A lot of people, especially on the management side on zooms et cetera, right, but.
Yeah Monday.
Thank you.
<unk>.
And I'm, saying no. Further question comes up all night at this time, so I'll turn it back to her name is that for any closing remarks.
Thanks, Christy. Thanks, Thanks, everybody very excited again on solid for turn it on I would say very bright future quite optimistic actually about about the next set.
Second half and next year.
Thank you very much thanks for your time.
<unk>.
Okay that that concludes today's conference call. Thank you very <unk> you may disconnect. Your lines at this time and have a great day.
Yeah.
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