Q3 2021 Solaris Oilfield Infrastructure Inc Earnings Call

Good day and welcome to this two large third quarter 2021 earnings conference call.

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Please note this event is being recorded.

I would now like to turn the conference over to Yvonne Fletcher Senior Vice President Finance and Investor Relations. Please go ahead.

Good morning, and welcome to the Solaris third quarter 2021 earnings Conference call I'm joined today by our chairman and CEO, Bill Bottler, and our President and CFO Kyle Ramachandran before we begin I'd like to remind you of our standard cautionary remarks regarding the forward looking nature of some of the statements that we will make today.

Hey.

Such forward looking statements may include comments regarding future financial results and reflect a number of known and unknown risks.

These refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.

I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance.

Presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Reconciliations to comparable GAAP measures are available in our earnings release, which is posted on our website at Solaris oilfield Dot com under the news section.

I'll now turn the call over to our chairman and CEO Phil Harbert.

Thank you Yvonne and thank you everyone for joining us today I'm.

I'm pleased to share another quarter of strong Soliris results, we generated a 40% sequential quarterly increase in revenue to over $49 million adjusted EBITDA increased 18% sequentially to $7 $7 million and we paid our <unk> consecutive quarterly dividend, we ended the quarter with $43 million of cash and no debt.

On the balance sheet.

Industry fundamentals continue to shape up strongly during the third quarter oil prices increased to $80 range and gas prices climbed over $5 in the global supply and demand dynamics continued to tighten.

During the third quarter U S horizontal rig count grew 10% from the second quarter average well completions activity grew at a slower rate as operators increase drilling activity and inventories of rolled it uncompleted wells reached multi year lows.

Third quarter, the horizontal rig count is up another 7%.

Many operators have taken advantage of higher commodity prices and attractive wellhead economics, albeit not at the same rate as the increase in commodity prices. We expect operators to continue to increase drilling activity, including many private operators that haven't been active in many years.

Meanwhile, we continue to see public operators strict capital discipline, many are indicating modest increases in drilling and completions activity and spending next year as they plan to maintain or slightly grow production. We believe this combination of robust commodity prices capital discipline from public operators in 2021, and growing backlog from both public and private.

Operators all set the stage for another year of activity improvement in the U S completions and for Solaris in 2022.

The increases in overall activity levels. We also believe recent supply chain tightness in the market will play well into soliris strength in the coming year. The industry is currently facing constraints in many critical areas such as labor and trucking in both new and existing Soliris offerings helped reduce the impact of these bottlenecks.

Abiding highly efficient large storage buffers with multiple unloading spots and built in automation.

We're continually improving our system automation that is core to Soliris. We believe continued automation can help further reduced labor requirements improve performance and reduce cost. We demonstrated this with our auto Hopper technology. We introduced a couple of years ago, which resulted in increased operational efficiencies reduced labor increased reliability introduced.

Spillage and dust when traditional Frac blenders arm use our new auto blend technology advances those automation gains by completely replacing traditional blender technology with a streamlined integrated all electric blender during the third and fourth quarters, we continue to run customer trials, which auto blend several of our customers have now seen firsthand the significant.

Prudent in reliability and performance of the auto blend versus traditional blenders.

We continue to demonstrate that our auto blend solution can further reduce head count requirements.

So improving uptime performance and sand throughput. Additionally.

Additionally, because auto blenders all electric it can be integrated with the same cleaner power sources that are used by a growing number of electric frac fleets.

We believe that the continued industry focus on capital efficiency and discipline will drive demand for technologies that can both improve operational efficiencies and meet sustainability initiatives.

Soliris is the only integrated provider all electric solutions for the low pressure side of well completions operations and we believe this strongly positions us to address many of the challenges of today's market as well as support our customers' key ESG targets.

We expect our next two auto blend units enter service no later than the first quarter of 2022, and we're looking forward to full commercialization of the system. We continue to have discussions with several customers about longer term contracts in order to secure spots in the supply chain cute.

The performance of our system and the commercial structure under discussions appear compelling for our customers that a trial of our system supply chain lead times on some of the components of the auto Glenn have continued to tighten and we have ordered long lead items for a few additional blenders as we finalized commercial negotiations.

Trucking is another area of tightness in the industry. It is receiving a lot of attention right now.

We managed the last mile for our customers. It means we manage the trucking logistics in conjunction with our silo based and storage services on well sites.

Much of Solaris ability to achieve record managed last mile activity in the third quarter is a direct testament to our equipment and the associated supply chain and operational technology. The team, we'd go into management and our balance sheet.

The last mile logistics team has grown in both size and sophistication and has worked hard to strengthen our deep relationships with trucking providers. Our strong balance sheet has also helped us secure trucking as excess as our debt free balance sheet and liquidity allows trucking carriers, both certainty and speed of payment.

We're also expanding our next generation belly dump unloading offerings that work in conjunction with our silos today, we have two new top film based systems of different designs currently running in full scale trials and are very pleased with the results of both so far both solutions allow for flexible placement on well sites up to 400 tons per hour offload rates and preserve.

The option to unload from pneumatic trucks to maximize current procurement flexibility.

Flexibility should allow operators to optimize their payloads for trucking availability lead to lower overall costs and increased surety of meeting production time schedules at a time when trucking resources are tight.

While the Solaris silo system already offers many efficiency benefits today, we believe this enhanced belly dump loading technology could ultimately result in new customers for Solaris.

Our customers will continue pushing for solutions that ensure wells can be completed as fast and efficiently as possible and at current commodity price levels. The timeline to reach production is crucial to driving value. We believe our people relationships and technologies are well positioned to ensure our customers can meet these timelines are also offering all electric automated and.

Safe solutions that enhance sustainability benefits for the entire oil and gas industries.

I will now turn it over to Kyle for more detailed financial review thank.

Thanks, Bill and good morning, everyone I'll begin by recapping some of the numbers during the third quarter, we generated $49 million of revenue and adjusted EBITDA of $7 $7 million. We averaged 59 fully utilized systems, which represents an 11% sequential increase from the second quarter total revenue increased 40% sequentially drip.

Both by an increase in system utilization as well as an increase in the amount of sand delivered in our last mile business.

Over the course of the quarter, we deployed a total of 88 proppant systems, which worked with varying degrees of utilization. This was an increase of one deployed system from second quarter levels or calculation of 59 fully utilized systems reflects a number of equivalent systems that generated revenue every day in the quarter.

The tightening in the gap between our fully utilized and deployed systems during the quarter reflects a modest compression in white space on the calendar.

11% increase in our fully utilized system count was achieved against the backdrop relatively flat industry completion activity and was positively impacted by Soliris record for both tons delivered and managed last mile systems operated in the corner.

We also benefited modestly from an increase in activity with the customer that we signed a three year agreement with during the second quarter.

Operating cash flow was approximately $7 7 million and included a relief relief and accounts receivable as we caught up with the late collection from a customer which was previously disclosed in our second quarter earnings call.

Consistent with prior quarters, we have continued paying for trucking services at an accelerated pace to ensure availability for higher activity levels in our last mile service offering.

We also realized a $1 million cash benefit from the employee retention credit as part of the cares Act of 2021, we have filed for an initial $2 million of benefit related to the first two quarters of 2021 and expect to realize that remaining cash benefit in 2022.

After total capital expenditures of approximately $6 million in the quarter, we were free cash flow positive at $1 7 million.

We returned a total of approximately $5 million to shareholders in the third quarter and dividends, which was flat with the prior quarter since.

Since initiating our dividend in 2018, we have returned approximately $87 million in cash to shareholders in the form of dividends and share repurchases.

We ended the third quarter with approximately $43 million in cash and $50 million available under our Undrawn credit facility for a total of $93 million in liquidity. We're currently in the process of negotiating an extension of our credit agreement with our lenders and expect to complete those negotiations well before the expiration of our current agreement.

In the second quarter of 2022.

Turning to our fourth quarter outlook. During October are fully utilized system count was flat with the Q3 average there are number of puts and takes that will likely play out for the remainder of the fourth quarter, including some level of holiday shutdown and budget exhaustion. These.

These can be balanced are offset by certain operators getting their 2022 programs started in late December.

We expect that our managed last mile service related activity will come off of the record level, we experienced during the third quarter and this is a throughput based business, which will be subject to lower volumes during holiday shutdowns and will likely be challenged with additional tightness and trucking during the holiday season.

This should result in overall activity levels for Soliris that are flat to potentially down slightly in the fourth quarter, but points to a positive outlook for 2022, where activities should be up from 2021 levels.

SG&A expenses for the third quarter were approximately $5 million inclusive of noncash stock based compensation for the fourth quarter of 2021, we expect total SG&A to be roughly in line with third quarter levels inclusive of the normal quarterly expensing of noncash stock compensation, our previous expectation was for full year.

2021, capex spending to be in the range of $15 million to $20 million given the strong interest from our customers and in anticipation for full commercialization of our new technologies. We have begun to order initial long lead items for additional auto blend units beyond the two we expect to receive by the end of the year as a result, we.

Our capex spending for the year to be approximately $20 million, we expect maintenance capex for 2022 to be flat with 2021, and the $10 million range and growth capex related to commercializing our auto blend and our belly dump solutions has the primary driver of capital expenditures in 2022.

In summary, we are excited about how industry fundamentals are taking shape for the coming year and we're excited to see the progress and the new technology. We've been working on for the past couple of years. We also believe our technology service differentiation and focus on core competencies can help drive value for our customers and help to alleviate many.

<unk> of the supply constraints currently facing the industry.

The timing of our new technology introductions with an industry up cycle offers exciting prospects for Soliris, we remain committed to capital discipline by focusing on new technology that can drive incremental returns for shareholders, maintaining our dividend and maintaining our debt free balance sheet and strong liquidity position.

With that we'd now be happy to take your questions.

Right.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

Our first question today comes from Stephen <unk> with Stifel.

Thanks, Good morning, everybody.

Good morning, Steven.

Two things from me.

The first just thinking about.

Some of the technologies and the capital spend that you talked about.

When we think about 2022 how should we Cal.

Calibrate your growth potential versus an underlying expectation of growth, let's say I mean, some people seem to be centered around 20% plus upstream spending growth.

But if you make an assumption that complete.

Completion activities up 20% give or take how should we think about your growth and that kind of environment.

Yeah, I think as we evaluate the new technologies, we see those as ways to grow market share.

So it does require incremental capital, but we do think it essentially provides an opportunity.

To grow beyond what say market growth is in terms of our activity.

I think both at the Blender technology as well as the top fill technology address specific pinpoints in the industry that potentially allow us to perform.

Ed.

At a higher level than <unk>.

Yeah, and I'd add.

The blender really does pull through potentially new customers with the silos that might not be there before so the complementary nature of the products allow additional pull through business that may not be there today.

And is there is there a pricing component we should be thinking about next year or is it too soon to tell.

We're in those discussions today I think you've heard from a lot of other public companies around.

Pricing for next year, and certainly there are inflation considerations, our investments investment considerations and the new technologies that we continue to talk about and enhancing our systems.

All of US had those conversations with customers in a very constructive manner too early to kind of come up with any firm numbers, but those are certainly discussions we're having.

Thank you and then the other topic I wanted to ask you about was.

And realizing its containerized solution versus your systems, but obviously the <unk> was interesting.

With Liberty just curious a how you think that.

Impacts the landscape.

Sort of what you think of those type of of marriages with with directly with a pressure pumper.

As a as an industry direction.

Well, we think our last mile business in the wildfire storage business is really a bit independent from pressure pumping a liberty was a large customer prospects and they help start that business up. So it was a very strong relationship between the two parties that made sense for them, maybe they're consolidated and from our perspective, though.

As an independent business, we treated differently, we manage our equipment differently.

It's it's just a very focused organization around managing what we call the low pressure side of the business or the logistics and supply chain from chemicals to the sand side to the ultimately when it all gets blended upside of the pumps and so our focus is there and we think that we have and continue to do business with.

Probably every single pressure pumper in some form or fashion, and we think there's value in that diversity.

Okay, great. Thank you for the color gentlemen.

Yes.

Our next question comes from Jon Hunter with Cowen.

Hey, good morning, everyone.

Okay.

So my first question is just on activity in the third quarter, where you outperformed your original guidance quite a bit.

I'm curious are these new customer wins are they expanded agreements with existing customers.

And is it fair to say that the <unk> exit rate was kind of the high point for the quarter.

Yeah, I think it's.

Always a mix of additional growth as our current.

Current customers new customers.

And we signed a three year contract with a customer in the second quarter and that drove additional growth as well that maybe it wasn't in our prior guidance.

So always kind of a mix there.

As far as the second point.

Right.

Sorry, John can you just restate the second question.

Yes, so you touched on I guess, new customer win and agreements.

Yes.

Try not to get too much in the month to month over month variance. We did mentioned in the prepared remarks that.

October is coming in pretty close to the average of the third quarter.

Finalizing some of those numbers, but yeah as we look into the fourth quarter that we talked about some puts and takes.

Certainly there are potentially operators shutting down for budget completion, but you know where commodity prices are today theres also potential for operators to say well I'm going to ignore that exhaustion I'm going to keep going but I don't want to lose the crews that are working really well and in risk starting up in January so.

Well our guidance is flattish.

Based on and based on those sort of.

Puts and takes in your obviously theres seasonality as well and for that I'm speaking to holiday shutdowns, specifically, our last mile business is a throughput business, where we get paid every time a ton is delivered to location and over Thanksgiving and over Christmas there will no doubt be days, where ore tonnes aren't.

And so that will have an impact on the fourth quarter, but all of that is shaping up in our opinion very well for 2022, where we see spending up and activities continuing to fill in the white space that we did see an improvement in white space sort of utilization in the third quarter.

Thanks for that call.

Sorry go ahead.

I was going to add to that Jonathan I think if you play back time, we werent at 80, we werent north of $5 on gas and north of $80 on oil when we made when we looked at the third quarter. So that does play. It frankly is muted relative to what one would expect at these at these price levels, but there has been increases.

Thanks, Bill and I guess along that same.

Line of questioning you know your utilization improved sequentially that was nice to see.

Can you talk about the sustainability of maybe that higher utilization on your deployed systems.

As a function of your customer mix and partnering with mainly large e&ps that are more predictable.

And how do you weigh that against maybe being opportunistic.

Opportunistic with with some of the smaller players that are reacting.

The improvement in commodity prices.

Well I mean, clearly I don't think being reliable and steady as necessarily a big versus small phenomenon and I think there are smaller operators that are very reliable. They keep a program going in and maybe adding to that program I think it's a really a dynamic that as things will begin ramping back up through this year, you've just seen random ramping of various.

Customers and now that all that white space against to fill up we will see more and more higher higher and higher.

Our ratio of actually fully utilized two systems that were actually deployed so that gap should continue to close as folks fully develop their capital budgets and their programs and may add a rig in fill in filling the completions programs to match.

Match, the ease of the DUC drawdown or the additional wells that have been drilled and you're certainly seeing the pressure pumping side, where operators that don't necessarily have a consistent program are having to really schedule ahead, because more and more folks that haven't been around for a while are popping up and completing wells.

So not only are we seeing higher utilization, but I think on the pumping fleets. We're also seeing higher utilization part of that is driven by equipment, but also by people.

So, it's obviously more efficient for the industry to to be running fewer crews at higher utilization then lots of crews with lots of people that aren't necessarily working all the time.

Yes.

That makes sense and then I guess just last one for me is you know if your activity is call. It flat in the fourth quarter. I know you said, it's flat to maybe down but let's just assume it's flat.

Would you assume that your margin would be flat with where it wasn't a third quarter or is there anything in <unk> that kind of weighed on results that goes away in the fourth quarter.

I think it's probably consistent the last mile business tends to have.

A bit of a mix impact there are certain jobs, where.

They are really firing on all cylinders and we're pumping a lot of tons every day and then they are jobs that have a wireline issues and were down for a couple of days and so that's sort of some of the volatility we're seeing.

From a quarter over quarter profitability mix as the last mile portion of our business continues to grow.

And that may be a negative of one quarter it may be a positive.

Yes, I appreciate that thanks, I'll turn it back.

Thanks, Joe.

And again, if you have a question. Please press Star then one.

Our next question comes from Ian Macpherson with Piper Sandler.

Good morning, Bill and Kyle coupon.

Morning.

Which way do you think we're heading next year with <unk>.

Overall completions efficiencies not just speaking to your purview, but.

It's been it's been a secular trend of getting better faster cheaper.

But we're hitting obviously hitting.

A lot of <unk>.

You know just short term supply chain snags, but also just running out of.

And the best crews equipment and Etsy.

Et cetera.

And as a enabler of efficiency gains do you think that that companies like Soliris can help the industry stay on that track or do you think that 2022 is teed up to be a year of reversal for efficiency gains for e&ps.

Well certainly the rate of change does appear to be slowing a bit but the actual changes are incredible. If you just look at it from Chile.

Pounds pumped per day, our hours pumped per day.

In basin by basin, all the measures are going up certainly.

Certain basins that are trailing from an efficiency standpoint, and that have room to catch up.

One of the you made a great point of view when we find them.

Some high efficiency N say zip.

Multi well pad all fracs well creates a challenge elsewhere and so we're seeing a challenges and Pierre trucking logistics getting enough capacity to deliver the amount of sand at the industry needs on location. So there.

Theres always a bottleneck that gets created somewhere either upstream or downstream of some of these efficiencies and from our point of view the blender.

<unk> to be incredibly high.

Point of contention in traditional well sites with lots of NPT.

<unk> heard lots of anecdotes that we can happy to talk about but the point is is there continues to be problems around blenders and that is a point, where we're really focused on health.

Helping the industry to get more efficient there.

And again the trials are driving a lot of interest on that product.

Completions activity really today, because we're trying to manufacture as a constraint management goal and so as you look to go seek around optimizing the efficient frac.

One bottleneck at a time, so it was sand logistics and San storage and then it becomes water then becomes clinical's. This removal of the blenders and beginning to automate things because labor becomes a challenge in people, making just simple mistakes and so our blender. In addition to the the silos and other things, but leaves what we think is one of them.

Most unreliable pieces of the actual low pressure solid completions, which is what we're focused on so our our goal is to continue to make it efficient.

Step changes are always big in May slow down, but our goal is to continue to keep a bit of a ramp on that I don't think any of this reverses so I think the trend.

Moderate, but but does continue somewhat in terms of the industry's ability to complete a well and a certain amount of time.

That's really helpful. Thank you both.

And in response to Steven's earlier question on the.

The prospects you and it sounds like you view that as.

And sort of neutral to your market wallet opportunity so.

Youre not necessarily reading any specific positive or negative takeaways from.

Sure Nimbly.

Nibbling up or down on market share around the edges. As a result of that transaction is that correct.

I think it will be around the edges I mean, we do some business with liberty in the boxes have a great place in the role on the well site and the silos that are a great place where all the wealth side I think a lot of that groundwork has established in and as we look at completions efficiency in the amount of storage needed NOL sites.

We have a much more capital efficient solution over time, and having a little more boxes and swing swing small boxes around the well site.

They've done a good job with it and I think they'll continue to do a good job with it.

There is plenty of room for both of us.

Got it thanks very much.

Yes.

Our next question comes from Samantha Hoh with Evercore ISI.

Hey, good morning, guys.

I'm just wondering if you could update us on your Ken and water initiatives.

There were some trials with the blender using combination.

Oh, the blenders and the water system and I was just wondering if you could.

Help us think about whether or not those initiatives can contribute to that.

2022.

Yes, all of them Blenders will have one.

Water systems connected to them. So that's a part of that kit.

Got I don't know, maybe roughly half a dozen maybe heat water systems running at any time with customers even on an independent basis.

And then on the <unk> system I think we've had a couple of running various points as well so not a ton of growth on the Chem systems at this point, but we do think it does tie in well into the blenders.

And same on the water side.

Okay great.

And then you know I was just wondering.

Do you think about the white space that your bill your.

That you have for your your rental system.

Are you seeing a point, where you might have deployed extra systems in the first half of next year.

I'm, just kind of wondering like how much fun right.

My space do you want to maintain just in case there is like.

You know last night demand from customers.

Anyway, that's like really that's all right.

Rental we're hearing out there.

Yes, I mean, if we look at let's just call. It 90 systems, having run into the third quarter to use round figures and if we think about our unutilized capacity is still quite significant so we've got plenty of room to capture whatever shares out there. So from an optimizing white spaces, you always wanted to have some reserves.

To make sure you're capturing all the revenue opportunities, but at this point, we've got plenty of capacity on the sand silos side of things to capture market share that may be available and then there is some level of that white space that is intentional because its logistics driven like we may have a system down maybe go into the same customer, but they may be moving locations that are further away.

We want to take that system down for a week and put another one in service. So there are some some mobe demoed reasons to actually keep some of that white space, it's higher than usual because of the.

The dynamic is the industry is ramping back up but we do have plenty of extra capacity to take advantage of additional spot work, which does sort of in itself create a little more white space.

And you guys used to give us a breakout of where all your gear systems were spread out geographically can you maybe just like at least update a very or if that was concentrated D. C.

The Permian continues to be our biggest center oppugnance I mean quite frankly, it's pretty closely aligned to the rig count and just overall completion activity I wouldn't say it's.

All of that different probably a little bit higher in south, Texas relative to rig count and maybe a little bit higher in the Permian relative to rig count.

Okay.

And can you kind of characterize.

Maybe any sort of like operating preference between like that like E&ps privates.

Okay.

I'm curious if you could say like you know.

I really wouldn't expect selection appears to be more efficient operator.

Nice.

Okay.

And what are you seeing any sort of notable trends in terms of how one operator at night.

You know work and like I said, they're interested.

The first of them out there.

No. They all have their unique characteristics.

Small guy there were some small guys that are extremely efficient in what they do and there are some big guys that are extremely inefficient with what they do so I think it's it's it's a mixed bag and we love them all the same.

On the new technology, we've got privates that loved the new technology, we're very focused on driving efficiencies. We are privates that are less focused on that and vice versa on the publics.

And can you share a mix of your yeah, you know what how much the privates where in terms of your system uses this past quarter, our daily 40, 50%.

I think.

From a rig count standpoint, the privates as it moved up to close to 60 plus percent of overall rig count and.

Don't know if its quite there on completions, but it will get there if it's not so.

So again, given our size as far as overall market share we tend to look like the market.

So a lot of the pressure pumping work, we do directly ends up being for private operators. Okay interesting. Okay. Thank you. So much have a great rest of the year.

Thanks, Matt.

Yes.

Our next question comes from Sean Michel them with Daniel Energy Partners.

Yeah.

Good morning, guys and thanks for taking thanks for taking the question. So one thing that caught my attention, obviously, a three year agreement and oilfield services today Oh.

It's a big win do you expect that an anomaly or do you think or do you expect that.

You'll see more of that to continue in the current environment.

We think.

It is.

Unusual, but I think it's very strategic for the counterparty and for US I think the blender and the notion of adding that kit into somebody's pressure pumping is vital as it is I do think that that.

<unk> tends to lead towards longer term contracts than generally spot work. So I do think that as a general trend because of the new equipment and new technologies and how integrated it becomes we will start seeing longer term contracts that are both good for both of us and our customers.

And then just as you think about the trends I do think youre seeing a lot more folks to the simulcast.

Wells, both on the public and private side, we've talked a lot of operators, but the biggest issue. It seems like when we sit down and talk to operators on the sidewalk practices water and sand and can you just maybe talk about you know how much of that are you seeing in I guess in your where your business is today or do you think that's a benefit.

Fit to you as the industry moves to more similar fracs.

We do we think that we can buffer, saying we can add a.

<unk>, we can add another six pack, we can put a lot of storage depending on the logistics nature of the particular location. You know some are clearly closer to mines in places depicts end up than others and so that drives the challenge for how much how much you want to store at the well once we're at the well site our connectivity to.

They hope to the high pressure pumps is as good as anything and its very reliable from that point on we're not relying on other kind of equipment from there. So I do think that as I mentioned earlier, it's all about constraint management I think that sand.

It has impacted some places more driven by trucking, but I do think there's been some tightness in the sand industry is as mine shutdown last year.

Coming back on or needing to have some sort of contract or some sort of term deal to begin to want to put.

Put the capital and hire the people back you need to get the minds back restarted so theres bottlenecks through the system and I think they're just they're being hit one other time and very location specific.

Anecdotally jobs shutting down to 12 hour operations due to trucking constraints on the sand side.

One of our last mile jobs, we had planned for X number of stages per day agreed to with the customer turns out they're doing you know $1 five X on the stage count.

Problem is there's not enough capacity to meet that demand.

So there's no doubt about it when we put it back on location you're doubling the inventory you may be providing say 12 bonus hours of inventory and a $3500 an hour in MPT charges.

The return on that incremental insurance, if you will have an additional six pack is quite compelling. So we haven't really seen it yet in the numbers materially, but we do think theres an opportunity to capture more calories. If you will per spread by providing that added level of insurance.

And then thank you and then maybe one more just as you I think in the prepared comments you talked about potentially two more blenders going out in 'twenty. Two just a higher level question on the blender is the adoption rate greater or in line or worse than maybe you expected in terms of how people are adopting that.

Technology.

The interest level is about as high as we expected we have quite a bit of interest in it and we're in the process of negotiating we've been.

Maybe a little careful with putting the capital to work and waiting on some contracts, which we're working through right now and and we'll be prepared as we mentioned we are spending a little bit on some long lead items in anticipation of that but haven't fully fully said go yet on a bunch, but it does feel like its psalms numerous brought problems and bottlenecks.

In the industry and we're fairly hopeful about it and the evolution of the interest is interesting to watches.

Two years ago, when we initially talked to people about it it was I don't have any issues with lenders, they're all brand new and they work really well.

Over the high end of those blenders have worn out and they've been.

Lots of challenges and so time is sort of our ally here and particularly as people get more and more focus on efficiencies.

Particular piece of equipment on traditional locations continues to be a bull's eye for those trying to drive efficiencies right and it's all electric and it integrates right in with the power sources for the electric Frac fleets be it a turbine or gas generation or line power.

Yeah, that's great. Thanks, guys.

Thanks, Sean.

<unk>.

This concludes our question and answer session I would like to turn the call back over to Mr. Bill <unk> for some closing remarks. Thanks.

Thanks, Charlie and thank you all for participating on our call I want to thank our employees customers and stakeholders for another strong quarter. We're very proud of all the efforts that have gone into the continued enhancement of our core offerings and the new product development activities. We look forward to providing further positive updates in the beginning of 2022. Thank you all have a great day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.