Q3 2021 Select Energy Services Inc Earnings Call
Greetings and welcome to the select energy services third quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad as a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Chris George Thank you, Chris you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us for the select Energy conference call and webcast to review, our financial and operational results for the third quarter of 2021.
With me today are John Schmitz, our founder Chairman, President and CEO, Nick <unk>, Senior Vice President and Chief Financial Officer, and Michael <unk> Executive Vice President and Chief operating Officer.
Before I turn the call over I have a few housekeeping items to cover a replay of today's call will be available by webcast and accessible from our website at select energy dotcom.
There will also be a recorded telephonic replay available until November 17, 2021. The access information for this replay was also included in yesterday's earnings release.
Please note that the information reported on this call speaks only as of today November three 2021, and therefore time sensitive information may no longer be accurate as of the time of the replay listening or transcript reading.
In addition, the comments made by management. During this conference call may contain forward looking statements within the meaning of the United States Federal Securities laws. These forward looking statements reflect the current views of selects management.
However, various risks uncertainties and contingencies could cause our actual results performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K for the year ended December 31, 2020, our current reports on form 8-K, as well as our quarterly report.
On Form 10-Q to understand those risks uncertainties and contingencies.
Also please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures.
Now I'd like to turn the call over to our founder Chairman President and CEO John Schmitz.
Thanks, Chris.
And thank you for joining us.
I'm excited to be discussing select energy again with you today.
As I've outlined on each of our recent calls we continue to focus on three primary strategic areas, which are <unk>.
First improving and bolstering the base business.
Second advancing our technology ESG initiatives and diversification efforts and third executing on strategic M&A.
I am very pleased with the progress we have made across each of these areas during the third quarter.
We continue to see the benefits of a strong commodity price backdrop.
Each has supported steady activity growth and productive pricing conversations with our customers.
This is driven revenue and our earnings higher during the third quarter.
On technology and sustainability front, we continue to add new recycling facility advance our emissions reduction efforts and have expanded our leadership team with the addition of a chief Technology officer to further advance our technology strategy.
And lastly, we continued to execute our M&A strategy.
<unk> closed on the acquisitions of both complete energy services and also recovery during the third quarter and Aqua Libra midstream at the beginning of the fourth quarter.
Looking at our operational and financial performance during the third quarter in more detail, we generated strong overall revenue growth of 27%.
Additionally, we saw adjusted EBITDA double <unk>.
Supported by both our base business and the complete acquisition.
Setting aside the growth contributions of our recent M&A activity, we still saw the base business grow revenues grew sequentially by 9% generating incremental margins of more than 30%.
This continued growth was driven by a combination of modest activity.
And market share increases and more importantly, continuing continued pricing improvements.
Additionally, we saw good momentum throughout the quarter with September representing our strongest month of the year to date.
I'll, let Nick speak to our fourth quarter financial outlook in more detail, but looking a bit further I feel very good about our continuing ability to grow the business meaningfully improve our pricing and capture market share heading into 2022.
With all above $80 and natural gas above $5, we expect to see capital budgets for our customers increasing next year by 20% or more that said, we still expect to serve a disciplined marketplace with much of the E&P capex growth directed at the increased service price.
<unk>.
Even with the service pricing growth our customers are still very well positioned to generate meaningful cash flows improve their balance sheet and return capital to shareholders.
All of these point to select maintaining a positive momentum over the coming quarters.
Looking beyond the macro driven tailwind and thinking about additional ways. We can support our business improvements we continue to make investments to support our technology ESG and diversification efforts I believe select is already a technology leader in the water solutions Mark.
Place.
But continued investments in our automation data analytics emission reduction and fluid match solutions will be critical to provide our customers with lower cost and improved performance.
To that end I am pleased to announce the addition of Suzy Colbert as our to our leadership team has selected first Chief Technology Officer.
Susie brings over 20 years of experience in a number of technology and financial operational leadership positions at marathon BP noble drilling and Anadarko.
Susie will oversee the integration and development of our R&D operational technology and efforts across the organization to ensure that we continue to advance our and grow our position as a technology leader in the sector.
Additionally, while the EBITDA in ESG is often top of mind in our business. We believe the other areas are weak equally as important.
Accordingly, Susie will be focused on reviewing accessing and enhancing our cyber strategy in data protection.
This is especially important given the critical investments we are making in technology machine learning real time data collection and cloud based analytics.
Shifting back to our environmental efforts, we continue to execute our emissions reduction recycling and infrastructure strategies on the emissions reduction side since signing our exclusive distribution partnership with emissions Rx during the second quarter, we release.
<unk> recently received our first delivered methane combustor unit during the third quarter.
We quickly deployed this through our first customer and we have five additional units on order that we expect to receive and deploy during the fourth quarter.
To remind everyone. These emission RF solutions are designed to help control reduce and ultimately eliminate methane and other waste gas emissions during the flowback and production phase of a well.
This removes the need for open flaring on location and at the production facilities. We believe there is a significant demand for this new technology and we're excited about the prospect of partnering with more customers in the coming months to further their emissions reduction strategies.
On the water sustainability side during the third quarter, we completed the expansion of our largest recycling facility located in Martin County.
We also completed our three newest Permian basin facilities late in September.
This brings our total combined fixed and mobile water recycling capacity in the Permian basin to approximately 525000 barrels per day.
What's also exciting to me is that we've seen <unk> SaaS and advancing our recycling efforts outside the Permian basin as well we were recently awarded a three year take or pay contract to build own and operate a produced water recycling facility for a major <unk>.
<unk> oil and gas company in the Rockies region.
We commenced construction on this produced water recycling facility late in the third quarter of 2021 and expect it to be fully operational in the first quarter of 2022.
This facility will support the recycling of up to 15000 barrels of water per day.
With the ability to expand up to 30000 barrels of water per day.
This facility will be connected by pipeline to an existing saltwater disposal well owned and operated by select we believe this connection to our existing disposal infrastructure provides meaningful optionality and flexibility for our customer.
In general these fixed infrastructure recycling facilities, streamline our customers' water logistics reduce their cost and improve their results in.
In addition to meeting our customers' business needs. These facilities will also be critical in advancing our ESG goals and those of our customers through decreasing both fresh water usage and waste disposal.
Now switching to M&A.
We continue to be active in the marketplace with the recent acquisition of complete energy Aqua Labor midstream and oil recovery. We saw the benefit of this activity during the third quarter with more benefits still to come in the fourth quarter and beyond looking at the two larger transactions in more detail the acquisitions of.
<unk> energy closed on July 9th, thereby contributing for a majority of the third quarter. However, the acquisition Aqua Libra from basic closed on October one and therefore did not contribute to the third quarter.
I spoke to the benefits of complete acquisition in detail on our last call and I believe the acquisition of Aqua Libre provides similar financial strategic and operational advantages overall with Aqua Libre, we believe we've added $70 million to $80 million of annualized current run rate revenue.
And $6 million to $8 million of annualized current run rate adjusted EBITDA with meaningful room for operational improvements.
Cost synergies and high ROI growth.
While we anticipate cost synergies, resulting from each of these transactions over the course of the coming quarters. We expect these two largely take hold in 2022 as we consolidate operation locations.
Move excess capacity and sell under underutilized assets.
Operationally with Agua Libre, we are getting a solid production service presence in Texas, New Mexico, Oklahoma, and North Dakota, as well as more than 550000 barrels per day of permitted disposal capacity approximately half of which is in the <unk>.
Permian Basin.
Additionally, more than half of Aqua Libra is current produced water volumes are delivered by pipelines supported by a number of long term contracts. Ultimately we believe these assets are very well position for subsequent development opportunities such as recycling solutions.
We view this captive supply of produced water as an alternative sustainable water source and we will continue to invest in technology and infrastructure needed to provide these solutions to our customers.
As you've seen in our recent take or pay agreements in the Rockies. We believe that we have a very unique opportunity to build sustainable full lifecycle recycling solutions around our existing and recently acquired infrastructure footprint and more importantly have the ability to do through long term.
Term contractual commitments around these assets.
In addition, with nearly 100% of Aqua labors revenue coming from production related services and infrastructure. We've added further revenue stability to our core completions oriented base business.
Combined these two deals have increased our production related revenue from about 10% of our total revenue during the first half of 2021 to about 25% on a pro forma basis as.
As we look forward I believe that continuing to grow our less cyclical production and industrial related revenues and adding contracted revenues through our recycling and pipeline infrastructure will further stabilize and enhance our cash flow generation capabilities and further separate select from its competitors.
Ultimately I believe the continued execution of this strategy will position us to reassess a more formal long term shareholders' return program over the course of 2022.
Again, I am very excited about our recent M&A execution, our technology strategy, our recycling projects and our other ESG focused investments I firmly believe the market needs additional consolidation and we are well positioned to execute on additional opportunities ahead.
With growing activity strong commodity prices and improved operational and financial performance in the third quarter and end of next year the future is exciting.
With that I'll hand, it over to Nick to discuss the financial performance and outlook in more detail.
Thank you John and good morning, everyone in the third quarter select grew revenues by 27% and gross margins by three five percentage points and successfully integrated complete energy services, while doubling adjusted EBITDA quarter over quarter and.
And as John discussed, we executed across all three pillars of our strategy through improving the base business advancing our technology ESP ESG initiatives and diversification efforts and further executing on strategic M&A.
Overall revenue growth of $44 million to $204 million was supported by $29 million from the complete businesses and a $15 million increase from the legacy select businesses.
We believe complete brought some attractive infrastructure assets into the water infrastructure segment with meaningful future development opportunity. So the majority of the current revenue from complete now resides in water services.
We don't intend to report legacy complete operations separately going forward, but hopefully that provides some context on how to think about that current revenue contribution and growth opportunities.
The complete integration has proceeded smoothly to date and.
And the performance of these business lines has met and in many ways already exceeded our targets. We're very pleased with this acquisition and expect it to make notable contributions going forward.
On a similar note while the Agua Libre integration is still in its early stages, we foresee highly accretive financial performance there as well.
Looking at the segments individually the water services segment grew its revenues by 47% and doubled its gross margin before D&A from 8% to around 16%.
While the addition of complete drove most of the revenue growth and was accretive to the overall segment gross margin the legacy select businesses, all improved revenue and margins as well.
With a flat internal forecasts for lower a lower 48 active frac crews during the fourth quarter, we expect low double digit to mid teen percentage revenue growth in the fourth quarter supported by contributions from the basic assets with slightly higher margins driven by continued pricing recoveries.
Water infrastructure revenue improved by 10% to $37 million driven primarily by the acquired complete assets as well as additional Permian volumes.
While this revenue growth was accompanied by an additional point of gross margin improvement. The overall results here fell short of our expectations.
The projected recovery in Bakken pipeline activity is pushed into early 2022 with some modifications to key customer schedules. However, the completion and startup of our latest water recycling project projects should progress. This segment's revenue forward by high single digit to low double digit percentage growth in the fourth quarter with projected margins in the <unk>.
Low to mid twenties.
We are engaged in active customer conversations around much of our newly acquired infrastructure assets in regards to adding additional gathering pipelines and recycling capabilities to existing assets and we hope to be in a position to detail. Some of the 2022 opportunities for this segment on our next call.
The oilfield chemicals segment expanded revenue by 8% to $55 million the challenges with the raw materials supply chain, along with cost associated with restarting the Tyler production facility compressed margins by 2% quarter over quarter.
Tyler facility is now producing volumes and will benefit the company both through increased production capacity and revenue potential as well as through decreased freight costs for shipments to the mid con haynesville and Gulf coast regions.
This also allows our primary manufacturing facility in Midland to gain further share in the Permian.
We expect low to mid teens percentage revenue growth with Q4 margins returning to around Q2's 12, 5% level.
All materials supply chain issues are not fully resolved, but we have seen more relative stability. So far in Q4 for our key polymers that has been the case through much of 2021.
As Tyler ramps up production and gain scale efficiencies. We expect further gains for this segment in the quarters to come.
On the SG&A side about $2 5 million of the nonrecurring transaction costs impacted our SG&A of 22 million for the third quarter.
The addition of complete also added a little over $2 million ongoing quarterly SG&A as well.
Was the successful acquisition of Agua Libre will result in some transaction costs in Q4, but I believe this number should be lower than Q3 deal costs and the addition of certain Agua Libre personnel and systems. So that a smaller incremental run rate and then the addition of completed.
Higher revenue combined with the usual systems integration timing challenges of an acquisition resulted in a use of cash from net working capital of $14 million, which combined with our targeted investments in recycling infrastructure led to free cash flow of negative $18 million for the third quarter.
We finished the quarter with $107 million of cash on hand, $232 million of overall liquidity and no debt.
With the Agua Libre acquisition that closed just after the end of the third quarter, we used a combination of cash and equity with approximately $15 million of cash consideration paired with a little less than $5 million worth of select stock.
Our strong balance sheet has allowed us to take advantage of a window of opportunity to execute accretive value, creating transactions and further to deploy cash into high return opportunities around our infrastructure.
Our commercialization of a water recycling facility in Colorado with dedicated volumes from a blue chip customer demonstrates the potential to expand our recycling operations beyond the Permian into other basins.
With the addition of the recently acquired assets, we can make further advancements on this strategy and invest in networking infrastructure into recycling facilities, where much lower costs than Greenfield development.
As anticipated with the construction of our new recycling facilities third quarter net capex stepped up to $15 million with first half total net capex of just 8 million. However, our 2021 net capex guidance remains unchanged at $30 million to $40 million.
Depreciation expense is projected to be around $85 million to $90 million for the year with no changes to the minimal interest expense consistent with our current quarter and no material tax expense.
Notwithstanding certain cost challenges our base business continues to improve as we gain market share and recover pricing.
Crude and natural gas prices are certainly supportive and early reports on customer budgets for 2022 reflects a continuation of the positive trends as well as being supported by a robust forward strip and hedge book or.
Our M&A strategy is further industry consolidation that attractive valuations with ample future upside.
These transactions have also diversified select and the more production levered revenue stream and accelerated our environmentally friendly investment pathway.
Whether organic or through M&A every dollar we put to work we will have to meet high standards in terms of delivering a superior return on equity of our shareholders as well as furthering our three key strategic gains with that I'll turn it over to the operator for some Q&A operator.
Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for.
Questions.
Thank you. Our first question is from Ian Macpherson from Piper Sandler. Please proceed with your question.
Thanks, Good morning, John and team congratulations on.
No.
Positive strategic directions.
Here.
Just high level John.
To me like our.
Sure.
Scenario planning for 2022 has broken relationship.
You referenced.
20% spinning growth for next year, which is.
Pretty consistent with what we've heard from others service pricing is increasing I think you said you think service pricing could.
Could represent the lion's share of that.
And yet everyone's expecting drilling.
Drilling activity and crude counts to be up like 20, or 25% next year. So.
40% spinning growth doesn't pay for all of that activity and pricing, where do you think that relationship.
<unk> breakdown and what do you think the opportunities for bigger pricing or more or the threats with more constrained activity might might surface.
Yes, a very good question. Thanks.
I think one of the things you've got to always think about <unk> and.
In the world of drilling and completion and where we deliver.
To deliver our services is there still an efficiency that's being gained so we simply get more work down inventory for our period then.
We did 12 months ago or six months ago, So that comes into the equation as well but.
As Nick said and as I said, it's 20% plus so we think the market growth, whether it's through pricing or through activity is bigger than that.
<unk>.
As we sit here today and said what comes out of pricing and what comes out of growth, we would probably say that it probably leans more to pricing for us.
And the ticket size, but the efficiency comment equal lay up the equalizes that and brings it back more 50 50 because.
Again, theyre going to get more done in the 24 hour period with the same people and asset base.
We've seen in the past and we continue to see that improvement in the field every day.
Okay. That's helpful. Thanks, when you look at year ambitions to grow the production related side of the business.
What do you think the next few quarters look like for select with regard to.
Inorganic.
Activity to fill in the infrastructure that youre that you have already begun to build out our there.
Is there a lot more out there that you can consolidate.
Or should.
Should we expect you to be more focused on integrating what you've recently acquired.
And building out from from.
Today's base.
As we said we do believe there is more M&A.
Opportunity and there is more consolidation needed in this space and we continue to say that given our balance sheet and our position in the market that we will.
B a leader as it comes to.
Further M&A and consolidation but.
To get to the base question, we have picked up.
A very good position.
Disposal wells in Oklahoma across.
The Permian across the Bakken These assets of came out of companies that were very capital constrained.
And there is good opportunity whether it's through.
On ability to pay lay pipe extend the reach of that disposal well take trucks off the road or <unk>.
Really repurpose the water Richard recycling and redistributing for Frac purposes. So.
We think we've got a lot of opportunity, but we don't believe that the current footprint will be the last footprint.
All right looking forward to next steps thanks, John.
Yes.
Thank you.
Thank you. Our next question is from Tom Curran with Seaport Research Partners. Please proceed with your question.
Good morning.
Good morning.
So for Agua Libre Youre expecting an initial EBITDA margin range of eight 6% to 10% with a midpoint of nine 3%.
How much potential do you see to raise that range.
What are the key levers you've identified for improvement.
On the asset basis is pretty underutilized as far as capacity and it's.
Its position in the market again because of capital constraints. So.
No.
It's a matter of capture in a matter of using the asset base either as a source of produced water for recycling purposes or use the asset base for disposal.
Matter of fact is is that the utilization of these assets are very low and the reason, they're very low is because they lacked the capital needed to take the next step, which is really pipeline pipeline related and recycling related.
So I think that's where the.
Operational <unk> Tom.
Secondary lever there Tom will probably be a little bit of addition through subtraction as we consolidate the operational footprint and sell off some excess equipment.
But fair to say then that.
You do see.
Expansion potential for that EBITDA margin.
Certainly it sounds like just on the utilization side alone.
As you ramp closer to which should be full effective utilization.
There would be meaningful upside.
Yes, we believe that in not only aqua libra, but the transactions that you are seeing us do that the operational.
To work or addition of ability to create a profit and revenue out of it as is.
Very meaningful tone.
Great and then.
John or Walsh, if he's on the call could you give us an update on how the industrial solutions groups opportunity set has evolved.
Recall that as of our conference I know, Walt making crisp, we're chasing a new project it sounded promising.
Yes, I'm going to let Michael scar can you take that one he is in the room with us here and he can speak to our efforts toward industrial sure. Thank you Tom So we're still evaluating the industrial market. It's obviously, a very large market in water and chemicals are a big part of it.
We're narrowing in on where we think we're going to be particularly competitive and have an inherent advantage based on the background. We've got in oil and gas and I would say that we're increasingly narrowing that scope and getting closer, but we really haven't completed our assessment yet so we're looking at it from.
On organic opportunity, an inorganic opportunity, but before we really dive into how we want to approach the market, we want to be very strategic in which segments or sub segments of the market. We want to go after.
Got it thanks for that Michael and then.
Just returning to pricing nicotine.
For water services.
Specific division can.
Can you give us an idea of how much pricing is up year to date.
And from here.
What your plan is or the potential you see.
For introducing additional pricing increases.
Sure Tom So you saw the margins double there.
Again, driven both by the <unk>.
Acquired businesses as well as the legacy <unk> business.
That legacy select.
Improvement there on the margin.
Part of that is activity driven part of that is pricing driven we're still having additional pricing increases that'll that'll be accretive to the fourth quarter.
It's still ongoing discussions with almost every customer here.
I'd say, probably on the entire water services revenue base, it's going to be a little less than 10% as far as what we've achieved in these third quarter numbers here.
And just a little less than 10%.
That will be over which period full year basis, sorry, not just a <unk> quarter.
Quarter over quarter basis, but if your question was on the full year.
About where we are on it basis, there and Tom This is Michael <unk> again, the one thing I'd say is we have experienced the price increases, but we also have inflation costs as well on labor and fuel and fuel is up 40% year to date.
And so thats going to dampen some of the price increases that we've had on the financial performance, but as John mentioned, we do see the pricing improvements continuing into next year and are seeing signs of some of our inflationary cost stabilizing whether it's labor raw materials or fuel prices.
Got it.
Thanks for taking my questions.
<unk>.
Thank you. Our next question is from Daniel Burke with Johnson Rice. Please proceed with your question.
Yes, good morning, guys.
Good morning, good morning.
If I look at water services and water infrastructure in Q4.
Think about the guidance and the addition of.
Agua Libre in I guess incremental week.
<unk> completed it looks like the base case is that the organic business is pretty flat from Q3 to Q4 is that fair I mean, I think thats a reasonable place.
Place to put guidance, but I wanted to calibrate that.
Okay.
No I think there is there is some growth in there driven by the organic business coming primarily from from pricing versus activity growth, which we don't see much of in Q4.
Okay fair enough I'll take a closer look at the numbers I guess that.
And to be clear the comments on basic current annualized run rates for revenue and EBITDA should be captured in this first quarter of ownership of the assets or does it take a little bit of.
Of repair to get even to that those initial forecast.
We may be a little short here in Q4.
Still obviously very early in the integration process there with an October one close date.
But we don't think it takes incremental investment or new business development to reach those numbers.
Okay got it and then maybe maybe it falls short of material, but any any initial thoughts after.
This year's acquisitions, most primarily of the complete.
Assets in the basic assets on while the potential for asset sale proceeds as you rationalize those asset basis.
Sure, we'll see a pretty good chunk here in the fourth quarter.
Asset sale proceeds we're still evaluating what's the total potential for that.
But it'll it'll certainly be significant it will be.
Well north of $1 million for Q4 and expect the next couple of quarters after that.
More or less around the same pace here, obviously, we'll provide a lot more detail on our 2022 outlook at our next call with our full budget.
<unk> worked through some of the Capex and net Capex factors there but.
Certainly it's significant and we will see action on that in Q4 in the numbers.
Got it.
Alright, guys I'll leave it there for now thank you. Thank you for the time.
Thank you.
Thank you. Our next question is from J B Lowe with Citi. Please proceed with your question.
Jamie Your line is now open.
Sorry, I was on mute.
I just had two quick ones.
First was on.
Looking out into 2022.
There's a lot of moving pieces, there's a lot of integration, but if we kind of take a step back.
Think about spending up 20% plus plus all the integration that youre doing with slips back out kind of the restructuring charges what types of Incrementals. Do you think you are you are now combined businesses can do in a 20% plus.
Spending growth environment with whatever pricing that you want to throw in there.
What kind of like.
Baseline incremental expectation should we should we kind of consider for 2022.
Historically, that's been 30% to 35% we saw those numbers in water services and water infrastructure. This quarter I'd say those are still valid for the base business here as we look across 2022, but we do have additional potential for upside around the investments that John referenced where we are.
Existing assets.
That have low utilization as opportunity to develop more recycling capacity around many of them will be making those investments and those should be overall accretive.
Even compared to those incrementals there.
And pricing upside of that is a wildcard there.
That's beyond what we're currently looking at.
Okay.
Okay great.
My other question was.
You're expanding your geographical footprint and some of these acquisitions are there any basins that you still feel that you are kind of underrepresented that you want to.
Well, a little bit more into.
Yes. This is John.
Sure.
The footprint is pretty robust if you look across the company.
We do keep our eye on the activity in the powder River as we think about it but.
We had a very solid footprint with select.
The two pieces, we added with complete in the DJ in mid Con was very.
Very strong.
<unk> definitely added to our.
Our opportunity.
Recycling and <unk>.
Fixed gathering in the Permian basin and it added to our our opportunity both in mid Con and the Bakken to do the same.
But we feel very strong about our position today.
We do think these.
These acquisitions, we're doing in the ones.
Still think potential are out there.
<unk> strength in this.
We do always think about.
Our exposure to gas as well as as oil.
And if you step back and look at the dollars in our position across the gassy areas too.
It is added to that but we.
We have a good strong position in gas as well as far as that.
This separation between oil and gas and activity goes.
Alright, thanks, so much.
Thank you. Our next question is from John Daniel with Daniel Energy Partners. Please proceed with your question.
Also included.
John just wanted to follow on a little bit to Jason's question on geography.
As you evaluate.
Prostitutes M&A strategy going forward is it more about consolidating core markets are continuing to build up sort of that bigger presence.
Okay.
And then just the views on sort of an industrial.
Desire to expand that versus our homeland astra's walk us through <unk>.
One strategy.
Sure.
When you think about M&A our way we look at it John is as we are.
It's not necessarily a region or maybe even a service line. It's more of an asset base. So if you think of a disposal well.
Our our position through an asset base that we're gaining.
Through these transactions and what we have to add to that our harvest out of that that's probably more.
Directive of what we have been getting with these M&A deals and continue to focus on go forward, we have a presence across the United States.
That's very solid so I would say, it's more driven by direct asset that somebody has developed in another company much like Aqua libre or completes disposal assets they had across the mid con.
Okay, we are various.
On the industrial side, we are very serious.
About it we think we got.
A great Guy and Walt to lead the effort as Michael said, we want to make sure we have defined and made the right choice about what that execution.
Areas, we're going to be disciplined about that.
We do think we got a very.
Interesting position between water and chemistry.
In the oil and gas space, we believe that completely fits over into the industrial space.
But.
So are our.
Our efforts and our attention are strong.
R R.
Complete business plan is incomplete yet we're still are honing in on exactly what we want to big John.
Okay, and then just one final one on the labor markets.
We keep hearing from everyone how tough it is.
Is it when you consolidate these enterprises complete and Aqua Libre from the people perspective are there is it a breath of fresh air where Theyre excited to have you guys take the notable at Midas in Missouri or do they all kind of move on to other things can you give us your experience with these two deals from a people perspective.
Yeah. So.
It's a breath of fresh air.
Okay on it as you can imagine I mean.
Got a lot of history with the complete guys.
I guess you'd say, we're glad to be hold enhance again.
Okay.
On the basic side very much.
Glad to be in a position that they are.
Sure.
Seems to be a defined future.
And they were very release, so I would definitely say, it's been strong and retention as well as strong in.
And the aggressiveness of excitement.
Okay. Thank you for letting me ask some questions.
You bet. Thank you.
Mr. Schmitz there are no further questions at this time I would like to turn the floor back over to you for closing remarks.
Just wanted to thank everybody for peg.
<unk> taken the time out of their day and.
Given select the attention and the questions that was.
Asked of the company.
As we say we are excited to go forward. So looking forward to talking to you in three months. Thank you.
Ladies and gentlemen, thank you for your participation. This does concludes today's teleconference. You may disconnect your lines and have a wonderful day.
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