Q3 2022 Ensign Energy Services Inc Earnings Call
Good afternoon, ladies and gentlemen, and welcome to the I'm, sorry to Energy Services, Inc. Third quarter 2022 results conference call.
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Following the presentation, we will conduct a question and answer session.
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Call is being recorded on Friday November four 2022.
I would now like to turn the conference over.
Corporate motto. Please go ahead.
Thank you Andrew.
Good morning, and welcome to Ensign Energy services third quarter, 2022 conference call and webcast.
Call today, Bob Geddes, President COO, and Mike Gray, Chief Financial Officer will review <unk> third quarter highlights and financial results, followed by our operational update and outlook.
And then open the call for questions.
Our discussion today may include forward looking statements based upon current expectations and involve several business risks and uncertainties.
The factors that could cause results to differ materially include but are not limited to political economic and market conditions.
Crude oil and natural gas prices foreign currency fluctuations weather conditions, the company's defense of lawsuits the ability of oil and gas companies to pay accounts receivable balances or other unforeseen conditions, which could impact the demand for the services supplied by the company.
Additionally, our discussion today may refer to non-GAAP financial measures such as adjusted EBITDA. Please see our third quarter earnings release, and SEDAR filings for more information on forward looking statements and the company's use of non-GAAP financial measures.
With that I'll pass on to Bob.
Nicole Hello, everyone.
I'm happy to report that enzymes third quarter results came in ahead of expectations and most importantly, a solid indication that the office space is finally, starting to deliver a sustainable profits with positive net income a few key highlights in the U S. We are definitely seeing another push on rates and the 10% range as operators quietly contract their most desired fleets moving.
<unk>.
With our application of our edge autopilot drilling rig control system at our performance advisors, which help the operator reduced net well delivery costs.
We actually deliver real value with our rate increases, which makes rate increase is very sustainable.
In our U S. Southern business unit the team successfully completed and commissioned nine high spec triples on long term contracts for the Permian at rates well into the mid to upper Thirty's. This brings us now to 31 rigs worldwide that we have received or that have received upgrades largely funded by operators through covered costs and.
Or incremental rate increases, adding to the recent re contracting of our two high spec 2000 horsepower AC rigs in Bahrain.
International team in Oman secured long term five year contracts with three of our high spec <unk>. All five of these rigs will utilize our edge autopilot drilling control system engaged on performance based incentive contracts, which will enhance the rig operating margins.
Currently have 124 rigs on the payroll today and have visibility to 140 by year end most of that uptick in rig count will come from Canada, and all with rate increases as we weighed into the winter with winter rates being established.
Will all have incremental revenue as usual.
At the end of October we rationalized, our Canadian directional drilling business unit for approximately 7 million shares and Cathedral energy services, making us about a 4% order in that business. The DD space in Canada is extremely competitive and crowded necessitating a trade into a consolidation strategy to unlock the value in that business unit the deal keeps enzyme invested into.
The upside that is anticipated as a result of the consolidation strategy and it also allows cathedral to have access to enzymes edge autopilot drilling rig control system platform, which is arguably the most easily and cost effectively drilling rig control system solution out there as we have expressed on prior calls incremental capex or upgrade reactivation must be funded.
By the operator at least 50% and that the day rate adjustments must be significant enough to generate sufficient cash flow to cover the remaining capex within six months.
Upgrade requests less than $1 million, we'd still see operator cover the upgrade 100%.
We've seen the wave of upgrades and associated capital requirements through 2020 to slow down as the most desirable and easily upgradable rigs have been completed and re engaged into the market.
As we wait through 2023 enzymes still has lots of upgradable rigs, especially in the double category in Canada, where we have 40 underutilized tele doubles that can be upgraded to high spec self moving tele doubles, along with our new edge autopilot light drilling rig control system for anywhere from $2 million to $4 million.
Again, we would be working with our clients to cover the upgrade costs for those transactions.
While finding new skilled labor with rig experience is challenging we continue to find ways to attract recruit and train new employees to the ensign team.
Enzymes global skill standard GSS trains field personnel on a managed competency career path much like you see in most other trades and is arguably the most desirable trading protocol in this space, we continue to drive efficiency through systems around the world with that we've reduced our G&A per operating day by 12% in the quarter with record penetration rates on <unk>.
While delivery times industry is finding accelerated wear and drill strings in some cases, we're finding drill strings in the Permian lasting only three years versus eight years only a decade ago to address this accelerated where issue. We are now modifying the current contract with our clients whereby a 100% of downgrades will be fully cost recovered with new replacement joints.
At the operator's expense, where operators have requested none inventory drill strings. The operator will be requested to provide the pipe at their cost or accept a market rental charge.
We've also introduced I'm sorry, we've also started to see operators wanting to contract for longer terms always assign that they feel another rate push coming with that we will take term in the upper thirties.
I'd like to respond with defined bumps every six months or annually.
Come back to an operational update before that I will turn it over to Mike Gray for a run on the numbers, Thanks, Bob and.
<unk> results for the first nine months of 2020 to reflect positive improvements to oilfield services activity Dayrates in financial results year over year. Despite the recent pullback in commodity prices the operating environment for oil and natural gas industry continues to improve.
Overall operating days increased in the third quarter of 2022 Canadian operations recorded <unk> 4009 operating days, an increase of 41%.
U S operations recorded <unk> 4937, operating days of 61% increase and international operations recorded 996 days, a 7% increase compared to the third quarter of 2021 for.
For the first nine months September 32022, operating days were higher with the Canadian operating operations, achieving a 76% increase the United States, a 51% increase and a 10% increase in the international operations when compared to the same period in 2021.
The company generated revenue of $432 6 million in the third quarter of 2022, a 61% increase compared to revenue of $268 6 million generated in the third quarter of the prior year for.
For the first nine months ended September 32022, the company generated revenue of $1 1 billion, a 59% increase compared to revenue of $699 4 million generated in the same period of 2021.
Adjusted EBITDA for the third quarter of 2022 was $105 4 million, 76% higher than adjusted EBITDA of $59 8 million in the third quarter of 2021 adjust.
Adjusted EBITDA for the nine months ended September 32022 totaled $243 7 million.
57% higher than adjusted EBITDA of $155 3 million generally generated in the same period in 2021.
The 2022 increases in adjusted EBITDA is due to improved industry conditions, increasing both drilling and well servicing activity.
In addition, operating activity increased as a result of the acquisition of 35 land based drilling rigs during the third quarter of 2021.
Depreciation expense in the first nine months of 2022 was $208 1 million a decrease of 3% compared to $214 million for the first nine months of 2021.
General and administrative expense in the third quarter of 2022 was $12 8 million or two 9% of revenue compared to compared to $10 million or three 2% revenue.
In the prior year.
Capital purchases for the third quarter of 2022 were $46 $9 million, consisting of $18 $4 million in upgrade and growth capital and.
And $28 5 million in maintenance capital and capital expenditures for 2022 is still targeted to be approximately $165 million on that note I'll turn the call back to Bob.
Thanks, Mike.
So let's start with the U S and the U S. We operate a fleet of 89 high spec ADR rigs and 48, well servicing rigs along with a Rockies directional drilling business. The team has grown its market share in the U S up to 7% most of which is concentrated in the highly active Permian region.
<unk> also has a strong foothold in the Rockies and California, both challenging areas to operate in from a regulatory standpoint with the nine recent upgrade reactivation in the southern business unit now commissioned and operating we now have a total of 62 rigs on the payroll in the U S. With the bid book recently picking up again, we are seeing visibility to $65 to 70.
Rigs operating by the end of the year.
Permian now has 41 of our highest spec ADR 1500, ADR rigs operating with a high probability that we will exit closer to 45 by year end and that area, California stay steady at eight rigs out of our <unk> 17 in the states state licensing issues are still a challenge in California, depending on whether licensing opens back up we could see.
Our U S, California business unit moving back up to 10 rigs in short order.
Rockies currently at 13 drilling rigs could possibly see another two rigs being picked up by the year end.
Our U S well servicing business, which operates a fleet of 47 relatively new well service rigs continues to run at high utilization rates and keeps finding ways to grow this business year over year in both the Rockies and the California area.
Our directional drilling team in the Rockies continues to deliver high performance service and has a steady book moving forward with a very local client base as.
As mentioned before we are seeing a strong wave coming at us again for our high spec triples.
And we are solidly bidding into the upper <unk> with six man crews to builders and our edge autopilot platform, we still have lots of runway as rates need to be closer to $50000 per day, all in before one could rationalize building a new super high spec triple and receiving a reasonable rate of return above cost of capital.
In Canada, we operate a fleet of 123 rigs that are focused in the western Canadian sedimentary basin.
Today, we have 46 rigs on the payroll with bookings that will get us to 55% in short order targeting 60 by year end, while we were able to elevate pricing right across all of our categories coming out of breakup, we have seen some price resistance in certain conventional rig type categories. This is a bit of what we call. The backdrop. The fact that some of the mid tier contractors look to.
Get some rig and crew started up before the winter.
That's not the case and the high spec rig types, where we enjoy a very strong utilization in leading edge price traction we continue to see growing demand occurring in the highest spec doubles in high spec triple rig categories as at Clearwater moves over to deeper well plans in Duvernay Montney stay strong.
We're bidding the high spec <unk> in the low twenties, the high spec <unk> and low <unk> as we enter into winter pricing scenarios I will point out again that enzyme still has lots of upgradable rigs, especially in the double category in Canada, where we have 40 underutilized tele doubles that can be upgraded to high spec sales moving pad tele doubles, along with our edge autopilot light drilling rigs.
Control system for anywhere from $2 million to $4 million again, we will be working with our clients to cover the upgrade cost for those transactions, we do see contractors moving rates slowly into winter, but expect rates to elevate another 10% through the first quarter 'twenty three on spot pricing setting the stage for the rest of 2023 for continuing rate increases.
10% to 15%.
While servicing business operates a fleet of 52, well service rigs in the Western Canadian Basin and have 15 operating today with with visibility to 20 by year end again rates are moving with every program negotiation.
On the international front, we have a fleet of 34 drilling rigs of which 14 are situated in Australia Asia and the Middle East and 12 in Latin America, South America as mentioned in my opening summary, our middle East team were successfully re contracting our Bahrain rigs.
Two five year contracts are performance based comp performance.
Performance based kickers as well as successfully negotiating to put three of our high spec <unk> and <unk> to work on five year contracts also at performance space Kickers.
We are finding that there is a growing market for high performance high performance applications of our edge autopilot drilling rig control system engaged on performance based contracts, where both the operator and enzyme when our rigs in Kuwait are performing in the upper decile and have three more years on their primary term.
In Australia, where we operate one of the largest fleets in the country. We're finally emerging out of Covid challenges, which stunted the business levels severely in the first three quarters.
Projects are coming back strong and we expect a very strong year ahead rates on our deeper highest spec rigs have been moving up about 15% to 20% with a tighter market developing in the mid sized high spec rigs. We have also planned two to three edge autopilot installations in the near future in Australia, which will generate incremental income of $600 a day.
Argentina has two rigs operating now with a third opportunity being negotiated that needed to generate electricity in Argentina is driving a strong push for deeper high spec ADR rigs to deliver gas in country cost effectively.
Venezuela, the prospect to get some of our fleet operating looks encouraging, but we won't hold our breath in any case, our eight rigs are cold stacked in the secure sites and ready to go back to work with very little capital once the U S lifts and modifies its current OPEC policy.
On the technology front, we now have our edge autopilot platform installed 56.
56 rigs worldwide and the other thing slowing us down or the only thing slowing us down as the global chip problem, So with that I'll turn it back to the operator for Q&A. Thank you.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session.
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One moment. Please for your first question.
Your first question comes from Aaron Macneil from TD Securities. Please go ahead Sir.
Thanks for taking my questions Mike.
Same thing working capital build this quarter I don't think we really need to get into the nuances.
But more importantly, looking ahead, what do you think working capital requirements will be.
As well as maybe year.
Our initial blush at 2023 maintenance and growth capital in the gas market.
But when you're trying to drive at is.
What do you think cash flows available for debt reduction.
It looked like in 2023, so I know youre not going to give guidance.
Any help on the other moving pieces might be might be helpful.
Yes, so for the working capital we saw about a $76 million increase in accounts receivable.
A lot of that was from the activity pickup we saw going from Q2 into Q3.
From a capital perspective, I mean, we were still.
Fairly firm on the 165 or about $133 million into it so from the accounts receivables coming into the door with the with sort of the capex requirements in Q4 and going into 2023, it'll deals I think sort of less than what we have seen so if anything we will see our liquidity buildup in the free cash flow definitely go towards the back.
Sheep and reducing the credit facility.
Okay.
Bob you mentioned a slowdown in the upgrades.
Was that specific to a certain class and what would your.
Tori and rigs that can be upgraded to a 500 horsepower super spec rig.
And.
Maybe you can put it into buckets of $1 million to $2 million $3 million to $5 million.
However, other buckets, you feel are relevant and I've got a follow up on the doubles that separately.
Right right so.
What we mean is.
Through 2022 of course, so it was a strong push.
From 2021.
People are starting to get after the upgrades. So there was a.
<unk> pushed through 2022.
The pace of upgrades has slowed down.
With the clients.
They are kind of gotten through their 2022 budget, we're already starting to see some uptick in some conversation with clients where they go hey, we like this rig have you got another one just like it.
If we're talking the high spec triple for a moment.
Well.
We can upgrade a rig.
Here this here's the scenarios, here's the day rate and Youre going to have to fund the upgrade.
We've got.
In the U S. We've probably got.
At least another five to 10.
Triples that can be upgraded.
I'd say theyre, probably in that three to five range.
That.
That would follow into that question in the highest spec levels of course, those would be focused in Canada, where we've got the greatest concentration of doubles.
As I mentioned, we have 40 upgradable doubles some of them are already high spec doubles that would be upgraded further.
Because they're not fully utilized we still probably got about 10 of those that we can put to work. So we've got we've got capacity.
For not a lot of money to to put those to work in those would be in the $2 million to $4 million range.
CAD for the Canadian stuff.
The U S for the U S stuff.
Okay, that's great.
Turn it over thanks for your time, Thank you everyone.
Your next question comes from coal Pereira from Stifel. Please go ahead.
Morning, all so many of your peers in the U S got it to sequential increases in drilling margins.
Call. It U S. One in $2000 a day range in Q4.
Obviously, you don't disclose this but should we expect sort of a similar range from ensign.
Oh, Yeah, yeah yeah.
The harbor.
The hybrid moves.
Similarly, absolutely yeah.
Got it and you mentioned 60 rigs in Canada by year end should we be thinking about that number as your Q1 peak or could that figure could go higher.
Our Q1 people will go higher.
I think we might get to 70% in Q1 peak 70.
Got it.
And as well I know you kind of just briefly referenced it but you know maybe on a percentage or absolute basis, how many of your tier one rigs in Canada do you expect to be active in Q1.
I would say.
I would say probably close to a 100%.
We're probably on the tier one high spec triples.
We're already at 90% so.
It's kind of the last.
Two or three going to work type of thing on the high spec triples on the high spec doubles, we've probably got capacity.
And high spec doubles.
Range, we're finding.
Our high spec levels are starting to push into the smaller.
What we call now Super high spec double to starting to push into the high spec triple market.
As you can imagine we've got clients that currently have the highest spec double doing great work, great crews and they want to put bigger pumps on that they want to put a little bigger top drive that type of things. So.
It's an evolution there is some convergence there between our high spec <unk> and <unk>.
The high spec triples that are out in the market currently so.
The margins are very equivalent I mean, our super high spec doubles are making the same margin as the high spec triples.
In Canada.
And is it sorry is that on a dollar basis or a percentage basis.
Dollar basis.
Got it.
And as well you have a bond due in April 2024.
Need to refi in the next five months to avoid it going current.
Obviously, the bond market is very challenging in the current environment can you just talk about how youre thinking about the strategy for that.
Yes, we're looking at it I mean, the story is definitely improving quarter over quarter.
When you look at where consensus as to where we've been the last couple of years that the story is definitely strengthening so definitely the high yield market has been a bit of turmoil right now as you said, but from our perspective continuing.
Continuing to improve the story and we'll we'll look to hit the market.
We think we're ready from a current I mean, if it goes current that's what's at the end of the world by any means so we'll we'll look to do what's right for the company going forward.
Got it so I mean, you would prefer to wait it out and maybe <unk>.
Similar.
Call it unsecured issue as opposed to increasing the security or some sort of other dilutive event or something of that nature.
We don't have any specifics I mean, we will look at all the different options that are in front of us and select what's best for the company going forward.
Got it that makes sense, that's all for me Thanks, I'll turn it back.
Thanks, Paul.
Your next question comes from Paccar, Sayiid ATB capital markets. Please.
Please go ahead. Thank you for taking my question.
Mike in Q3 was there any rig reactivation costs that were embedded in the Opex number.
There'll be some.
Some rigs in the U S are reactivated.
Their view.
A little bit it wouldn't be material by any means.
A couple of million dollars to $2 million is that a reasonable number.
Well I'll probably within the ballpark.
And then for Q4 do you have any guidance for rig reactivation costs.
Well, we have the Oman rigs starting up.
Which actually started this week and last week, so we'd have some startup costs with that as they get on the payroll.
And then throughout the United States, there might be one or two here and there but for the most part.
International is where we'll see some reactivation.
And how big a number that would that be for the international.
Well once again, its two rigs so fairly immaterial.
Okay. Okay.
Okay.
Sounds good and then.
Bob in terms <unk>.
Re contracted number of rigs in the middle East.
What is that.
Does the new rates compared to the fevers, one in and then the margin compared to where they have a contracted before.
Yes.
Turnover rate.
Negotiations in the Middle East.
Uh huh.
Happen over.
A year or two type of timeframe.
Not over a month the re contracted rates are.
With our performance based contract slightly higher than where we were before so there should be.
You could at least model the same but with the application of our autopilot and our performance we think.
P 50, we can increase rates by about $5000 a day 90 by about $3000 a day.
Contract over contract.
Right Okay.
That makes sense and then Mike the net debt number went up by about $58 million.
Some of that was there was some cash outflow in the quarter.
But there was beyond that is that all translation effect of currency or is there something else going on.
So it'd be all FX. So it will be taken out high yield issuance, which is about $417 million USD outstanding translating at the quarter on rate.
When you look at foreign exchange in this quarter. The income statement translation was almost 10 cents lower than the quarter on translation I'm just given the FX moves in the last couple of weeks of the U S. Dollar.
Yes, it was quite significant.
Okay.
Great.
Any early indication of where the capex could be for next year.
No particular guidance as of yet so I mean, we're going to budget season, right now but I.
Predominantly we're looking at maintenance capital going forward and having customers pay for upgrades.
It would be less.
We're seeing some.
I'm sorry, Bob you said you didn't would be less.
Yeah, I think right now we're seeing that on.
The net on a net basis again, we're pushing operators too to cover any upgrade cost and strengthen.
Strengthen that position and get stronger as the market gets tighter so I'd be very surprised if it wasn't last year over year.
For sure but.
Just thinking from a.
The cash flow statement perspective, the gross number that you report.
For Capex that number.
What's still to be higher year over year.
That law.
The gross amount should be lower.
From what were seeing it looks like it will <unk>.
Finally be maintenance capital, we've done 30, plus rig upgrades and activation. So there's less rigs reactivated but those are that's probably a higher cost of which would be.
Well hopefully funded by the customer so from our point of view as it sounds right now it would be less unless we get into an upgrade cycle.
Okay.
Great. Thank you very much.
Thanks Waqar.
Your next question is from John Gibson from BMO.
Please go ahead.
Good morning, all.
Your commentary on your commentary on this call seems to be more bullish in terms of rig adds in pricing relative to forward guidance in the release this morning.
<unk> in the U S. Just wondering how we should reconcile these these statements just given.
The market dynamics for pricing and margins combined with data expected rig adds you touched on this morning.
Yes, I think.
I mean generally the comments are pointed in the same direction.
Sure.
The commentary that I provided as the reality, we see down in the sales desk and the operation side. So that's that's what's happening.
So.
Yeah.
Okay fair enough.
And then just last one for me you spoke to contract terms, maybe extending on the high spec rig classes can you put some goalposts around the length of contracts, you're signing now versus safety.
Hey, a few months ago.
Yeah, Yeah, well, it's always a balance.
We always find that when operators start asking us for a term.
When they go from six months to one year and one year to two year, we're getting some clients, saying they want to tie the rig up for two years.
Those are leading indicators of course that they also believe that rates are going to move up so they're trying to tie that in.
We've we structure to any type of conversation along the lines like that where we say well tie in new two year contract, but we're going to already establish what the second year of that contract term would look like and it would be at 10% to 15% bump.
We've also got.
Some clients, where we're purposely saying we will read you can add the rig the rig isn't going away, but we're going to renegotiate every six months.
And every client has a little bit different in that regard. So we want to make sure we keep.
Our cadence proper.
In our rig turnover.
Such contract turnover, such that we don't have them all coming off at the same time.
Because thats never going to the market as well we'd like to.
Cadence about a quarter every quarter of the fleet is the ideal situation and we're getting pretty close to that so we've got a pretty good.
Our contract book on cadence that I think will allow us to react quick on any.
The upcoming <unk>.
Continued upside that we continue to see.
Quarter over quarter. These things go and pushes it at the beginning of 2022, we had a push of.
On the high spec triples.
Five to $8000 a day.
And then of course, the backdraft effect, which I call when the mid companies mid cap companies come in and they take up some market share back and they do that with a little bit of rate. So you see it.
Rates steadying through that process now, we're seeing them utilize to the market share that they seem to feel comfortable with and now theres. Another push so we're able to push another two to $3000 a day increases in current bid process.
Got it and maybe I'll just sneak one more in you talked about.
Dayrates.
$50000 needed to.
Contemplate newbuild premises it seems to be moving up constantly just is that just based on.
Your expectations for a newbuild price and just given the inflationary environment over the past few months or.
Or yeah, yeah, what's.
What's going on there no you nailed it.
The cost to build the high spec Super spec Triple is 30% to 35 basis operating costs are a little bit higher I mean, everyone is seeing.
And I mentioned drill pipe. One example, drill pipe costs or are up significantly from where they used to be because we are drilling wells faster. The other thing is and I pointed out a reasonable rate of return above one's cost of capital everyone's cost of capital is moving up as well right. So now we're into a.
Close to $50000 a day before I think anyone would.
Which sensibly contemplate a newbuild.
Great I appreciate the color I'll turn it back.
Thank you.
There are no further questions.
Sorry, there is a question now in the queue. This question as well.
Keith Nieto from RBC capital markets. Please go ahead.
Hey, Dave.
He's NATO. Please go ahead.
We're still here on this end.
Keith is live.
He's like photos live at the moment.
Hi can you hear me.
Hello, Keith.
Hi, sorry about that.
Apologize if please come back.
I just had one question to start off with CBA.
Monetize you've talked about your Canadian directional drilling business.
And talk about the competitive dynamics.
Just curious how youre thinking about.
Our U S directional.
Our business in the Rockies.
Do you see the same sort of dynamic down there.
Is that a more favorable business the launch of vehicles.
Yes, it's quite a completely different business down in the Rockies Rockies is much smaller.
Business area.
Canada Calgary.
The center of the Canadian Oilfield service space. So there's about 2020, some directional companies in Calgary in the Rockies.
Barely a handful.
And we focused on we have a directional drilling mud motor shop, where we take our motors and we basically manage the motors for the operators. So we basically don't do a lot of directional drilling in the U S. We've kind of focused in on a on a key area that we can make it through.
30% margin and <unk>.
Got a good client base that we serve as well.
And they are.
They are quite loyal and we do a heck of a job there so it's.
It's not to be confused with the Canadian directional drilling space, which.
We did not build.
Our mud motors and shop, we would build that out we would assemble them and repairing them, but we were more of a.
What you would consider a competitive directional drilling business with directional drillers, well plans things like that in Canada. So.
It's just a different business down there.
Okay. Thanks for that and maybe a follow up would be how are you thinking about the portfolio of the balance sheet and financial liquidity over the next.
Three to six to 12 months are there other assets you would consider monetizing for the right price or are you pretty happy with what <unk> got where <unk> got it.
Yes, when we look at liquidity, we'll definitely see the expanse going into year end, and then going forward as well.
The large chunk of Capex for <unk>.
Looking for the customer to pay for the upgrades next year. So from our perspective liquidity will continue to grow the balance sheet will be in better shape quarter over quarter with improved results as well so from our perspective.
The laser focus on the balance sheet laser focus on costs on laser focus on performance.
Thanks Thats it for me.
Okay.
There are no further questions at this time. Please proceed.
Alright, let me wrap up here, it's clear that the 12 trillion dollars underinvestment in the oil and gas business over the last decade has created the opportunity for drilling companies like enzyme to see more opportunities to expand our active operating rig count and with that the ability to move our rates more into a range that provides a reasonable rate of return on the capital invested in addition to capital.
<unk> industry has made in high torque top drives self moving pad systems additional high pressure pumping capacity and the application of drilling rig control systems that use algorithms and AI to replicate record wells over and over again provide real value to our clients with reduced cycle times and reduced well cost as most of you on the call understand the drilling.
Contracting business has lots of margin torque and up cycle markets and let me suggest we're definitely at the front end of that upcycle market look forward to reviewing our Q4 results in the new year with you have a safe and Mary Thanksgiving and Merry Christmas. Thank you.
Yes.
Ladies and gentlemen, this concludes your conference call for today.
You for participating and ask that you now please disconnect your lines.
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Thank you.
Thanks.
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Got it.
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