Trican Well Service Ltd. Q1 2023 Earnings Call

During this conference call is being recorded.

Now I'd like to turn the meeting over to Mr. Brad Fedora, President and CEO of tracking well service limited. Please go ahead Mr. <unk>.

Thank you and good morning, everyone and thank you for attending the <unk> Q1 2023.

Quarterly results call.

First Scott maps, and our Chief Financial Officer will give an overview of the quarterly results. I will then provide some comments with respect to the general operating conditions and the outlook for the rest of this year and then we will turn the call over for questions. Several members of our team are in the room with me here today and will be available to answer any questions.

That may come up I will now turn the call back to Scott.

Thanks, Brad so before we begin I'd like to remind everyone that this conference call may contain forward looking statements and other information based on current expectations our results for the company.

Certain material factors or assumptions that were applied in drawing conclusions or making projections are reflected in the forward looking information section of our MD&A for Q1 of 2023.

A number of business risks and uncertainties can cause actual results to differ materially from these forward looking statements and our financial outlook. Please refer to our 2022 annual information form.

This risk section of our Q1, 2023, MD&A and our MD&A for the year ended December 31, 2022 for a more complete description of business risks and uncertainties facing <unk>. These documents are available on our website and on SEDAR.

During this call we will refer to several common industry terms and we use certain non-GAAP non <unk> measures, which are more fully described in our Q1 2023 MD&A.

In our quarterly results were released after close of market last night and are available both on SEDAR and our website.

So with that let's move on to our results for the quarter. Most of my comments will draw comparisons to the first quarter of last year and I'll provide some general commentary about our quarterly activity and our expectations going forward.

<unk> results for the quarter were significantly improved compared to Q1 of 2022 industry conditions were quite strong.

Two solid activity levels across our business lines.

<unk> is somewhat moderated leading to a more sustainable margin profile and that resulted in improvements across all major financial categories.

For the quarter was $297 million, an increase of about 36% compared to the same period of last year and adjusted EBITDA came in at $81 6 million a significant improvement over the $38 9 million, we generated in Q1 of 2022.

I would note that our adjusted EBITDA figure includes expenditures related to fluid end replacements, which totaled $2 3 million in the quarter and were expense in the period.

Adjusted EBITDA for the quarter came in at $82 9 million or 28% of revenues a significant improvement compared to the 42.0 million, 19%. We printed last year to arrive at EBITDA as we add back the effects of our cash settled share based compensation.

To more clearly show the results of our operations and remove some of the financial noise associated with the changes in our share price because we mark to market. These items.

On a consolidated basis, we generated positive earnings of $46 million in the quarter or about <unk> 20 per share.

Sure I can generate in free cash flow of $69 5 million during the quarter.

As compared to $30 4 million in Q1 of 2022.

Our definition of free cash flow is essentially EBITDA less than non discretionary cash expenditures, which include maintenance capital interest cash taxes paid in cash settled stock based comp.

Capex for the quarter was about $19 5 million split between our maintenance capital program of 11, two and upgrade capital of $8 3 million upgrade capital mainly dedicated to our ongoing tier four capital refurbishment program, which breath touch on later.

Balance sheet remains in excellent shape.

Is it in the quarter with positive working capital of approximately 181 billion, including cash of two five.

Finally, with respect to our return of capital strategy, we were quite active with our NCI program during the quarter, we repurchased and canceled about $9 8 million shares at an average price of $3.31 equating to approximately 4% of the company's issued and outstanding shares based on the share count at the beginning of the year.

We remain active as we moved into Q2 and have repurchased another one 7 million shares or so since April one.

As we reported yesterday the board of directors declared a dividend of <unk> <unk> per share to be paid on June 30 of 2023 to shareholders of record as of close of business on June 15th 2023, and I would note that these dividends are designated as eligible dividends for Canadian tax purposes.

So with that I'll turn things back to Brad for some comments on our operating conditions and our outlook.

Thanks Scott.

<unk> Q1 quarter.

We're very happy with how it went to I mean, basically went exactly how we had planned it seems like every year, we have a slower start than we anticipate.

So I think thats basically a trend that we're gonna have to factor into our budgeting.

We were lucky this year and that we didn't have any weather delays in March and we were able to work right till the end of the month and so even though we did have a bit of a slow start the quarter basically unfolded.

From an activity and financial perspective, exactly how we had planned.

We're still like Scott was saying there is still inflation in the system and it's but the rate of change has slowed considerably.

It's things like sand chemicals third party trucking et cetera are main main source of third party purchases and we do have ongoing labor inflation within our company. So all of that adds up is significant.

We haven't seen any now that commodity prices have come down a bit of course, none of that was factored into our suppliers pricing and where they can and I think the whole value chain is trying to operate at a at a reasonable level.

From a return perspective, so I don't anticipate the inflation of our costs are going to change anytime soon.

Pricing has been very stable basically since last summer if we're fortunate that our customers have allowed us to pass on inflation.

It has been occurring but so basically pricing has been flat. It's just changed it just fluctuates with inflation, which is which has been actually somewhat modest in the recent time.

On the fracturing side the market is very much balanced you know theres about 30 to start fracking crews operating in Canada, and with two to 225 drilling rigs running basically those 32 crews are.

Our operating close to capacity, but we're not in an under supplied situation as of yet and I don't expect that will change anytime soon try Ken is still operating seven frac crews, which we've been operating now I think for the last year and a bit.

And as we won't add crews into this into this market until until activity levels rise.

And certainly we have the equipment ready to go we still have about five parks cruise, which represents a fairly large percentage of the idled capacity in Canada.

But we'll just play it by year end and if there is demand for an additional crew we will put it in the field.

And if there isn't we will continue operating with our with our seven crews.

All of which are the tier four technology.

We're very happy with cementing division.

Fracturing represents about 70% of our revenue in cementing is about 20% and coils the remaining 10.

The cementing divisions very significant to this business.

And I think we've done a lot we've done a lot to improve that even though it was running very well we've done our work to improve that in Q1, and we actually went from about 17 cruise to sort of 'twenty. One 'twenty two crews in Q1, allowing us to better service, our customers and maintain our market share and the deep more technical areas of the basin.

We still operate with about a 30% to 40% overall market share in Canada, but we're about a 50% market share in the Montney and deep basin, which is where we think we add the most value and we can differentiate our product offering.

And we will again, the same with with spending as in fracturing.

Activity lifts.

I'll try to bring on more units to make sure we minimize the lakes that we experienced in late 2022, but as with.

Any kind of labor in the oilfield services sector. It can be a challenge adding.

Getting incremental workers, but we will we will stay focused on making sure we operating efficiently in each of our divisions coil has been fairly steady we operate seven coil units.

In Western Canada, and we don't we don't expect that to change anytime soon so just the outlook for the second half of this year.

I know everybody is nervous with with where gas prices are in our sort of wondering if it has significantly impacted our forecast for the second half and certainly we don't we.

We're not naive we keep a very close eye on on on.

Natural gas prices in particular condensate prices thats, what drives the economics of our plays like the Montney and Duvernay et cetera.

We're not seeing a big pullback in activity at all actually I think there is a bit of a disconnect between the general market and what's happening here in the oil patch and certainly it's.

It's something we're watching but we expect the second half of the year to be fairly busy.

We're now in a situation where our customers.

Our spending less than 50% of cash flow very disciplined programs very long term thinking.

It all feels quite thoughtful and well planned out and when you're spending less than 50% of your cash flow on drilling and completions.

Currently there is a bit of a shock absorber there.

We obviously had a very warm winter both in North America and in Europe , and that has a huge impact on gas prices and we expect that that will that will level out as the year goes on.

It feels like we're going to be reasonably busy for the next few years and I've said this before it probably never felt this this good about the industry from a long term predictability perspective.

The pressure pumping market is quite balanced you know any active any increase in activity that may occur late this year and next year with tighten up the supply and demand balance and may even require more crews coming into the market but.

It sort of feels steady as she goes here for the for the next little while.

We're obviously excited about the fact that some of the issues in northeast BC with first nations have been started to get worked out and more well licensing.

More well licenses are being issued and of course, that's all very LNG focused drilling.

Big Wells, multi well pads very fracturing intensive.

Very meaningful to our business in it and I think I've been getting questions about.

If certain of your customers are focusing efforts in north East BC are they pulling are they pulling work away from other areas and that the answer is you never know and it changes from quarter to quarter, but it feels like to be in the.

The increase in activity in northeast BC will be incremental to the overall industry activity.

Don't think its it comes at the cost of something else at this stage.

And of course, it's a very tight labor.

Tight labor environment, we're doing all we can to make sure that we have good crews for our customers and our people are operating.

Safe and efficient manner.

We take great pride in our staff and the work that they do we're focused on training, particularly safety training. We're fortunate that our people are committed and.

Are looking for more and more training all the time, we have an excellent safety record and without the dedication of our people, we would not be able to operate as efficiently and safely as we out we've taken an incredible amount of costs out of our business in the last few years, it's quite significant and it's enabled us to <unk>.

Maintain.

Decent or a reasonable margins.

There is some issues with the supply chain, it's not nothing.

Nothing really has changed there and I don't expect that that's going to go away. The biggest one is sand supply every time, we sort of go into quarters like Q1, or Q3, and there's a there's a big ramp up in activity. It really stresses the logistics and of the sand and theres lots of sand available, but there isn't a lots of rail and truck.

Available and so we are expecting this summer to be pretty pretty tricky and then we're going to be making sure that we manage that appropriately and are looking six weeks into the future at all times and we are.

We're very fortunate that our logistics group and our supply group here at Tri can seem to no matter what seem to get that figured out and allowing us to provide service for our customers.

Sure.

From a corporate strategy perspective, nothing really has changed we're very bullish on the industry in Canada, We believe that Canada will play a very important and growing role with respect to providing the world with clean reliable and sustainable energy, particularly natural gas.

LNG demand will will recover we won't get warm winters in Europe forever.

I think more and more Canada is going to be a key supplier to the world with respect to providing our clean sustainable natural gas and certainly we've got now three LNG.

For LNG projects coming on in the next few years, the first one being LNG, Canada, which should be active in 2025 and places like the montney, whether its northeast BC, Alberta, the deep basin will play well into our will be feeding that facility with.

With natural gas and that will make sure that there's an ongoing demand for our services.

I would say frac intensity on a per well basis is still increasing.

Larger sand volumes more stages, we are seeing we're starting to see a trend where some of the customers that we're doing.

Ball drop systems are looking at going to a plug and perf style of completion, which is more fracturing intensive more sand going into the wells. So we will keep a close eye on that that's generally I would say beneficial to us as long as we can manage the logistics of sand supplier.

You know our strategy is still to differentiate and modernize our business and while maintaining a conservative balance sheet and we're focusing on state of the art equipment, making sure. The systems are keeping up allowing us to make good decisions predict.

Use data to make predictions were very focused on ESG and indigenous partnerships and it's all about building a sustainable business that will thrive in Canada for the years to come.

We base our business on a guiding principle of clean air clean water.

Tier four technology is replace diesel with with natural gas.

Lower emissions.

Less particulate is into the air et cetera, our chemistries allow for more use of produced water and recycled water. So there's there's less need to take fresh water out of the lakes and rivers.

The oil and gas industry doesn't take much water it doesn't use much water, especially compared to the to other industries like the agricultural business, but still we're always looking for ways to reduce our footprint reduce our impact on the environment and I think we've got a great start.

To building a sustainable business.

Our fourth tier four fleet.

Came into service late Q1. So now we are out of the seven crews that were operating for them our tier four so the brand new fleets and I know this industry has plagued with underinvestment just much like our customers, but we really stand out with respect to having almost a brand new fleet operating today.

Paired to two years ago, and then that allows much more efficient operations less maintenance and repair costs.

People are excited to work on the new latest greatest equipment and technology the customers or are you excited to use it to reduce their emissions reduce their fuel costs. So I think our strategy has played out well we've got a great great.

Great start to having the most technically advanced fleet in Canada.

Don't foresee that changing anytime soon.

And just along that since the beginning of 2021, we've displaced 28 million liters of diesel with our tier four technology.

That's really meaningful and we're using natural gas for the most part right up right from the pad.

So our customers are happy with it the public is happy with it means less fuel trucks on the road less emissions.

Think it's a win win for everybody.

We do it we do expect that this will be the standard technology going forward.

But I think we've done a good job of staying one step ahead and as we've been building our tier four technology. We've also just recently brought in.

What we call electrified backside of our Frac spread and really what that means is we've electrified the blender the chemical unit, San storage and delivery equipment and the data van.

So it used to be with our tier four technology that we were displacing about 75% to 80% of the net of the diesel usage on location with this new electric equipment, we're now up to 85% to 90% diesel displacement. So again less admissions less fuel cost and more importantly, it's all electronically.

<unk> controls from the data and so we have no people in the hot zone or what we call. The Hot zone, which is the danger zone of <unk>.

Natural gas spread it's all it's all operated from the data van.

So we're very excited about this something our customers are getting basic.

Basically getting in line to us. So we will continue to differentiate our product offering going forward and we're completely agnostic with respect to technology.

Long as it provides a benefit for our customers and provides a return for our shareholders. We will continue to evaluate all the technologies that are out there and put in place. What we think is the best one for the Canadian operating environment.

Sure.

On the return of capital strategy I think Scott touched on this.

We have a diversified return of capital we believe in share buybacks dividends, a modest a modest sustainable dividend. We've purchased 11 5 million shares since year end.

<unk>, 38% of the outstanding shares since we began the buyback program back in 202017, so very happy with how that's going we expect to maintain the dividend for the years to come.

And I think we're going to be.

Probably more opportunistic on our end CIB going forward I think we will definitely fulfill our full 10% by by the end of the program, which gets renewed in October .

Certainly we will look for down days to be.

More active on on buying our stock back and lastly, just before we go to questions.

With respect to the forest fires that are burning in Alberta, we haven't had any effect on our on our operations materially as of yet.

Its breakup may is without a doubt our slowest month of the year, we're not all that active.

We've had two of bat we've had to evacuate.

A few locations abandon some equipment on location, but so far so good.

Nobody has been harmed none of our equipment's been burned we don't expect this to have any significant impact on our quarter, assuming we get control of these fires.

Q2 is probably more impacted by rain than anything.

And as with as always with our quarter, It's very June backend loaded which happens to be the rainiest month of the year in Alberta.

So we're actually more.

More concerned about.

Getting a bunch of rain at this stage than anything, but I think in general our our Q2 should be very very similar to last year's I.

I think I'll stop there and we'll go to questions.

Pass it back to you.

Yes.

Thank you.

We will now begin the question and answer session.

And the question queue you May Press Star then one on your telephone keypad.

You'll hear it saw in acknowledging your request.

If youre using a speakerphone please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.

The first question comes from KOL Pereira of Stifel. Please go ahead.

Good morning, all so it sounds like Q3 is looking pretty good obviously, there's always a couple of different ways. It can go but can you talk about how you see that quarter, playing out relative to Q1, and whether there could be an opportunity for margin expansion through either a better economies of scale or be higher net pricing.

Yeah, I think Q3 will be similar to probably be when you look at last year's Q3 and Q1.

Take an average of those two it's probably where it's going to.

Where it's going to wash out.

But again it's early.

And interesting time of year, because our customers are reviewing budgets and plans for the second half of the year and of course natural gas prices are not cooperating.

But yeah. The board is full for Q3.

So we expect that we're going to have a decent quarter and we think pricing is going to stay flat.

Don't expect any sort of expansion or degradation of margins I think we're sort of at a stage here where on.

The market is fairly balanced and I think pricing will will stay pretty similar to what it was in Q1 in the second half of last year.

Got it thanks and.

This is kind of a difficult question to answer but from your perspective, how much white space was there in Q1 across the basin or how much do you think drilling activity needs to rise before you'd need another frac crew in the basin.

Generally.

If you were to add a frac crew I don't think any of the companies in the pressure pumping business would do so without <unk>.

Sort of a least a year of visibility.

We would need an incremental growth of sort of five to seven drilling rigs on an annual basis.

To add additional frac crews.

There is lots of white space so they don't.

As normal.

There's travel days set up rig up days.

Scheduling conflicts white space is just part of the game and its never going to go away, it's more making sure that.

We have a drilling rig growth in northwest, Alberta, and northeast B C that looks like five to 10 rigs on an ongoing sustained basis, you might see another frac crew come in.

But I don't I'm not the one to be able to answer as to how much white space. Our competitors are dealing with I would assume.

Their schedules are fairly similar to ours.

But I.

I don't think youre going to see that this summer.

The addition of a frac crew.

Got it.

And so I mean, you paid off your debt been active with the buyback paying a nice dividend now that business should continue to grow in Canada, just from LNG blueberry, but.

But how do you think about growth beyond <unk> via M&A, either in Canada or the U S.

We're always looking.

And I think probably the biggest hurdle to M&A at this stage is just the multiples that are being assigned to the industry as a whole.

The average fracturing multiple and or the average pressure pumping multiple.

In Canada, and the U S is.

Less than three.

We're fortunate.

We get a premium multiple but.

The the willingness to transact at.

Those levels as low and regardless, whether it's cash or shares.

I know you can say, it's really irrelevant as long as if youre doing a share deal, but just psychologically it's tough to transact.

When you have a two times EV to EBITDA multiple.

Got it Okay. That's all for me, Thanks, I'll turn it back.

The next question comes from the car.

<unk> capital markets. Please go ahead.

Thank you for taking my question and good morning.

Scott just a housekeeping question the $1 7 million shares that you bought a quarter to date, what was the average price, but chase price.

Good question Waqar, you got me on that one but it'll be.

Between three and $3 25.

Okay.

And then Brad.

Got five.

Two as you said that.

Bob right now would those be tier two diesel tier two diesel fuel.

Diesel.

Yeah, I mean, it depends on the day, but generally they be older diesel equipment that would require a fairly significant upgrades before we brought them into the field.

Okay.

And then Oh.

But I noticed that the coil tubing revenues have been like any yes.

While flat to down.

What's the rationale for that.

Like what's your outlook as well for that business.

Well the rationale is that where we're not doing a good enough job of our coil division.

Something that need that is getting more focus and attention here.

We have we have made some moves with people and brought people in to help us build that division up.

And I think it's a little early to make predictions on.

How fast.

Division grows at this stage.

We're kind of doing a bottom up sort of review of the business.

Okay.

And we've seen a trend on that.

U S site and something that companies are.

Offering integrated services, whether that's a fax and logistics in mining.

And fueled a devoted side so a lifeline for example.

Is that something that you would consider.

Yes, I mean, the answer is yes, we would consider everything we look at.

Particularly with respect to sand logistics, we're always looking at ways to make our operation our logistics operations more efficient we do expect tightness in the market and again, it's not because of the amount of sand out there. It's the industry's abilities to move it from a to b.

When you need it it's quite a process, obviously to bring sand from from.

From Wisconsin to northeast BC.

We're always looking at the potential to make investments.

To better to better serve our customers, but again, we don't really know.

<unk> spend money unless we can get a return on it.

And that's sometimes thats that's difficult to do.

With respect to sort of integrated services, and we tend to somewhat shy away from those situations, particularly.

Wireline because eventually the customer just wants it for free.

We're not.

We can't have a sustainable company with <unk>.

Giving away products and services.

Yeah.

It makes sense and just one final question.

Touched on.

B C and D. We think thought that could happen there, but Canada LNG now given the very stringent environmental regulations that are there.

Being implemented there.

Pumping perspective, and again from a supply chain perspective, there what do you think is eventually going to be the best answer there.

<unk> going to be the best answer.

Or is it going to be E fleets, or how youre thinking about that marketplace and the growth there.

Like our market or our.

Our thinking about that market continues to evolve all the time and as new information becomes available.

We factor that information.

And process it accordingly.

It's a tough operating environment, they're remote there is no. There is no power lines certainly not with the amount of electricity that would require that would be required to run a frac spread.

So even though our goal is 100% natural gas and when we look at all the technologies out there we want to get to the stage, where we are burning 100% natural gas as a fuel.

No diesel being consumed on location at all and we're sort of 90% of the way there give or take with our tier four engines in our electric equipment that runs off a natural gas generator.

So we hope that we can adapt our existing equipment.

But we don't.

At this stage given the cost of an electric fleet.

There's just isn't a willingness by the customers to pay more for their pumping services.

And you know an electric fleet is I don't know $70 million to $75 million Canadian you could never justify the economics of that type of investment and the other thing is.

It would be a totally different way of doing things you would need different.

Mechanics different operators have different procedures, which that's fine.

But it's just something to consider when you think about totally changing your your equipment designs and technologies.

System is frankly isn't sort of set up for that at this stage, but.

It's the.

The transition of our backside.

<unk>.

To run off electricity.

Given what I, just said was actually quite easy and has worked really well. So far so we think we'll be buying more of that.

So like I said lower maintenance less people less fuel costs.

We just got to make sure that the equipment eventually pays out in a reasonable time.

Okay, great well. Thank you very much for your comments appreciate that.

Thank you.

Sure.

The next question comes from Eric Mcniel at TD Cohen.

Uh huh.

Hey, good morning, and thanks for taking my questions Brad to sort of follow up on Kohl's M&A question.

You mentioned prevailing valuations for try Ken in your pressure pumping peers in sort of that unwillingness to transact but.

Aside from Chipping away at TN, CIB, which it sounds like Youre going to do why not take a bigger swing with a with an S. IV.

Oh.

Yes, we think about that.

All the time.

Yeah.

And I think that's certainly something that needs to be thought through carefully.

I would I would tend to agree with you given the.

You are basically using that as your M&A strategy by buying yourself back.

Which is great.

So I tend to agree with your thinking.

What sort of leverage would you take on.

Do that.

Or.

We haven't worked or.

Our way through that yet.

As you know where that adverse.

But we were not.

We're not afraid of that at reasonable levels of debt.

So.

Wouldn't sort of getting into specifics at this point, but we would be comfortable with a little bit of that for sure.

Given our working our noncash working capital surplus which is fairly significant as you saw.

Obviously as a protection against leverage in a downturn, but.

But we're still pretty conservative just it's just our nature around the table and that's market would change anytime soon.

It makes total sense.

You sort of mentioned it in the prepared remarks, but.

How should we be thinking about.

Further our incremental investments in the dynamic gas blending engines beyond what you've sort of articulated.

We've got our fifth spread coming this year and we're basically.

Of the mentality that we want to modernize the fleet.

And then.

In its entirety.

And at the same time, though we don't want to be over committed to one type of technology, unless we really feel that it is going to provide 100% natural gas solution down the road.

We've been very happy with how the equipment has been running at effectively operates at a 100% utilization.

It's very well received by the customers.

So a significant part of our ESG plan.

We're always like I said, we're agnostic to technology, where there's.

If something better comes along tomorrow.

We would switch.

But in general we've we don't we as part of our annual capital budget, there would be sort of at least one.

Fleet upgrade I would say.

When do you have to start ordering stuff for the 2024.

Capital budget.

A very long lead time on equipment now I mean, I'm looking at Todd, but it's over a year 12 months yeah.

Okay.

Alright.

I appreciate the time thanks, guys.

Thanks.

Once again to join the question queue. You May Press Star then one telephone keypad, you'll hear it so let me call generic question.

You are using a speakerphone please pick up your handset before pressing any key.

If you have a question. Please press Star then one.

The next question comes from Keith Mackey of RBC. Please go ahead.

Hi, Good morning, I'm, hoping you can talk a little bit more about the.

The trend in pad size in Western Canada that that Youre doing how.

How many wells per pad would you say you're you're okay.

Equipment is working on on average and how is this trended over the last year.

The year to two.

The trend is definitely more wells per pad.

I don't have the exact numbers handy, but probably our average.

Pad would be four to six wells.

Just looking at.

The other people in the room here.

We do see 10, well pads, but theyre not commonplace for us yet.

We certainly we think it's going there sooner than later.

And that's that's great because <unk>.

Anytime you can sit on location for a month plus.

Makes for a very.

Effective use of the equipment.

And the people the staff love it right when you use.

You sort of your rig in and you're just sort of heavier manufacturing facility that runs every day.

I know I'm not really answering your question but.

It's definitely the number of wells per pad has definitely trended up but it hasn't trended up as fast as I thought it would and I think once you get more sort of targeted LNG development. You will see you will see additional wells on a on a path.

Okay got it now that's that.

It's helpful. Maybe just to turn to the <unk>.

Electric ancillary equipment can you just talk about what percentage of your <unk>.

Sites or crews are working with that type of equipment now and how how high do you think that can go can you be fully electric on the backend on all of your fleets or or will it be will it be a mix of some kind.

We just brought our first set.

Late Q1, so it's still very early days, so far so good and we do have another set on order.

That will be.

Operating in the second half of this year.

So we would imagine all of our equipment would get there certainly.

Certainly that equipment that sits on the pad.

It may not be may not be practical in our cardium situation, where you are on and often in a very short period of time.

You need room for the generator et cetera.

So, but it's something I would assume.

We would assume all of our sort of Montney deep basin fleets would get eventually.

Yeah, and what's roughly the cost for to outfit.

Our fleet with that type of equipment now.

5 million.

Canadian.

5 million Canadian.

So it's not.

It's not insignificant.

And we can't spend money.

Unless there is a return.

So we we think quite carefully about that situation.

Yeah, and I guess on that like what is the business proposition for it as it charged out on a percentage of fuel savings or is there a higher rate that you can charge for providing electric.

Ancillary equipment.

It's based around the fuel savings for sure I mean, it's different in every situation but.

It's generally yeah, there's there's less emissions.

And it's fairly significant fuel savings so personnel, so first less people on location.

So our costs are people and our repairs and we expect that this equipment is going to be.

Quite reliable, especially with respect to the blender.

And blenders can often be the source of the majority of the breakdowns on location. So.

Part of our motivation for this equipment was not just the electrification frankly it was also finding a more reliable blender.

So we think we'll get our returns with a combination of all of those.

Got it okay. Thanks, very much I'll leave it there.

Thank you.

As there are no more questions on the phone line. This concludes the question and answer session I would like to turn conference back over to Mr. Pandora for any closing remarks.

Thank you everyone for your time and your interest in our company and if there is any app any follow up questions.

The executive team will be available today and Monday to answer any questions. You may have thanks again.

This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.

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