Q3 2023 Trican Well Service Ltd Earnings Call
Yeah.
Good morning, ladies and gentlemen, welcome to the Tri Candid All service third quarter 2020 earnings results conference call and webcast.
As a reminder, this conference call is being recorded.
I would now like to turn the meeting overachieve, Mr. Brad store, President and Chief Executive Officer, Frank Kendall surface Limited. Please go ahead Mr. Stark.
Thank you everyone. Thank you for attending our third quarter conference call a brief outline on how we intend to conduct the call is first Scott Madsen, our CFO will give an overview.
Accordingly results I will then provide some comments with respect to the quarter and our current operating conditions.
I'll look for the future and then we'll open the call for <unk>.
As usual we have several members of our executive team here and a refreshed civil Bill to answer any questions that may come up I'll now turn the call over to Scott.
Yes, Brad and good morning, everyone. So before we begin I'd like to remind everyone that this call.
This call may contain forward looking statements and other information based on current expectations or results for the company.
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 Q3 2023.
<unk> business risks and uncertainties could cause actual results to differ materially from these forward looking statements and our financial outlook. Please refer to our 2022 annual information form and the business risks section of our Q3 2023, MD&A and our MD&A for the year ended December 31, 2022 for a more complete.
Description of the business risks and uncertainties facing <unk>.
Documents are available both on our website and on SEDAR during.
During this call we will we won't refer to several common industry terms and use certain non-GAAP measures, which are more fully described in our Q3 2023 MD&A.
Our quarterly results were released after market closed 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 third quarter of last year and I'll provide some commentary about our quarterly activity and our expectations going forward.
Our results for the quarter were as anticipated down slightly from last year due to lower activity.
Yes, somewhat more moderate inflationary environment revenue for the quarter was 252 and a half million dollars a decrease of about 2% compared to the same period of last year. Our pivotal is that activity level was down marginally compared to the same period of last year, mostly attributable to the specific well designs and customer programs that we executed during the period.
Adjusted EBITDA came in at $65 7 million or 26% of revenue down from the $79 million or 27% of revenue we printed last year in the same quarter. This was mainly attributable to the job mix I noted earlier and persistent inflation in some of our key inputs.
I would also note that our adjusted EBITDA figure includes expenditures related to fluid end replacements, which totaled $1 5 million in the quarter and were expensed in the period.
Adjusted EBITDAX for the quarter came in at $68 5 million or 27% of revenues again slightly down from the $72 1 million or 28% of revenues, we printed last year to arrive at EBITDA, we add back the effects of cash settled stock based compensation recognized in the quarter to more clearly show the results of our actual operation.
And remove some of the financial noise associated with the changes in our share price as we mark to market. These items.
On a consolidated basis, we continue to generate positive earnings printing $36 4 million in the quarter, which translates to <unk> 17 per share both on a basic and fully diluted basis.
We generated free cash flow of $47 7 million during the quarter as compared to $64 9 million in Q3 of 2022.
Again, our definition of free cash flow was essentially EBIT got flash non discretionary cash expenditures such as maintenance capital interest cash taxes and cash settled stock based comp.
I would note that we moved into our next taxable position in 2023, which is the primary driver of the year over year difference you could see some more details on this in the non-GAAP measures section of our MD&A.
Capital expenditures for the quarter totaled $27 1 million split between our maintenance capital program for $6 5 million and our upgrade capital program of about $26 million or upgrade capital continued to be dedicated mainly to our ongoing tier four capital refurbishment program and the electrification of certain ancillary.
Frac equipment, which Brian will touch on later.
Balance sheet remains in excellent shape, we exited the quarter with positive working capital of approximately $144 million.
Cash of $44 5 million.
And finally with respect to our return of capital strategy, we renewed our normal course issuer bid program on October 2nd have repurchased and cancelled about one 1 million shares under the renewed program.
On a year to date basis, we've repurchased and canceled approximately $21 2 million shares at an average price of about $3 40 per share.
And as noted in our press release yesterday, our board of directors declared a dividend of <unk> per share to be paid on December 29, 2023 to the shareholders of record as of the close of business on December 15th 2023, and I would note that those dividends are designated as eligible dividends for Canadian income tax purposes.
So with that I will turn things back over to Brad.
Okay. Thanks.
So overall the <unk>.
There was a little quieter than we had expected.
Still very happy with our results. It was it was still in the Grand scheme of things a great quarter for us.
There was lots of interruptions of summer with fires.
They're not actually flooding at the same time that we were having fires.
There were a few less rigs than last year, just I think just due to lower natural gas prices and.
And as a result, we did we did experienced some pricing pressure.
Some of our competitors position themselves for the winter and as a result, we lost some customers is as we've said before we don't we don't play in that game. So what what we offer our investors is stability and discipline and we're very fortunate in that we have very long term customer base that has been with us for years.
Ears, and so we tend just to step aside when that is happening in the market.
On the inflation side of things.
We're still seeing inflation, but it's it's really.
It has really slowed.
We still expect standing sand price increases third party trucking can get tight very quickly and they're very quick.
To respond with rate increases in our products.
The U S. Canadian dollar I'm going against US here, we will we will experience product price chemical price increases things like that.
All of the parts that we source.
Generally out of the U S and so the.
Exchange rate is very relevant to us in an area, where there's a real near term so we're getting inflation, but.
Kind of like the rest of the economy, it's somewhat under control.
On the fracturing side were still operating with seven Frac crews in the basin activity Hasnt grown enough for us to add any more equipment to the to our to our operating fleet that means that we're operating at about 60% of our fleet with 40% on defense and are ready to go you know our competitors are operating at.
Near if not 100% capacity and so as demand grows in the basin will be able to respond with bringing more equipment into the field.
And even though we're.
Leading the sector in profitability were actually not in the sweet spot of of our operation from a profit perspective.
Obviously, our infrastructure is built for much.
More than 70, frac crews and more than 22 cement crews and so as we add equipment to the field our profitability will grow.
We currently have to depreciate all equipment, whether it's operating in the field are parked against the fence just that's the way the accounting rules are in Canada. So as we bring that equipment off the fence and into the field and it's a direct drive right down to earnings immediately as our fixed cost work won't change at all.
We operated with for tier four dynamic gas blending fleets today, and we get our fifth fleet and I'm going to talk about this a little bit later, we get our fifth high pressure fleets in late December so that'll mean.
We'll take another we'll take an old diesel fleet or a tier two fleet out of the field and replace replace it with another DGB fleets. So as of Jan one five of seven fleets will be will be the low emissions Nash.
Natural gas.
Frac fleets.
On the cementing side, we're very happy with this division is continues to perform quarter after quarter after quarter.
And we couldnt be happier with our results. There overall, we're sort of 30% to 40% market share in the overall basin, but really the focal point for that division has been the montney, we hold about a 50% market share.
In the Montney and deep basin, just because when things get technical you know where to go to provider for.
<unk> services, we have a fully operational lab and <unk>.
Fairly extensive engineering group here in Calgary, So it's kind of a no brainer for the for the larger more technical wells at <unk> and we'll be doing that we'll be doing that work now.
<unk> share gains there are really limited to our ability to add staff.
And just as we get more qualified staff and we get them through training will continue to add units to the field and I can talk a little bit at this later as well, but we're going to continue to focus on some of the markets that we've had to give up just with us staff shortage and we have to concentrate our staff into the Montney deep basin and as we're able to add it.
We will take back some market share that we had lost in other in other areas.
We have talked before that we werent happy with our coil division, but we've made great strides in the coil division. So really good progress. There Q3 was one of our best quarters ever in coil, where operating six to seven units again were held back by staff. There are demand far exceeds our ability to supply coil and it's just as soon.
As we can catch up on.
And things like Supervisors, another field staff will add more units into the field and again there is no fixed cost increases as we add as we add those units. So it's very profitable proposition for us to add more equipment.
The outlook for the for the for Q3 and Q4 and next year.
Similar to what we've been saying for the last.
Last year. So we expect Q4 to be very similar to last year.
<unk> was a very busy month for us some of the work from Q3 to push into Q4 and as a result, some of the October work has been pushed into November and December. So we will have a good quarter, but it will slow down going into Christmas.
That's a good thing as we've said before I think Q2 is now busier than it ever has been in the past and then as a result, we have a we have a wind down into the Christmas season, which is which is great for the field staff.
We expect next year to grow about 5% and activity.
Capex is more like 10%, but there is inflation. So I think it will result in about a 5% activity increase and Theres always commodity price volatility and things will always change and you may have busy quarters, followed by slow but overall the market. We think is going to be 5% higher.
Next year in the pressure pumping market is operating at very high utilization. So as activity grows next year over 2023, and that's a great thing for our sector.
We're already working sort of 23 to 24 hours a day and so we don't really have any more hours to give from an efficiency perspective, and so any more.
Additional activity will will will result in.
Additional demand for our services the focal point of the base is still the Montney of course.
Everybody is getting ready for LNG.
The Montney is a very profitable play world class.
So thats still the focal point of activity. We are seeing we are seeing more growth in the duvernay. The duvernay play has been around for years, but we really didn't wasn't very busy and just the plans for that play are for increased activity.
<unk> Frac intensive play with.
With very high treating pressures and we believe that our Frac technology is really well suited for this area and our fifth tier four fleet, specifically designed as a high pressure high durability fleet with 3000 horsepower pumps. So.
The leading the leading Frac fleet in Canada for sure and a specifically designed for places like the Montney and Duvernay that have high treating pressures and you need to be able to operate sort of $23 nine hours a day at very high pressure. So we specifically designed this equipment and as a result.
Very high reliability low R&M should be should be very attractive to the duvernay players in the <unk> area in particular.
The Clearwater gets lots of attention very.
Very profitable play, obviously and we generally haven't we haven't sort of been active in that play just due to due to manpower shortages. So we are expanding our cementing services into the Clearwater.
Successful there we have a few rigs running and just as we're able to add more people will focus on plays like the Clearwater Clearwater and taking back some market share that we've given up in heavy oil and the oil sands.
And as always if people are the bottleneck, there getting getting people hired and trained.
And making sure that they can operate safely in the field and provide good service to our customers is our first priority. So.
It takes a while and that's okay. We want to make sure that we're building a long term sustainable business and we will take the time to do it right and we're very fortunate we have great people Theyre very committed to this organization and the strategy that we've put in place and we have an excellent safety record and so we continue to enjoy the dedication of our people.
We wouldn't be able to operate as efficiently without them. So.
From our perspective employee retention and getting good people is of course, our top priority right now, making sure that we can grow profitably as the as the industry grows the supply chain on the SaaS side, particularly is is definitely stressed.
We've got a.
It's basically operating at or.
Above its capacity. So we expect that we're going to see some sand shortages from time to time, especially when things get cold.
Railroads have to go in half, but we expect this will be tight for the for the next few years.
So I'm going to talk a little bit about this on the strategy side.
We are very bullish on Canada.
We think this is a great place to have our business, we're not looking outside Canada. At this time, we think Canada is going to continue to play an important role in providing natural gas in particular to the rest of the world. Obviously LNG is coming on stream here in the next 18 months. So we view this as a very attractive basin in which to.
Two to grow our business and we believe it will be sustainable growth as well, we think the dramatic cycles of the past are being basically a more muted now the heizer are lower and the lows are higher. So we're really we're really comfortable looking at Canada as a long term.
<unk> invest.
From a long term investment strategy.
The Montney and Duvernay will drive lots of pressure pumping demand we have the newest fleet.
And we think will be will benefit from all the activity that's happening here. Unfortunately, our customers remained very disciplined with respect to the capital budgets, they're still spending about half of their cash flow and drilling and completing wells provides a great shock absorber to temporary volatility in the commodity market.
We are where our hearing directly that they are doing LNG based activity now.
And if we if LNG comes on stream early 2025.
Those wells have to be drilled very soon in fact, that's what we are seeing.
Frac intensity.
It's still growing.
And we're talking about the supply chain.
On a per well basis, we're seeing higher sand volumes more stages.
And we've gone from a basin that pumped about 6 million tons of sand and 2021 to about 8 million tons of sand and 2023. So of course that means the logistics and supply chain is being stressed some of these wells in northeast BC require 50 to 100 railcars a SaaS so.
That requires probably an infrastructure buildup.
We'll look to make strategic investments into logistics, particularly in northeast B to make sure that the northeast BC, sorry that to make sure that we can provide.
Sand for our customers and have more efficient operations in that part of the world. The issue there is.
In North East BC without without sort of trans loading facilities that are connected to rail you can end up with very long trucking times, which.
On those types of highways in the winter period here you can experience all sorts of delays so.
We'll make strategic investments that are to have returns immediately and benefit our customers.
As usual, we're very focused on free cash flow and return on invested capital and I've said this before EBITDA is not really a good indicator of success. In this service line I think you really need to look at free cash flow and in particular return on invested capital.
Because our depreciation is real.
So earnings is something that should get more attention than frankly than free cash flow and earnings should get more attention than EBITDA.
Yes.
Our strategy is still the same.
Differentiation and modernization, while maintaining a conservative balance sheet, we focus on state of the art equipment, improving our systems to be state of the art internally.
Developing a good ESG strategy.
Working with indigenous partnerships to help help facilitate work in northeast BC, making sure that everybody benefits from what what is happening we have a guiding principle of clean air clean water. So all of our investments generally are focused on providing low emissions more efficient operations lower cogs.
Yes.
I think that the public is happy to see.
And it's not just equipment, it's things like chemical <unk> as I've talked about before that allow us to use more produced water versus freshwater so something that both the clients and the local communities and want to see this industry do is use less freshwater.
Recycle and use produced water whenever possible. So we have a full suite of chemicals to provide our customers with respect to that.
We're extremely happy with the results of our tier four dynamic gas blending equipment.
Saying, our fifth high pressure fleet will be ready in late December and our since we brought this equipment to the base of it it's basically been operating at a 100%.
Utilization is generally we we can't keep up with demand and as a result with.
Running five fleets now we have the we have the newest most efficient state of the art fleet in Canada with low emissions high performance long pump times lower R&M.
We're less trucks on the road, because we're sourcing the natural gas right on location.
Because the utilization is high it's been good for our shareholders from a profitability perspective.
The customers are happy because theres significant fuel savings, we try to capture a good chunk of that of course, but as you've seen our competitors have responded by building the same technology because it makes sense in Canada.
We're not ready for an electric fleet in Canada yet.
Or a fully electric fleet in Canada, yet just because of their requirements, but so we think this natural gas engine technology is going to be basically the standard for the Montney and deep basin.
We and we're not stopping there we continue to differentiate our service offering.
And in the last year, we've we've built.
Electric equipment in our Frac fluid frac spread for everything other than the Frac pumps, and so we call. It the back side and that includes the blender the chemical unit sand belt. The data ban all of this runs off electricity, which means there is a natural gas generator on location and this of course means more diesel.
Placement less fuel cost fewer people. This electric gear operates very nicely without manpower and being controlled from the data then that means none of our employees are in the dangerous parts of the Frac spread which we call the hot zone.
And with that this electric equipment, we are now getting up to 90% natural gas substitution on location, so industry, leading throughout North America.
Tier four technology, we were getting the best substitution rates in North America and now with the addition of this electric gear, we've taken it to a whole new level now so we're basically.
Getting 90% natural gas substitution, which means it's almost the same as a fully electric frac spread but operationally it makes much more sense.
In Canada and of course, our customers. This electric gear is very well received we cannot get more of this fast enough.
We announced a preliminary capital budget of $76 million for next year in 2024, and some of that will be to build out in two new electric packages.
I wish we could get more of it sooner but.
There's still lots of constraints in the supply chain to get new equipment.
There's other things we're working on as well on the technology side. We're currently trialing the hydrogen cell aftermarket add on technology on our sand hauling trucks and what this does is injects hydrogen in the engine instead of using pure 100% diesel.
And preliminary data looks really encouraging with a temporary 10% to 12% reduction in fuel consumption and a really significant reduction in emissions. So we'll continue to test. This if it makes sense therapy continues to perform over the long haul like it's performed so far this is something that will go off on our fleet of trucks.
As we've talked about before we have 500 plus trucks on the road.
On any given day, and we drive over 20 million kilometers a year and so we can get a 10% to 12% fuel reduction and reduce our emissions, obviously thats an investment that likely will make sense.
On the what.
The value for shareholders on a return of capital as we've talked about before we were very fortunate we generate significant free cash flow when we have a clean balance sheet and so our priorities are to build a resilient sustainable differentiated company that can provide good service to our customers we invest in growth.
And.
Grading opportunities like like the tier four engines or the electric gear will continue we'll continue to look at M&A opportunities as they arise, but I think the idea is that we want to provide good cash flow and earnings.
Consistent cash flow and earnings stream, that's growing ideally with a consistent return of capital to our shareholders. We believe in a diversified strategy, which means we both buy back shares and pay dividends. We've been very aggressive on are in CIB. We finished our 2002 2003 and E Bay and.
CIB early and we've just renewed our 23 and 2024 program a month ago and have basically been active in the market everyday in calendar 2023, we purchased more than 21 million shares.
We will just continue to chip away as we think buying buying our own shares at these kinds of multiples is a great investment opportunity actually quite hard to between when you put it in the Grand scheme of building new equipment or doing M&A.
Buying our own shares back is still still one of our one of our best investment alternatives and just as a reminder, since we started this program in 2017, we bought over 42% of our shares back. So we're we're we're definitely dedicated to this to this program.
As Scott was saying, we do have a.
Modest dividend of <unk> 16, a year when paid quarterly <unk> quarterly.
We will continue with that program.
We hope it's permanent and hope that we can increase it as the as the share count goes down so.
We will continue to review that in the context of our other investment opportunities.
Okay, operator, I think I'll stop there and turn the call over for questions.
Thank you.
We will now begin the question and answer session. Two giant question queue you May press.
Star then one on your telephone keypad, you'll hear it's not acknowledging your request.
Youre using a speakerphone please pick up your handset before pressing any keys.
Draw. Your question. Please press Star then two.
Classroom, Amit let's call it sure. Thank you.
First question comes from Aaron Macneil of TD Covid.
Please go ahead.
Hey, good morning, and thanks for taking my question, Brad you mentioned the <unk>.
Seven active crews and swapping the legacy fleet in the new year with the tier four instead of going to eight.
I'm sure you, obviously noticed one of your competitors, bringing pressure pumping equipment from the U S Canada and.
Obviously.
Probably based on a pretty good demand outlook into Q1, I guess are you seeing the same strength in your calendar.
What would you need to see to bring on that eighth crew in.
How long do you think it would take to hire the people.
Yes, Q1 of next year, it looks less busy.
Yes.
I know, we're a little behind on adding an eighth crew but.
Yes.
Part of our disciplined model, we're not going to do it just to do it we don't at the end of the day terrible market share we.
Only care about returns.
<unk>.
So for us to add an eighth crew, we would we would want that equipment working at a very high utilization for the entire year.
And I'm not sure we're quite there yet.
Well, we're always looking to make that move.
But.
Just given the positioning that happened this summer with pricing kind of removed ourselves from that battle.
But thats okay.
We excited to do it.
The hiring side.
Not insignificant, it's going to be a few months for sure.
Get that number of people hired and trained and then entered in the field.
Getting to the point, where they are where they are good to operate on their role and of course, we spread the new people around the company, we don't put them altogether on one on one frac spread or anything like that but let's.
But still we're we're dealing with high pressures.
Very expensive equipment lots of driving risk so.
We don't take adding a new crew lately and it would take time for sure something that can't be rushed.
Makes sense.
You mentioned that the backside investments embedded in the capital program next year, but.
It doesn't seem like you've contemplated any further tier four upgrades. So similar question I'm wondering what you need to see the green light another upgrade in.
What do you think the probability of that is happening and how much do you think it would cost.
Yes, I think Aaron I think we are.
Constantly evaluating what that next suite of technology looks like as well as we come through the end of this year, we'll have five of seven crews running on tier four technology.
And we are evaluating the next generation as we speak which would be full Nat gas engines. As we go that's probably not next year discussion thats probably.
A year or two in the future.
But Steve metrics would apply right in terms of how do we bring that stuff in from from high profitability and utilization perspective. So.
I will make it to our thinking has changed on the technology suite, we'd love to get more geared in the field, but that next generation, probably a little ways away for now.
Okay, maybe ill sneak one more question and it just seems like you got.
Okay.
Reluctant.
Get excited about the near term outlook, you mentioned, the 5% activity increase in 2024.
Obviously mechanical completion of coastal gasoline happened.
This media last week, and so are you sort of risking the timeline for LNG related growth.
How should we think about your view towards that no not at all.
The great thing about this market now as well.
I would say like it is a much more stable predictable market.
So.
We had our operating environment that we've ever had the downside of that.
Of all of this financial and capital discipline as you don't have these 30% growth years.
That's a good thing frankly, we wanted to do our thing.
Ill provide good service to our customers, we're not we don't care about.
Big flashy.
Sort of events to.
Better share price catalysts, right like where we've taken the sort of long term disciplined grind it out approach.
And as a result, we pay the dividend, we buy the stock and we're providing growth that way.
But don't get me wrong like this kind of a market that we're in today.
Is awesome alright.
As we know LNG is going to put out a foundation of activity into this into this basin there's tons of LNG going on in the U S lots of Canadian players selling into that market.
It's nothing but good.
It looks great and Thats why were so happy to be in Canada.
But again the downside of that is it's all very disciplined and thoughtful.
By our customers and so therefore, we need to be disciplined and thoughtful and not not.
Supply the market.
We were fortunate we we just have the one operating environment.
Somebody has to be disciplined right and Thats us we're the leader in the market.
And we will take that responsibility on and show some discipline.
And our shareholders can count on that kind of financial and operating discipline going forward, but make no mistake.
We think this market is great.
<unk>.
It's barrier for the first time, we can think of in terms of five plus years. So it's a great place to be.
Okay makes sense. Thanks Randall.
Okay.
The next question comes from Keith Mackey of RBC. Please go ahead.
Hi, Good morning, just like to start on the $76 million capital preliminary budget for next year can.
Can you just maybe talk about.
What make what turns that from preliminary too to final or actual results is there some factors that could make that change.
Materially to bring that north of north of 100, it sounds like maybe not more tier four equipment, but just trying to get a sense on where things could go given.
Your outlook for next year, which is a very modest growth in industry activity. So is there anything particular that could make that capital budget change materially or.
It should it be really a 74, plus five or minus five kind of a thing.
Yes.
Probably pretty secure at the number that it's at.
Biggest component of that 75 is maintenance capital our capitalized maintenance.
That usually runs around 3% to 4% of revenues on an average basis. So that's a big chunk of it similar to what we spent this year.
We did about 100 ish this year, which included $30 million to $35 million of tier four upgrade right. So you pull that upgrade out and you're kind of at that 75, or so million, including a couple of on the backside additions that Brad talked about earlier so.
I don't see that number at this point materially changing but now as we get into Q1 and get a bit more better view of what the rest of the year looks like.
We'll evaluate it accordingly, but for now I think it's a pretty solid number.
Okay got it and and as you think about potential investments in logistics or rail trans load sand hauling type investments like.
I know Theres nothing I think you said last last call. There is no immediate press release coming or anything like that but can.
You get us give us a sense of how youre thinking about that like could this be something that's a substantial investment are there any investments that you would actually put debt on the balance sheet for ore or is this or this is much much smaller in magnitude.
Yes, it would be more it.
It would be definitely smaller nothing that would require any permanent debt of any kind.
And the timing is just getting getting approvals is always it's always proves harder than you would expect and so.
But these investments wouldn't be.
Huge because you're probably better off with a couple of small ones that are with one big one or something like that it's still early days.
And we want to make sure that any money that gets spent.
That were that we are generating the kind of returns that our investors require rate. So we generally don't spend money unless we think we can get high teens low 20% return on it and.
So you've got to be careful.
You can't just go out and say well we need this.
It's not that simple, we're going to spend everything cost millions of dollars as we all know so if youre going to spend that money.
To our shareholders to make sure that we're gonna get subsequent cost reductions or efficiency gains that are going to generate returns.
Got it okay. Thanks, very much I'll leave it there.
Thank you.
The next question comes from Waqar Syed with <unk>.
<unk> capital markets.
Hey.
Okay.
Thank you for taking my question.
Brad could you talk about.
The total.
But the bigger fleets.
In Canada now that tier four.
And how do you see that trending over the next 12 months or so.
I think I encourage you will card.
Total tier four fleets in Canada at the end of this year would be.
Five from Us and I think two of our competitors have one each so it make a total of seven out of say 31. Please.
Okay.
And do you see a need for an <unk> like.
We hear that <unk> have significantly less wear and tear Guangdong.
And so.
Yes.
Bringing down opex quite a bit because of that.
And then obviously the significant fuel savings as you go to 100% replacement.
Do you see this as there's a need for that in Canada.
I mean, yeah, everybody I think knows the nice thing about electric equipment is it.
It's.
<unk> operates with less wear and tear.
It's probably easier to operate electronically versus demand and we would love to go to a 100% electric but it just isn't practical here.
If you had an electric frac spread it would be 35 megawatts of electricity required I mean that that's a lot of electricity being needing to be generated so.
The pressures, we're getting particularly in northeast BC has a smaller footprint right and that's a strategic advantage to have a smaller footprint. So if you start rolling a bunch of natural gas generators onto location that makes her a bigger footprint.
And so that's why we love this combination of electric backside gear and the tier four years, because we're at 90% natural gas.
The 100 that you would have with electric but the.
The investments and the footprint increases that we would see by going full electric we don't think are warranted at this stage.
Got to make sure that we are.
We're good corporate citizens right, we want to we want a smaller footprint, we want to make sure our people are safe when they're operating the equipment.
Theyre not theyre not that experience with that kind of electricity.
Yeah.
Let's not downplay that side of it.
We've got an entire oil patch.
That is has grown up with mechanical gear.
And all of those high voltage lines running around that has lots of potential for.
Significant problems and so we're not transitioning into that for many many reasons.
And we're happy with the tier four technology now that being said of course.
So we are looking at new technologies, all the time.
And I'm not pulling electric gear just in northern Canada.
It's not that tactical yet.
Yeah.
And yeah.
U S site.
You've gone some like zipper, two samples back and now there's some talk of like I don't even know what the right what is <unk>.
<unk> three was being facts in time.
In terms of the service intensity and like the size of the crews needed to complete these jobs like where do we stand in Canada and what do you think how do you think that would change in the coming one or two years in terms of the.
I'll start with needed at the website.
Yes.
<unk> gone away from the two frac fleets on location.
So a lot I know exactly what you're asking me.
But it doesn't seem to have trended that way here.
These pads.
20, plus wells on them.
But we haven't gone to this we haven't gone back to this sort of a zipper style frac or do you have a couple of you have a couple of frac fleets on location doing multiple wells at the same time it is.
<unk> been more one fleet at a time, one well at a time with everything you know, obviously, Colombia, so theres no theres no downtime between stages.
Okay.
That's the reason for that that those.
The U S that isn't that relevant here is there.
It's just that.
Okay.
Sure.
Over time that the Canadian market with a shift towards that side as well.
Yes, it's a footprint issue is significant.
Particularly in BC I am not sure anybody everybody is trying to figure out how to build a smaller path.
Bigger pad.
And if you want to especially on when you're when you're on first nations land they want to know.
We want less trucks smaller disturbance.
And that doesn't Jive with I think what youre asking.
I understand what youre, saying, but you.
You got to remember that Canadian Frac operations are so efficient.
If you look at them compared to the U S.
We're almost exclusively 24 hour operations.
We're a frac.
Or the number of drilling rigs per Frac fleet here is higher meaning the frac operations are more efficient. So maybe that's part of the reason why youre just not seeing is because.
We're already there from an efficiency gains perspective.
And we have to we have to do our part to provide a smaller footprint on location so that were.
We have less disturbance.
Great. Thank you very much thanks for your answers.
Okay.
Okay.
Once again, if you have a question. Please press Star then one.
The next question comes from John Gibson of BMO capital markets. Please go ahead.
Good morning, all just regarding those San numbers, you were talking about in 'twenty, two and 2023, where do you see this going in 'twenty, four and beyond just giving given a bit of an uptick in activity as well as <unk>.
Increasing wealth entities and is there enough capacity in the system to handle these levels either from a logistical or operational perspective.
I mean, we don't think there is not efficiently right like so where we're at say eight.
1 million tons. This year, let's say, we have a 5%.
Activity growth in knee.
You can't use the wealth or the wealth or the rig count anymore, right, because the rigs get more efficient and a drill longer lateral. So you have to sort of look at the number of wells and the average loan per Walter sort of back backfill us sand demand number, but yes, they're dwelling.
As we all know there is lots of sand around.
But the logistics issue is not easily solved because of the rail was only one rail company north of Edmonton and Theres no real giant trans load facilities in northeast BC. So we do a lot of trucking out of sort of Grande Prairie area into northeast BC and you end up with these.
16 hour.
No storm or a traffic accident or a road construction.
All of that goes out the window and trucking times growth so.
The logistics side is definitely stressed and that's why we're having a careful look at it to see where we can where we can add some value.
Got it thanks, and lots of already cementing work.
It appears to be making up a larger portion of your revenue what's driving this.
Are you seeing some inroads with customers on the pumping side through your spending.
Sorry say that again.
I'm, just saying Youre submitting work appears to be.
Up a larger portion of your revenue and I'm wondering what's driving this and if it's.
Allowing some inroads to customers on the pumping side yeah.
No like or some any customer list is massive and really why we've had some net growth is.
Because we finally were able to sort.
Meet some staffing.
Staffing demands.
The demand was always there for our cementing services is just we werent able to we werent able to staff the equipment.
As well as we would've liked and so we've seen a number of units grow in the last year from sort of 17, 18% to $22 23 units, which is significant later.
Still demand is is there for more if we can find the people.
Sulfur military it back thanks.
Thank you operator, I think we will we will end the call here I don't see any more questions on the board.
The <unk> management team is available for any follow up questions for the remainder of the day. Thank you everyone.
Okay.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a plan.
Sure.
Sure.
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Sure.
Okay.
Okay.
Yes.
Yes.
Yes.