Q4 2024 KLX Energy Services Holdings Inc Earnings Call
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Speaker Change: It is now my pleasure to introduce your host Ken Dennard Investor Relations. Thank you Sir you may begin.
Ken Dennard: Thank you operator, and good morning, everyone. We appreciate you joining us for the <unk> Energy services conference call and webcast to review fourth quarter and full year 2024 results.
Speaker Change: With me today are Chris Baker, <unk>, Energy's, President and Chief Executive Officer, and Keefer, Lehner, Executive Vice President and Chief Financial Officer.
Following my remarks management will provide a high level commentary on 2024 results and its 2025 outlook before opening the call for your questions.
Speaker Change: There will be a replay of today's call. It will be available by webcast on the company's website at <unk> Dot com.
Speaker Change: I'll also be a telephonic recorded replay available until March 27th 2025.
Speaker Change: More information on how to access. These replay features was included in yesterday's earnings release.
Speaker Change: Please note that information reported on this call speaks only as of today March 13, 2025, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.
Also comments on this call will contain forward looking statements within the meaning of the United States Federal Securities laws.
Speaker Change: These forward looking statements reflect the current views of Calix management, however, various risks and uncertainties and contingencies could cause actual performance or achievements to differ materially from those expressed in the statements made by management.
Speaker Change: The listener or reader is encouraged to read the annual report on Form 10-K quarterly reports on Form 10-Q, and current reports on form 8-K.
Speaker Change: To understand certain of those risks uncertainties and contingencies.
Speaker Change: Comments today will also include certain non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in the <unk> press release, which can be found on <unk> website and with that behind me now I will turn the call over to Chris Baker Chris.
Chris Baker: Thank you Ken and good morning, everyone. Thanks for joining our fourth quarter and full year 2024 conference call I will start with commentary on the successful refinancing of our 2025 notes and ABL. Our Q4 results and then touch on our full year 2024 achievements and finally pre.
Chris Baker: <unk> color on market trends and our outlook for 2025.
Chris Baker: First I'm very pleased to announce that we have finalized our refinancing efforts.
This was a significant undertaking I want to thank our finance team for their dedication and bringing this to a successful close in a difficult market following persistent rig count declines.
Chris Baker: Great team effort that positions us to continue to execute on our strategy going forward.
Chris Baker: We finished the year strong despite typical seasonal headwinds in fourth quarter budget exhaustion, we reported Q4 revenue of $166 million the midpoint of our guidance and margins that were above our prior guidance.
Chris Baker: Our continued focus on cost controls combined with mix shifts and PSL contributions and are waiting to completion production and intervention business lines enabled us to significantly increase our 2020 for fourth quarter adjusted EBITDA margin compared to last year's fourth quarter.
Chris Baker: Despite revenue and rig count being down, 15% and 5% respectively over the same period.
Chris Baker: These results highlight the strength of our franchise and the fact that 50% of our revenue occurs post the frac job, thereby sustaining activity later into the fourth quarter, we achieved the significant margin improvement due to the cost cutting efforts in early 2024 to further streamline our overhead cost structure.
Chris Baker: Our Q4 results underscore the strategic advantage of our diversified model in a volatile industry landscape.
Chris Baker: <unk> less diversified peers, we again demonstrated resilience and consistent outperformance validating the effectiveness of our strategic choices and operational execution across varied market conditions.
Chris Baker: Geographically for the fourth quarter, the southwest represented 37% of revenue compared to 36% in Q3.
The northeast mid Con represented 30% of revenue compared to 28% in Q3, and the Rockies represented 33% of revenue compared to 36% in Q3.
Chris Baker: The southwest and Rockies demonstrated particular strength with the southwest benefiting from robust completion and production activity, particularly in rentals and tech services and our completions operation drove significant contributions in the Rockies.
Chris Baker: For the full year 2020 for the southwest represented 38% of revenue compared to 34% in 2023, the northeast mid con represented 30% of revenue compared to 35% in 2023, and the Rockies represented 32% of revenue compared to 31% in 2010.
Chris Baker: Three.
Chris Baker: On an end market basis drilling completion, and production and intervention services contributed approximately 22%, 52% and 26% respectively to revenues for the fourth quarter 2024, with a similar revenue breakdown for the full year 2024.
Let's take a look at full year accomplishments the team really came together to deliver some impressive results.
Chris Baker: First I want to commend our entire team for their commitment to safety and operational excellence in 2024, we achieved a <unk> and LTE IR of 0.63, and zero to two respectfully, which places us well below industry averages.
Chris Baker: Additionally, we achieved a total vehicle incident rate of 0.58 supported by real time, AI, driven fleet management software platform across our entire fleet of heavy and light duty units.
Chris Baker: <unk> remains a top priority and we continue to invest in programs and technologies that protect our workforce and assets. We are very proud of a robust safety culture, which is a testament to the dedication of every member of our team.
Chris Baker: <unk> strong safety performance not only protects its most valuable asset our people, but also contributes to operational excellence and financial performance, which is required by blue chip customers.
Chris Baker: Second we reported full year revenue of $709 million.
Chris Baker: Which was driven by leading customer base anchored by the largest most active operators in the sector.
We expanded our market share with key customers and based on recent wins. We expect this trend will continue in 2025.
Chris Baker: Full year, adjusted EBITDA was $90 million with an adjusted EBITDA margin of approximately 13% and we are focused on further adjusted EBITDA and adjusted EBITDA margin expansion for 2025.
Chris Baker: We continue to make strides and capture market share with our upgraded suite of proprietary tools and products and latest generation equipment most.
Chris Baker: Most recently, we have launched the Gen. Two of our Oracle SRT and now have approximately 250000 running feet under our belt. This.
This latest generation is expected to provide heart-whole capabilities and we believe this launch is timely given the expected activity growth in gas directed basins.
Chris Baker: Our 2020 for full year performance reflects our continued success in capturing market share through a relentless focus on operational excellence and differentiated assets and technologies.
Chris Baker: <unk> continues to take market share across our core psl's with outsized strength across our rentals and tech services offerings that include some of our highest spec highest returning ourselves.
Chris Baker: Operationally <unk> maintained positive momentum with our downhole technology and differentiated rental fleet complemented by our market leading completions performance.
Chris Baker: These capabilities, coupled with our operational expertise and broad geographic footprint solidify our competitive position.
Chris Baker: With key customers across major basins.
Chris Baker: I'll now turn the call over to Keefer to review our financial results in greater detail and I'll return later on the call to discuss our outlook and optimism for 2025.
Keefer.
Chris Baker: Thanks, Chris Good morning, everyone as Chris mentioned, we reported Q4 revenue of $166 million.
Chris Baker: A 12% sequential decrease and a 15% decrease over the prior year fourth quarter.
Chris Baker: Our consolidated Q4, adjusted EBITDA was $22 $7 million down 18% sequentially, but on par with Q4 and 2023 with an adjusted EBITDA margin of 13, 7%, which compared to 14, 7% in Q3 and 11, 8% in the fourth quarter.
Chris Baker: Last year.
Total SG&A expense for Q4, 2024 was $17 $6 million down.
Chris Baker: Down 17% sequentially from $21 2 million in Q3, 2024, and down 11% from $19 8 million in Q4 of 2023.
Chris Baker: For the full year 2020 for SG&A expense totaled $79 6 million a.
Chris Baker: Greece of 8% from $86 $7 million in 2023.
Chris Baker: Adjusted adjusted SG&A expense, excluding nonrecurring items was $72 million in 2024.
Chris Baker: A 10% decline versus the comparable metric for 2023.
Chris Baker: The cost structure changes, we implemented in early 2024 related to insurance.
Chris Baker: And third party professional fees continued to benefit us driving these year over year savings and we expect this lower SG&A level to continue into 2025.
Chris Baker: Moving to our segment results.
Chris Baker: For the Rocky Mountain segment revenue operating income and adjusted EBITDA were $54 million, $4 7 million and $11 $8 million, respectively for the fourth quarter of 2024.
Chris Baker: This represents an approximate 20% sequential decrease in revenue from the third quarter of 2024, largely due to winter holiday seasonality and budget exhaustion, which affected all of our regional completion and intervention offerings, including coil tubing, frac rentals and wireline services.
Chris Baker: Our Rockies business is the most seasonally sensitive typically in Q4 and Q1 when compared to our other geographic areas of operation.
Chris Baker: Operating income and adjusted EBITDA decreased sequentially by approximately 52% and 29% respectively. As a function of the seasonal decrease in activity, which similar to 'twenty three 'twenty four is expected to correct as we exit the first quarter of 2025.
Chris Baker: In the southwest segment revenue operating income and adjusted EBITDA were $61 4 million $1 1 million and $9 $6 million, respectively for the fourth quarter of 2020 for.
This represents an.
Chris Baker: And 11% sequential decrease in revenue largely due to annual seasonality tied to budget exhaustion and winter holiday breaks, which affected all of our PSL in the region, including our directional drilling and flowback services.
Chris Baker: Relative to Q3 segment operating income increased by 57% and adjusted EBITDA increased by 10%.
Chris Baker: Due largely to a favorable shift in our revenue mix towards higher margin offerings, and a reduction in overhead costs, including headcount and vehicle fleet.
Chris Baker: For the northeast mid Con segment revenue operating income and adjusted EBITDA were $50 $1 million.
Chris Baker: $300000 and $9 8 million, respectively for the fourth quarter of 2024.
Chris Baker: This represents a four 4% sequential decrease in revenue driven largely by decreased completion activity due to budget exhaustion and winter holiday breaks.
Chris Baker: Sequentially segment operating income decreased by 85% and adjusted EBITDA decreased by 10%.
Chris Baker: Largely due to lower completions activity, including pressure pumping, partially offset by modest increases across other PSS.
Chris Baker: At corporate our operating loss and adjusted EBITDA loss for Q4.
Chris Baker: Were $11 1 million and $8 $5 million respectively.
Chris Baker: And remained in line with prior quarters.
Chris Baker: Going forward, we expect similar levels of quarterly corporate costs.
Chris Baker: Turning to our balance sheet cash flow and capitalization.
Chris Baker: We ended the quarter with a liquidity position of $112 million, consisting of a cash balance of approximately $92 million.
Chris Baker: And approximately $20 million of availability not borrowed on our December 2024 asset based revolving credit facility borrowing base certificate for our prior facility.
Chris Baker: As Chris mentioned, we are pleased to have successfully completed our refinancing efforts specifically regarding the refinancing we have accomplished several key objectives first.
Chris Baker: We extended maturities to 2030 on the new notes and to 2028 on the new ABL.
Chris Baker: Second the new $232 million note issuance further reduces our notes outstanding by approximately 2% compared to the outstanding balance as of Q3 2024 signaling our commitment to continued deleveraging.
Chris Baker: Further.
Chris Baker: The pre wired amortization in ECS sweep within the new bond will enable us to continue to deleverage over time at par.
Chris Baker: The new bond also allows <unk> the ability to elect to pick interest if needed at the companys election.
Chris Baker: We also entered into a new $160 million ABL facility inclusive of a $125 million base ABL, a $25 million accordion option at the company's discretion and a $10 million silo.
The new facility provides additional liquidity and structural structural flexibility as compared to our prior ABL.
Chris Baker: Finally this.
Chris Baker: This refinancing with supportive partners and lenders positions <unk> to continue to execute on accretive deleveraging M&A.
Chris Baker: 2024 also marked significant improvements in our working capital management, as we streamlined billing and collections processes.
Chris Baker: We ended the year with networking capital of $26 million.
A 46% decrease from year end 2023.
Chris Baker: Driven by lower revenue and shifts in our days sales outstanding.
At year end 2024, our DSO reached a historic low.
Chris Baker: A substantial sequential improvement from the third quarter.
Chris Baker: And from year end 2023, but unfortunately, we do not expect to be able to maintain this level consistently going forward.
Chris Baker: And would note that similar to prior years Q1 is typically our most working capital intensive quarter.
Turning to Capex.
Chris Baker: Q4 capital expenditures were $15 3 million a decrease of 27% from Q3.
Chris Baker: Mainly due to a normalization from the elevated levels in Q3, but.
Chris Baker: But inclusive of an opportunistic 3 million nonrecurring spend so normalized Q4, capex was approximately $12 $3 million.
Capital spending during the fourth quarter was driven primarily by maintenance capital expenditures across our segments focused on our rentals frac rentals pressure pumping and coiled tubing assets.
Chris Baker: Net capex defined as Capex less asset sales was approximately $10 $5 million for the quarter.
Chris Baker: If you back out the non recurring $3 million of Capex, It was $7 $5 million for the quarter.
Chris Baker: Net capex for full year, 2024 was approximately $51 million or $48 million when adjusted for the Q4 nonrecurring spend.
Our capital capital allocation strategy remains focused on supporting our highest spec highest return differentiated product service lines through prudent and disciplined spending.
Chris Baker: This approach allows us to maintain and enhance our existing asset base, ensuring we can meet the demands of our customers most challenging projects.
In 2024, we invested strategically in our core competencies, particularly in our rental fleet and coiled tubing operations, which have demonstrated strong performance and healthy market demand.
Chris Baker: These investments are targeted to drive operational efficiencies expand our service capabilities and ultimately enhance our competitive position within key markets.
Chris Baker: Looking ahead to 2025, we anticipate our capital expenditures to be in the range of $45 million to $55 million with net capex to be in the range of $35 million to $45 million.
Chris Baker: As always we actively monitor future capex in light of current market conditions and can modify our spending is needed.
Chris Baker: The forecasted level of investment underscores our commitment to maintaining the quality and reliability of our equipment, while also allowing for selective growth opportunities, ensuring we're prudent stewards of capital.
Chris Baker: Along with our recent refinancing our disciplined approach to capital allocation also supports our ongoing efforts to strengthen our balance sheet and create long term shareholder value <unk> remains committed to generating free cash flow, reducing our leverage profile and maintaining financial flexibility to capitalize on future growth.
Chris Baker: <unk>, including inorganic consolidation.
Chris Baker: I will now hand, the call back to Chris for his concluding remarks and outlook.
Chris Baker: Thanks, Keith as we look ahead to 2025 I want to provide some color of what we're seeing in the market and our expectations for the year.
Chris Baker: For full year 2025, we expect revenue to be flat to slightly up but more importantly, we anticipate that we will expand adjusted EBITDA and adjusted EBITDA margin and based on known customer wins mix shift and cost structure controls. We expect our 2025 adjusted EBITDA margin to range between 30.
Chris Baker: <unk> to 15%.
Chris Baker: Looking at the 2025 quarterly cadence similar to 2024, we expect some softness in Q1 relative to Q4 due to a few transitory issues, including significant weather impacts across our areas of operation and unexpected white space in our completions calendar that we are striving to backfill.
Chris Baker: And the fact that we expect a shift in revenue mix from Q4 to Q1 due to our core completion offerings largely following the completion of the Frac job.
Chris Baker: With that said, we continue to expect a strong 2025 and expect results to strengthen in late Q1 and into Q2 and the bench strength to continue into the back half of 2020 thoughts.
Chris Baker: From a macro perspective, we are closely monitoring the potential for increased gas directed completion activity driven by LNG export demand are.
Chris Baker: Our exposure in the Haynesville approximately 7% of 2020 for revenue and 9% of 2023 revenue and other gas prone regions, such as the northeast and South Texas positions us well to benefit from this trend.
Chris Baker: We believe that the amount of incremental completion.
Chris Baker: <unk> needed just in the Haynesville to meet demand for LNG export capacity will drive a significant shift in market dynamics.
Chris Baker: The us LNG export capacity is expected to approximately double by 2030 with significant capacity coming online in the next 12 to 24 months.
Chris Baker: We believe this increase will drive incremental.
Chris Baker: Natural gas directed activity that will ultimately lift and support service pricing and utilization across all basins.
Chris Baker: For perspective, our best quarterly revenue in the Haynesville and the Marcellus Utica combined occurred in Q1 of 2023 and yielded a $150 million annualized revenue run rate based on 119 average operated rigs.
Chris Baker: For comparison, our Q4 2024 annualized revenue in the same basins was approximately $80 million or <unk> 65 average operated rigs.
Chris Baker: This highlights our upside leverage to this emerging trend and we are confident that the market will see incremental gas directed activity in 2025.
Finally, we continue to actively pursue accretive deleveraging M&A opportunities that would further enhance our market position and create value for our shareholders.
Chris Baker: Targeted acquisitions will align with our growth strategy and financial objectives.
Chris Baker: Debt documents from our recent refinancing or pre wired with a sizeable parry pursue that basket to help facilitate potential acquisitions. We believe this approach of combining strategic M&A with significant equity consideration and a focus on deleveraging positions us well to capitalize.
Chris Baker: Our market opportunities, while maintaining strong financial foundation.
Chris Baker: In summary, we are optimistic about 2025 and believe <unk> is well positioned to capitalize on potential opportunities ahead. As we've said in the past the general takeaway is that larger customers would prefer to see fewer service providers rather than more.
Chris Baker: For a whole host of reasons, such as number of invoices the ability to bundle services and solutions.
Chris Baker: As such <unk> is exceptionally well positioned to serve this customer base and expand our share of wallet.
Chris Baker: With that we'll now take your questions operator.
Chris Baker: Thank you we will now be conducting a question and answer session.
Chris Baker: I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Chris Baker: You May press Star two if you would like to remove your questions in the queue.
Chris Baker: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Thank you. Our first question comes from the line of Steve <unk> with Sidoti. Please proceed with your question.
Good morning, Chris Good morning, Keith I appreciate all the detail on the call I know you guys have been very very busy. So appreciate the time this morning.
Speaker Change: Can you walk through a little bit and you did cover this but significant margin improvement across all three regions year over year. Despite the dip.
Chris Baker: Klein.
Chris Baker: Drilling and completions activity and then it looks like in each region.
The driver was maybe a little bit different can you walk through how you got big beyond the cost cuts how you got that margin improvements for the three regions on lower revenue.
Speaker Change: Yes, good morning, Steve and I. Appreciate the question busy may be a bit of an understatement of late but I appreciate the thoughts.
Yes, I think look to your point calix performed exceptionally well in Q4, improving fourth quarter EBITDA margin year over year, despite continuing declines kind of a grind lower throughout the year in rig count.
Speaker Change: We had guided to 12% at the midpoint of the range revenue roll to your point, that's that's different across the different basins.
Speaker Change: That happens to be almost exactly the same as the 2023 revenue role I think we spoke about it last quarter that was despite Christmas and other new year's holidays et cetera, being in the middle of the week, which as we know drives operators to be more prone to extend the days all.
Speaker Change: Look at the end of the day I think.
There's mix shifts between the segments without a doubt, but what we saw this year.
Speaker Change: It was really and I talked about it in our prepared remarks, but 50% of our revenue really occurs post the frac jobs. So we always talk about our our blend of drilling completion production and intervention revenue, but when you think about most of our high margin product lines like thru tubing rentals flowback coiled tubing most of that occurs post the frac job.
Speaker Change: And we were able to sustain activity later into the fourth quarter. Despite numerous operators taking frac holidays in December.
Speaker Change: And so it's really comes down to that product line mix and completion production intervention services and I think to your point on the cost controls.
Speaker Change: You said, except for the cost controls, but yes.
Speaker Change: Revenue for operated rig which is the stat, we've talked about before fell to approximately $290000 per rig almost exactly the same level as Q1 of last year, yet EBITDA per average operated rig was approximately 40000 per rig compared to Q1 being approximately 20000 per rig and so.
Speaker Change: There's numerous reasons for that but the cost controls that we implemented in Q1 are clearly a key component year end accrual on lines as well in the fourth quarter, but the PSL mix shifts that we talked about are definitely a large component in Q4, we saw a higher relative contribution from the.
Speaker Change: Higher margin product lines, including rentals, Frac rentals Tech services, and coiled tubing, which candidly have all been areas of focus from a capital deployment standpoint.
Speaker Change: Okay.
Speaker Change: That's helpful.
Speaker Change: And Youre also your guidance.
Speaker Change: Implies your.
Speaker Change: Your guidance was for even further margin improvement in 2025, even though you're guiding for relatively flat revenue given that the cost controls we put in place Q1 of 2024.
Speaker Change: What can drive further margin improvement on flattish to slightly up revenue in 2025.
Speaker Change: Yes, it's a great question I think sort of what we talked about rate margin increased in Q4 of 24 compared to Q4 of 23, so youre getting kind of the full year benefit of those cost controls, but look from a guidance standpoint markets are very dynamic right now commodity prices are highly volatile as we know.
Speaker Change: As I stated in the prior question part of our 24 capital deployment strategy was really setting us up for 2025 with known customer wins and some of our higher margin <unk> as well as we also renewed at a slightly elevated pricing structure, our one dedicated frac contract.
Speaker Change: So what we've seen and we've talked about it before post the wave of customer consolidation those larger customers require higher spec equipment, which has garnered we've garnered more of their wallet share as the reality post that capital deployment. We've also seen lower revenue contribution from some of our lower.
Margin product lines, and we've shifted our focus as have many of our competitors for instance in wireline to more of the conventional space rather than the pump down space, where it's really a knife fight right and so all of that is a bit of a mix and then as we look at the forward strip. The reality is we expect the <unk>.
Speaker Change: Second half of 2025, assuming commodity prices hold in.
Speaker Change: To be stronger, especially in the gas directed basins as we sit here today, we know numerous customers, bringing rigs into the haynesville talked about it in the prepared remarks, but if you.
Speaker Change: You just think about Q1 of 24 in the same Marcellus Utica Haynesville basins, we generated approximately $108 million of revenue on 83 operated rigs that number was only $81 million in Q4 of 2400 65 rigs. So the leverage there is meaningful.
Speaker Change: Louis and I would remind you that we have a very focused effort in those gas basins. We don't run every PSL there and the sales we do run a pretty attractive margins. So it's a macro theme around mix shift.
Speaker Change: Okay.
Speaker Change: That's helpful.
The guide for net Capex.
Speaker Change: Meaningfully lower you generated a little bit of cash flow. This year, Matt that was including what was very challenged as you noted Q1 of 'twenty 'twenty four based on your guidance in that lower Capex. How are you thinking about cash flow for 2005 and uses of cash.
Speaker Change: Yeah, So I'll hit Capex Keefer can kind of talk through puts and takes of working capital if needed but.
Speaker Change: From a capex standpoint.
Last year Q3 was very robust some of that was catch up from the prior years, we've talked about some of it was pulling some capex forward and then in Q4, there was a keefer alluded to it on the call. There was a kind of an opportunistic acquisition of some assets for about $3 million that really helped us kind of forward stage some of our.
Speaker Change: Capex for this year, we've consistently been able to so let me back up.
Speaker Change: So that brings us to maintenance capital being in the $45 million to $55 million range, which is the number of <unk> referenced on the call. We've consistently been able to monetize as you know whether it's through idle antiquated assets real property or just lost in hole and DVR tools that we charged back to the clients.
Speaker Change: Somewhere on the order of $10 million to $12 million of assets over the last couple of years. We think that's sustainable this year with what we know about a couple of properties and other things that we think will monetize as well as kind of the customer bill backs.
Speaker Change: Does that complete your question.
Speaker Change: No I was I was asked about how that how the lower capex and higher margins converts to cash flow for thoughts on cash flow in 'twenty five and uses of cash.
Keith: Yeah. Good question, Steve This is Keith and good morning.
Speaker Change: As you think about other kind of puts and takes.
Speaker Change: We're happy to announce the refinancing that closed earlier this week.
Speaker Change: From a just a straight coupon perspective.
Speaker Change: Interest expense is probably slightly up year over year from 24 to <unk> 25 based.
Speaker Change: Based on the new refinancing with that said, we do have some pre wired amortization into the note.
Speaker Change: And so there's probably some puts and takes there but as you think through the bridge with reduced Capex theres likely slightly elevated interest expense versus prior year. Additionally, as you think about uses of free cash flow.
Speaker Change: New bond does have the concept of an excess free cash flow sweep.
So as the company generates free cash flow.
By and large based on current leverage profile 75 cents of every dollar would actually go towards deals.
Speaker Change: Deleveraging and we would be able to do that at par.
Speaker Change: So as you think about uses of free cash going forward.
Speaker Change: We are laser focused on <unk>.
Speaker Change: One free cash flow generation in two largely focusing on continuing to delever.
Speaker Change: Fantastic Thanks for that.
Speaker Change: Last one for me just how Q1 sets up this year versus last year. We no completion activity had a slow start again this year, but you ran into some.
Speaker Change: Non.
Speaker Change: Some outside driven factors that impacted you in Q1 last year, you had the customer safety stand down and you had some severe weather so.
Speaker Change: Given take on this Q1 versus last Q1.
Speaker Change: Q1 should be better if we don't have a recurrence of some of those issues correct. Because we're only a couple of weeks left to Q1.
Speaker Change: Yes, I think look we guided to Q1 basically being soft to Q4 in the prepared remarks, and I think your point some of the completions activity started off a little slow this year with certain customer standing backup frac spreads and back to my earlier point Coyle.
Speaker Change: Coil tubing drill outs flowback et cetera, all happen on the backside of the Frac right. So definitely seeing some softness there along with we did have probably eight weather days this year, which is part of the seasonality impact.
Speaker Change: So we would expect it to be soft but to your question specifically, yes. We would also expect it to be we would expect it to be soft relative to Q4, but we would expect it to be above Q1 of last year. We have had some white space that was unexpected in our completions calendar that we're dealing with and trying to backfill real time.
Speaker Change: But we'll see how all the puts and takes shakeout.
Speaker Change: Just just last one for me on just how you're set up for and you covered it with the <unk>.
Speaker Change: Significant increase in LNG export capacity, that's coming obviously power expectations for higher power consumption, we know AIA again raise their $25 26, Nat gas price forecast this week.
You are not putting a lot of you write your guidance doesn't imply a ton of uptick in the gas basins, but it potentially sets you up for a much stronger 2026, depending how at least some people think this plays out with higher gas prices fair.
Speaker Change: Well, we haven't given 26 guidance.
Speaker Change: I'm just trying to set the right because what im saying is your 2025 implies some improvement, but not a lot given a lot of what we think is coming how do you think that sets you up for two or three years without specific guidance yes.
Speaker Change: And so what I would say is.
Speaker Change: The forward gas curve is highly constructive and as we've talked about before that forward gas curve everybody has been laser focused on the haynesville and rightly. So and then the northeast. The reality is we would expect the incremental gas priced also assist with south, Texas and mid Con operations right.
Speaker Change: No all of our assets have wheels can travel if the haynesville.
It goes back to its heyday were not predicting that by any stretch and I think.
Speaker Change: There's a lot of debate in the market.
As to the incremental rigs required in the haynesville to keep those LNG facilities full.
Speaker Change: I've heard some numbers that get us pretty excited and we've seen some of those published and we've heard some numbers that I think are overly conservative.
Speaker Change: And as I look at our internal customer conversations today.
Speaker Change: What we know about incremental rig count.
Through June.
Speaker Change: Is kind of in the high teens.
Speaker Change: Not going to speak to specific customer.
Speaker Change: <unk>.
Speaker Change: Lans and activity, but thats kind of what we see forthcoming for the first half of this year and to your point the commodity slate is only more robust when it comes to gas for the second half of next year and going into 2006.
Speaker Change: Thank you. Our next question comes from the line of John Daniel with Daniel Energy Partners. Please proceed with your question.
John Daniel: Hey, guys. Thanks for having me.
Speaker Change: <unk>.
Speaker Change: Chris a two part question.
Chris Baker: As you pursue M&A are you focused more on consolidating deals or potentially adding new services Thats part one and then the second part is.
How is the E&P consolidation.
Chris Baker: I know, it's influencing your M&A strategy.
Chris Baker: Elaborate on how that might be influencing your strategy on what deals you would pursue.
Chris Baker: Yes, no great question I think we've touched on the M&A strategy before as far as stepping out.
Chris Baker: That's really not our focus I think our focus is.
Chris Baker: To execute on accretive deleveraging transactions that provide scale in our existing product lines. As you know, we're we're pretty diverse service provider as we sit today for us to step outside of a product line that we don't have today it would have to be highly synergistic and provide pull through torn up.
Chris Baker: Of our existing <unk> right and so candidly John we looked at a couple of opportunities last year that I guess im willing to discuss in hindsight.
Chris Baker: We walked away from one due to perceived integration risk.
Chris Baker: On another of the counterparty continues to push value in the face of a declining market. We didn't think that made sense and then we rolled into December of last year, and we saw a number of what I would deem very strategic.
Chris Baker: Opportunities that have high degrees of industrial logic that are kind of market leading companies.
Chris Baker: But we candidly need to execute on our refi.
I think those opportunities still exist today, and I think our refi and our debt documents provide ample flexibility to consummate those types of transactions.
Chris Baker: Okay.
Chris Baker: Got it and.
Chris Baker: You talked a little bit about the haynesville on their call I, just got back from the Haynesville yesterday, and I met with a number of businesses up there.
Chris Baker: They they claim to be essentially sold out or see strong.
Calendars as you go into the summer, which is great and a bunch of them are now adding people because they need more people to meet the demand. So like you hear all of that and it gets you excited.
Chris Baker: The next logical step would be you need to start raising your prices.
Chris Baker: Just curious if you could sort of pontificate on the sequence of that if you will because it's all the things are aligning right.
Chris Baker: Just your thoughts on how that might play out.
Yeah look the Calisaya throws the people side of the equation has not been as onerous as it was say in 'twenty, one as you well know Ryder to more specifically.
And the reality is.
Chris Baker: A lot of assets and a lot of people migrated to the mid Con South Texas in the Permian when the Haynesville rolled.
Chris Baker: Covid level rig count lows were 29 rigs, that's where we've been the last couple of months in the Haynesville I would imagine.
Chris Baker: Thank and I think I'm pretty confident here theres a lot of people working in the Permian that would love to get back to East, Texas, and Shreveport, Bossier and work from home is the reality of it.
Chris Baker: For us our business lines that are in the Haynesville.
Chris Baker: Probably over half of our revenue is not that people intensive so its problems. It is easier for us to leg into your point when people talk about being sold out what does that asset utilization or is it people utilization my sense is by and large it's people utilization.
Chris Baker: That's right.
Chris Baker: <unk>.
Chris Baker: The remnants of the asset base that they have left because a lot of our competitors pulled assets to go compete in other basins. So thats why the rising tide lifts all boats from a pricing perspective, if the haynesville really rallies hard and people start to chase returns in the Haynesville. It should at some level buoy pricing as well or at least sustain it.
Chris Baker: In some of the other adjacent spaces.
Speaker Change: Fair enough last one is in <unk> or if you said this in your prepared remarks I missed it I apologize, but can you tell us what the pro forma cash and debt balances after the deal.
So pro forma that is.
Speaker Change: The new notes or $2 32.
The ABL is 55.
Speaker Change: The new ABL sizes of 125 deal.
Speaker Change: With a $25 million accordion.
Speaker Change: $10 million phyllo, both are executable at the company's discretion.
Speaker Change: Within 12 to 18 months, respectively post closing.
Speaker Change: And in terms of uses of cash to close.
Speaker Change: The refinancing.
Speaker Change: Roughly $28 million.
Was used to close the refi that's inclusive of.
Speaker Change: <unk>.
Speaker Change: The debt Paydown I E a smaller issuance size.
Speaker Change: These advisers legal issuance otherwise.
Speaker Change: Right.
Speaker Change: The new notes.
Speaker Change: As well as the accrued interest that was due on the prior notes.
Speaker Change: So ballpark doing the math in my head, which is dangerous for an old person 65 ish million plus or minus $5 million of cash.
Speaker Change: Yes, we haven't updated interim cash numbers since were intra month.
Speaker Change: Okay fair enough alright.
Speaker Change: Alright.
Speaker Change: Thanks, guys.
Speaker Change: I appreciate it John Thank you.
Speaker Change: This now concludes our question and answer session I would like to turn the floor back over to Mr. Baker for closing comments.
Chris Baker: Thank you once again for joining us on this call and for your continued continued interest in <unk>. We look forward to speaking with you again next quarter.
Speaker Change: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.