Q1 2025 Natural Gas Services Group Inc Earnings Call
Speaker Change: Someone else just joined. You will now be placed into the conference. You are muted on this call. This call is being recorded.
Speaker Change: Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group Inc. quarter one earnings call. At this time, all participants are in listen only mode. Operator assistance is available at any time during this conference by pressing zero pound.
Speaker Change: Or now I would like to turn the call over to Miss Anna Delgado. Please begin.
Anna Delgado: Thank you, Luke, and good morning everyone. Before we begin, I would like to remind you that during the course of this conference call, the company will be making forward-looking statements within the meaning of federal security laws.
Anna Delgado: Investors are cautioned that forward-looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. Finally, the company can give no assurance that such forward-looking statements will prove to be correct.
Anna Delgado: Natural Gas Services Group disclains any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.
Anna Delgado: These and other risks are described in yesterday's earnings press release and are filings with the SEC, including our form, TENQ for the period ended March 31st.
Anna Delgado: 2025. Ann your report on Form 10K for 2024 and our Form 8 case.
Anna Delgado: These documents can be found in the Investors section of our website located at www.ngsgi.com. Should one or more of these risk materializers should underlying assumptions prove incorrect, actual results may vary materially.
Anna Delgado: In addition, our discussion today will reference certain non-GAAP financial measures, including EBITDA adjusted EBITDA and adjusted gross margin among others are.
Anna Delgado: A reconciliation of these non-GAAP financial measures to the most directly comparable measures under GAAP. Please see yesterdays earnings release.
Justin: I will now turn the call over to Justin <unk>, Our Chief Executive Officer Justin.
Justin: Thank you Anna and good morning, everyone.
Justin: I'd like to welcome all participants to our first quarter 2025 earnings call.
Justin: Let me first introduce the team joining me today, we have Ian Eckert, our Chief Financial Officer, and Brian Tucker, Our President and Chief operating Officer.
Justin: I'd also like to extend a special thanks to the entire N. G. S team for their dedication passion and unwavering commitment to servicing our customers.
Justin: After two record years at Ngls, we started off 2025 and great fashion.
Justin: I need to believe NCS is a very strong competitive position and we will continue to deliver attractive growth in revenue and profits in the years ahead.
Justin: Market demand for compression remains strong and our success in winning market share stems from a combination of our innovative technology high service levels, driven by the strength of our people and flexible balance sheet, while while there has been a great deal of market volatility over the past couple of months, we have been fortunate that our business has not been a material.
Really impacted to date.
Justin: Our 2025 unit deliveries all of which are under long term contract remained on target in.
Justin: In addition to the already contracted unit deliveries in 2026, our discussions with customers remain focused on growth in the future. We have and continue to allocate capital prudently supported by our expanded credit facility and a balance sheet that affords flexibility even in these volatile markets.
Justin: I'll give just a couple of highlights as it relates to first quarter financial performance rental revenue hit a quarterly record of $38 9, million% to 15% increase versus the prior year quarter and 2% sequentially.
Justin: Adjusted rental gross margin of 61, 9% another banner corner.
Justin: Order for margins.
Justin: Adjusted EBITDA of $19 3 million in the quarter once again a record number.
We finished the quarter at 2.18 times leverage providing significant margin of safety against any currently unforeseen softening of results. While also providing significant offensive firepower to maintain organic growth and add inorganic growth to the mix.
Justin: As a final note in the quarter, we exceeded our internal expectations, which I will discuss further.
Justin: Guidance.
Justin: Turning to the overall market conditions, there was obviously a lot going on in macroeconomic factors and commodity markets.
Justin: Since our last call we've seen W. T I in the fifties in the seventies and everywhere in between in our last call was less than two months ago.
Justin: We've used this volatility to look at the business in multiple cases and upside downside and stable. So that in each case, we can Mount an offensive game plan, we remain confident in our ability to perform regardless of the volatility of price level that we see looking.
Justin: Looking at the public pronouncements of customers to date, we see modest capex reductions that are not hitting us. These public statements are consistent with our discussion with customers that show a locked in 2025 and growth in 2026, obviously, we are keeping a very keen eye on this area.
Justin: Natural gas prices are currently hovering in the mid threes, after peaking above or with a broad range of 2026 forecast some stable with current levels with others well into the fours and beyond.
Justin: LNG export growth in new pipeline projects could create upside for our small and medium fleet and present, an entry point into midstream large horsepower compression a potential tailwind not yet reflected in our models.
Justin: While tariffs remain a source of volatility the direct impact on Ngls is minimal given our supply chain consists mostly domestic vendors are major imported components are largely exempt.
Justin: That said the indirect effects are harder to predict so we will continue to monitor the market and get and engage with our customers and suppliers to better assess any indirect risks and plan accordingly.
Justin: As it stands now our business and customer installations remain on track for what is shaping up to be a strong 2025 and 2026.
I'd like to now shift to our strategy and provide some updates as it relates to our growth and value drivers I'm going to focus on three of them today asset utilization fleet expansion and M&A.
Justin: I'll start with asset utilization, which is comprised of converting noncash assets into cash and increasing utilization of our existing fleet.
Justin: Our days receivable improved from 118 days a year ago to 35 days at the end of Q4 'twenty four and stayed at 35 days at the end of Q1 'twenty. Five this has been great progress, which we are now maintaining.
Justin: Additionally, we made significant progress on monetizing the $11 million income tax receivable that was recently submitted to the joint committee on taxation in the U S House of Representatives for final approval. This is the last approval required and typically this takes less than 12 months, we look forward to reporting the collection of this amount nearly one dollar.
Justin: Per share in cash in the near future.
Justin: We have significant owned real estate, which we are looking to monetize in the near term currently we're focusing on the two largest assets our corporate headquarters in Midland and our recently closed fabrication shop in Midland.
Justin: We also have opportunities to reduce inventory further.
Justin: As I've stated previously the combination of the income tax receivable owned real estate and in AR and inventory creates an opportunity at least as large as the approximately $25 million, we monetize in accounts receivable in 2024.
Justin: Lastly, I'll add that in terms of horsepower utilization the vast preponderance of idle horsepower is in small and medium units. We're continuing to review options for technology upgrades electric conversions of modernization, although still early I'm starting to see some green shoots in this area certainly strengthening natural gas prices and increased volumes are helping but I think the <unk>.
Justin: Ecological innovation service levels, we're providing are starting to make a difference as I've mentioned previously this was never going to get fixed in a couple of quarters. This will take time and while I don't have enough data points to have a trend I'm cautiously optimistic that some anecdotes.
Justin: The third driver fleet expansion, we have previously disclosed signed contracts in unit deliveries scheduled to add roughly 90000 horsepower most of which in 2025 with another significant number of signed contracts for unit deliveries in 2026.
Justin: These commitments are all focused on large horsepower, including a material increase in electric motor drives.
Justin: A majority of these fleet additions are allocated to a key customer that will ultimately become our second largest with well over 10% of our total revenue.
Justin: Once units are set.
Justin: As you'll note in the first quarter 10-Q, our largest customer was 46% of revenue in the quarter down from 54% in fiscal 2024.
Justin: This decrease in concentration is due to growth in our other customers not with any loss with oxy as we continue to grow that relationship as well.
Justin: Diversification has and continues to be a focus and we're growing both the number of key accounts and the volume of business we are doing.
Justin: The fourth and final driver of M&A.
Justin: We remain focused on continuing to drive significant organic growth while at the same time continuing to explore the M&A markets, we remain well positioned both operationally and financially should strategic and accretive acquisition opportunities emerge given.
Justin: Given the current state of the markets. We believe consolidation will continue this year and more attractive assets may be in play.
Justin: Our strong balance sheet and leverage position, coupled with a volatile commodity back box, which make backdrop makes us a natural consolidator whereabouts <unk> are attractive.
Justin: In April of this year, we amended and expanded our revolving facility from $300 million to $400 million with an accordion future raised from $50 million to $100 million. The amended facility has lower pricing and a more accommodating leverage leverage covenant as well. This is a significant win that supports our industry, leading organic growth and provides.
Speaker Change: Ali for M&A. We appreciate the continued confidence of our banking group and welcome our new partners, we look forward to delivering for them and for our shareholders with that I'll turn the call over to Ian to review first quarter performance in more detail.
Ian Eckert: Thank you Justin and good morning to those joining us I'll begin with a brief overview of our first quarter 2025 financial and operational performance.
Ian Eckert: For the first quarter of 2025 natural gas services group reported total revenue of $41 4 million.
Ian Eckert: 12% increase over $36 9 million recorded in the first quarter of 2024.
Ian Eckert: Rental revenue was $38 9 million up 15% year over year and 2% sequentially.
Ian Eckert: This increase was driven by higher average rented horsepower and continued pricing improvements, particularly from large horsepower units.
Ian Eckert: Total adjusted gross margin for the quarter was $24 3 million, an increase of $3 1 million over prior year quarter, and $1 3 million sequentially.
Ian Eckert: Adjusted gross margin percentage came in at 58, 6%, representing a 140 basis point improvement over Q1, 2024, and a 210 basis point improvement compared with the fourth quarter of 2024.
Ian Eckert: These results reflect sustained pricing discipline unit additions and enhanced cost controls.
Ian Eckert: Rented adjusted gross margin.
Ian Eckert: Reached 61, 9% up 80 basis points from the prior year and 150 basis points sequentially, marking one of the highest levels, we've achieved in the past decade or so.
Ian Eckert: Net income for the quarter was $4 9 million or <unk> 38 cents per diluted share compared to $5 1 million or <unk> 41 per diluted share in the prior year period.
Ian Eckert: Sequentially net income increased by $2 million, largely reflecting the impact of the inventory allowances recognized in the fourth quarter of 2024 tied to the closure of our Midland, Texas fabrication facility.
Ian Eckert: SG&A expense rose by $7 million.
Ian Eckert: Year on year to $5 4 million.
Ian Eckert: However, as a percentage of revenue SG&A remained essentially flat at 13%.
Ian Eckert: Adjusted EBITDA for the first quarter was $19 3 million, an increase of 14% compared with the first quarter of 2024 and 7% sequentially.
Ian Eckert: As of March 31, 2025 rented horsepower totaled approximately 493000, representing an 11% year over year increase.
Ian Eckert: Utilization was 81, 7% essentially unchanged from year ago.
Ian Eckert: And all recently deployed large horsepower units were fully utilized.
Ian Eckert: Moving to the balance sheet, we ended the quarter with $168 million outstanding on our revolving credit facility leverage ratio was two eight times down from 2.36 times at year end 24, and our fixed charge coverage ratio improved to 298 times.
Ian Eckert: As of the end of the first quarter, we had 132 million in available credit. This excludes the $100 million expansion that we secured in April.
Ian Eckert: These results put us well within our covenant thresholds.
Ian Eckert: Accounts receivable were $15 4 million at quarter end, a modest decline from year end levels days' sales outstanding performance remains strong reflective of our continued efforts to monetize noncash assets.
Ian Eckert: Cash cash from operations of $21 3 million nearly quadrupled the $5 6 million generated in the first quarter of last year.
Ian Eckert: Capital expenditures in the quarter totaled $19 $3 million.
Ian Eckert: Including $16 7 million of growth capital and $2 6 million of maintenance capital.
Ian Eckert: Gross spending is in line with our 2025 plan and will be weighted towards the back half of the year in conjunction with scheduled unit deployments.
Ian Eckert: Our focus remains on margin expansion disciplined cost control and capital efficiency.
Ian Eckert: Our balance sheet is solid and we have ample liquidity to fund our growth initiatives, which potentially could it.
Ian Eckert: Pursuit of value accretive acquisition opportunities.
Justin: With that I'll turn the call to Justin for closing remarks.
Justin: Thank you Anthony.
Justin: We entered 2025 with strong momentum and our Q1 results exceeded our internal expectations with that background. We are increasing the high end of our adjusted EBITDA guidance to $79 million.
Justin: To preempt some of the conversations I suspect that might have with those following our stock I know that our Q1 adjusted EBITDA of $19 3 million annualize the $77 2 million.
Justin: This puts us above the midpoint of our revised range without accounting for unit delivery schedule, which is predominantly in the second half I.
Justin: I suspect that might hear the word sandbagging at some point in those conversations.
Justin: Given the current macro uncertainty and we're only two months since our year end call I'm going to be as I will describe it prudent and a little patient to see another quarter versus alts and more importantly, overall market conditions.
Justin: If macroeconomic conditions were more similar to 2024 and the high end of guidance would likely have had an eight on the front of it I.
Justin: I will reiterate that I do not currently see any material impacts of tariffs on our business and I'm excited for the balance of 2025 and 2026.
Justin: We are maintaining the growth capex guidance, we provided in March.
Justin: Of 95 to two <unk>.
Justin: We are.
Justin: They start over again, there we're maintaining the growth Capex guidance, we provided in March of $95 million to $120 million heavily weighted to the second half alongside maintenance capex of $10 million to $13 million and a target of at least 20% return on invested capital.
Justin: Rental revenue margins and EBITDA are all tracking in line or ahead of plan and our expanded credit facility gives us the firepower to capitalize on organic growth and strategic M&A.
Justin: We will continue investing in technology systems and people to deepen customer partnerships improve service levels and further differentiate mgs.
Justin: In short, it's an exciting time for our company, we are taking market share strengthening our financial position and focusing intensely on creating meaningful value for our shareholders. Thank you again for your interest in Ngls operator, we're now ready to take to open the call for questions.
Speaker Change: Ladies and gentlemen at this time, we will conduct the question and answer session. If you would like to state. A question. Please press seven pound on your phone now and you will be placed in the queue in the order received <unk> seven pound again at any time to remove yourself from the queue.
Justin: We're now ready to begin.
Speaker Change: Our first question comes from Mr. Rob Brown with Lake Street Capital Markets go ahead. Please.
Rob Brown: Good morning.
Speaker Change: Rob Thanks for calling in.
Speaker Change: Our first question is kind of in the current demand environment and the volatility obviously.
Speaker Change: No, it's a bit of a bit of a volatile situation, but what's the what's sort of the <unk>.
Speaker Change: Indications from customers and how do you see see that flowing into your conversations is it is it really timing of the 26 deployments or as they're starting to be some pricing.
Speaker Change: Pressure and just what's the what's sort of the demand environment applications at the moment.
Speaker Change: So I would say, we haven't really seen much of a change in the demand environment.
Speaker Change: Over the past, let's call. It 60 days from 90 days ago 2025 is essentially all locked in.
Speaker Change: Still having discussions with customers about 2026 growth, we have a significant number of <unk>.
Speaker Change: It's already contracted for delivery throughout 2026.
Speaker Change: There remain ongoing discussions of.
Speaker Change: Hum.
Speaker Change: Incremental units to get contracted in 2026, and so from the demand environment there.
Speaker Change: We really haven't seen any change it remains a strong environment.
Speaker Change: On the pricing side and no material discussions.
Speaker Change: There are always times when customers ask for price, but there's nothing that's any different from the environment, we've seen or at least since I've seen since our since becoming CEO. So it's really pretty consistent from from where we were even 90 days ago.
Speaker Change: Okay, great. Thank you.
Speaker Change: And then on the gross margins they continue to tick up.
Speaker Change: Was there anything unusual in the quarter or is this just a function of the.
Speaker Change: The mix of the high horsepower and should that continue to expand as the mix.
Speaker Change: So on the let me address two parts to the margin one is the rental adjusted specifically and then the overall adjusted gross margin on the rental adjusted we're seeing.
Speaker Change: I think consistency in kind of that something with a six on the front of it.
Speaker Change: We were 61 nine this quarter.
Speaker Change: The differences there are some items, including kind of parts, where you can see some movement in that quarter to quarter, it's not huge movements, but it can be enough to move it from 61 nine something Thats 65 in that zone. So that's great and just a little bit of movement and some of those types of items world.
Speaker Change: A little light in the first quarter.
Speaker Change: And so that's kind of the natural volatility, we're expecting to see but I think they will.
Speaker Change: Proving now pretty consistent in our rental adjusted rental adjusted gross margins and in this particular quarter was was kind of a high end of that.
Speaker Change: Overall.
Speaker Change: We were able to reduce the gross margin impact of the sales line.
Speaker Change: Was particularly high in the fourth quarter of 'twenty four as we were closing the Midland Fab facility, we've mitigated a significant amount of those losses in the first quarter and thats, helping the overall adjusted gross margin as well.
Rob Brown: Okay, great. Thank you congrats on a good quarter. Thanks, Rob appreciate it.
Speaker Change: Thank you very much. Our next question comes from Mr. Jim Rollyson with Raymond James Go ahead.
Speaker Change: Hey, good morning, Justin.
Speaker Change: Just maybe circling back question on to follow up on that margin question. You guys have obviously kind of been hanging around the low 60% range in rental specifically and I'm wondering as we go through the year and you start taking the bulk of your new deliveries or is there anything on the cost side as you kind of get perhaps for <unk>.
Speaker Change: Those going in the field that might drag that down or is kind of about 60 plus percent rental margin being pretty sustainable as we go forward.
Speaker Change: If you look historically for Ngls now and historically, if you look over the kind of the last five years.
Speaker Change: As we've been setting increasing amounts of large horsepower.
Speaker Change: There have been in certain.
Speaker Change: Instances over that period.
Speaker Change: <unk>.
Speaker Change: Temporary blip in expenses on installations now, sometimes that's offset with revenue, sometimes or not depends on the customer and just kind of depends on and sometimes theres been no impact at all.
Speaker Change: It's something we're obviously closely looking at and monitoring to ensure to the greatest extent that doesn't happen.
Speaker Change: It's possibly be some but it would be very temporary in nature and I wouldn't expect it to be a significant.
Speaker Change: Impact could it put us to the lower end of the range on what we've seen on the rental adjusted gross margin over the past.
Speaker Change: Six to eight quarters or probably six quarters it could.
Speaker Change: Don't foresee anything specific today.
Speaker Change: But it is something that we're we're closely looking at it and it would be temporary in nature.
Speaker Change: Gotcha, just cut it seems like the low to mid point of guidance kind of Embeds, a maybe even though 60 ish or low 60. So I was just part of our sub 60 range or just trying to get on that and then you talked a little bit of update around some of the monetization plans. Maybe just a reminder, kind of you went through the last.
Speaker Change: Year.
Speaker Change: So in the 30 days range, which is pretty pretty impressive as you go through and focus on the real estate coupled specific targets, you've mentioned and the tax receivable.
Speaker Change: What is your general plan for use of proceeds there given that you guys are at the stage of returning capital as it just redeploying into.
Speaker Change: Additional organic growth is that the general thought process right now it is I think it's too.
Speaker Change: At that particular time.
Speaker Change: We're creating proceeds from any of those different items that you mentioned, whether real estate or income tax receivable or inventory the immediate.
Speaker Change: Use would be to pay down debt, but then its organic growth.
Speaker Change: And there've been discussions both publicly and privately.
Speaker Change: Churn of capital and that's something that.
Speaker Change: Board is looking.
Speaker Change: He has looked at closely and is continuing to look at very closely of what do we think is the appropriate time and way to move to a return of capital to shareholders on the one hand.
Speaker Change: We're growing at a very high rate and have we believe very high return on invested capital that we're generating.
Speaker Change: On the other hand.
Our industry is one of which I think shareholders have an expectation around some form of return of capital and the board are sensitive to that and I think it's really just the timing of wind when do we move to that and that's something we're looking very closely.
Speaker Change: Got it I appreciate that and congrats again on the new credit facility, especially given the market environment. When you guys got that signed up. So thank you very much. We were are quite quite happy to get that closed I think it was right around two days after after April 2nd and as I looked at the.
Speaker Change: High yield and a term loan b market not very much was getting done. So we thought it really spoke to the strength of the relationship.
Speaker Change: Of the business.
Speaker Change: Okay.
Speaker Change: Thank you very much. Our next question comes from Mr. Simon <unk>.
Speaker Change: Stifel.
Speaker Change: Go ahead please.
Kim: Hi, Good morning. This is Kim on for Selman Congrats on the quarter. Good morning, Tim Thanks for joining.
Kim: So just first question do you anticipate any of this kind of crude oil volatility to kind of bring some of the smaller compression providers to market and then also given some producers are trimming.
Kim: Trimming some of their Capex do you think there's potential for more outsourced compression and less in source compression.
Kim: So on the the.
Kim: <unk> of crew.
Kim: Crude oil prices I think for us.
Kim: That's primarily our horsepower sizes that are servicing really more crude oil wells are.
Kim: The large horsepower in the medium.
Kim: In terms of the small horsepower, that's driven more by natural gas prices and as I mentioned in the prepared remarks.
Kim: We're seeing some green shoots there nothing a trend that I would point to at this point, but.
Kim: I think there are some people who believe that.
Kim: LNG is really going to drive significantly both not just volumes prices.
Kim: Too early to tell on that or the impact of small horsepower, but I think the trend is.
Kim: Modestly favorable at this point.
Kim: In terms of the Capex budgets.
Kim: The range is I've seen so far or kind of I think the low end was kind of like two 5% decrease up to kind of 10% really not hitting any of the areas.
Kim: And their budgets that impact us and.
Kim: And in fact as I've read a number of customer releases really a big focus on productivity and that really plays into our strong suit in terms of the technological innovation our units, we help drive productivity and run time for our customers and so I think there is there is actually a greater focus on that in terms of insourcing versus outsourcing.
Kim: Sourcing I think it's too early to tell on that one would think if <unk>.
Kim: Companies are concerned about leverage and cutting back capital they would move more towards a renting mindset versus a buying mindset.
Kim: But I think it's too early to tell on that.
Kim: Got it perfect.
Kim: And then.
Kim: I'm just wondering if you could give an update on lead times for engines frames and factors just kind of what youre seeing in real time on that sure really no difference from from last quarter.
Kim: The.
Kim: Engines are running depending on the model and.
Kim: The manufacturer and manufacturer in the model Youre looking probably somewhere six to nine months.
Compressor frames at the shorter end of that.
Kim: And fabrication is nine.
Kim: As much as 12 months.
Kim: So really no change in that.
Speaker Change: Awesome. Thank you guys for the time, Thank you Tim I appreciate it.
Speaker Change: And again, if you have any questions. Please press seven pound.
Speaker Change: Our next question comes from Tate Sullivan with Maxim Group go ahead. Please.
Tate Sullivan: Thank you good morning, Jeff can you did I just circling back to a comment from earlier did you say the potential sale proceeds from Midland assets.
Speaker Change: Fabrication facility that we the $25 million decrease in receivable.
Speaker Change: Can you frame it that way, yes. So if you look at the aggregate of those three different areas, mainly the income tax receivable, which of that amount is defined.
Speaker Change: $11 million.
Speaker Change: Then adding in the proceeds from Mont.
Speaker Change: Monetization of the real estate and inventory combined we see that as an opportunity that's at least as part of the approximately $25 billion of cash we were able to pull out of <unk> and <unk>.
Speaker Change: 2024.
Speaker Change: Okay, and then Midland in the last two months.
Speaker Change: Have there been.
Speaker Change: A fair amount of real estate transactions.
Speaker Change: Building transactions than Midland.
Speaker Change: I think relative to the size of the market, yes, it's it's still been active.
Speaker Change: Real estate is a little bit more difficult to predict the timing a little bit longer lead time.
Speaker Change: So we're actively working on those the Midland Fab facility, we didn't have fully closed down until.
Speaker Change: Really the end of the first quarter.
Speaker Change: Those are ongoing.
Speaker Change: Our processes in terms of monetizing those I think there are attractive assets and I think we.
Speaker Change: We don't we arent in a in a rush that we have to sell them for any reason, it's just a now improving the capital efficiency of the business and so we can be.
Speaker Change: Prudent and move at our pace in terms of realizing full value there.
Speaker Change: Thank you and then.
Speaker Change: Can the Q that you highlighted in the case I haven't focused that much before as the percent of your horsepower rented on a month to month basis.
Speaker Change: 22% in the first quarter do you think that's a level that will remain around that level or continue to come down as you deploy more larger horsepower on multi month contract I think that number has been trending down over the quarters and any.
Speaker Change: New units going out.
Speaker Change: They are all large horsepower theyre all pre contracted.
Speaker Change: And those are contract ranges that are in the three to five year range and typically towards the high end of that.
Speaker Change: So.
Speaker Change: The impact is yes that number should continue to trend down.
Speaker Change: Okay, and then last squeezes.
Speaker Change: Your comments on the LNG is it.
Speaker Change: Mostly related to putting currently unutilized smaller horsepower out into the field or could indicate that some larger horsepower. It would be for midstream purposes are mostly on the smaller horsepower. So in terms of our customers today and our applications.
Speaker Change: It is increased volumes.
Speaker Change: Small horsepower is used in gathering in natural gas.
Speaker Change: And that's where we're primarily anyway.
Speaker Change: We're we're we're seeing some increased level.
Speaker Change: Modest increase but.
Speaker Change: I think there is some at least positive feelings around that well, we arent in the midstream today in trend or is it true midstream on pipelines, but I think that as a potential opportunity and even if we don't penetrate that that customer base. It it keeps what is.
Speaker Change: No.
Speaker Change: Exceptionally excuse me.
Speaker Change: Basically 100% utilization for large horsepower across the industry. It keeps that supply very very tight and so even if we don't enter into our midstream application.
Speaker Change: Just keeps the overall market very tight for where we are today and the large horsepower.
Speaker Change: Thank you very much.
David: Thank you David I appreciate it.
David: Thank you and I don't see any other questions.
David: Great.
David: So thank.
David: Thank you Luke.
Speaker Change: Thanks for all of your questions and participation on the call.
Speaker Change: Really appreciate your support we look forward to updating you on our progress in the next quarter. Thank you and hope everybody has a great day.
Speaker Change: And this concludes today's conference call. Thank you everyone for attending.