Operator: Thank you for standing by. My name is Jordan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Trican Well Service third quarter 2026 result. All lines have been placed on mute to prevent any background noise. I would now like to turn the conference over to Brad Fedora. You may begin.
Brad Fedora: Thank you, everyone. Good morning. First, Scott Matson, our CFO, will give an overview of the quarterly results, and then I will provide some comments with respect to the quarter overall and talk a little bit about what we are seeing for the next six to nine months, and then we will take questions. As usual, we have all the senior members of our executive team in the room today, so we should be able to handle any questions that may come up. If you do have a question about your model or anything like that, please leave that for later today. Now I will turn the call over to Scott.
Scott Matson: Thanks, Brad. Before we begin, I would like to remind everyone that this conference call may contain forward-looking statements and other information based on current expectations or results for the company. Certain material factors or assumptions that were applied in drawing conclusions or making projections are reflected in the forward-looking information section of our MD&A for Q3 2026. A number of business risks and uncertainties could cause actual results to differ materially from these forward-looking statements and our financial outlook. Please refer to our 2025 annual information form for the year ended 31 December 2025 for a more complete description of the business risks and uncertainties facing Trican. This document is available both on our website and on SEDAR. During this call, we will refer to several common industry terms and use certain non-GAAP measures, which are more fully described in our Q4 2025 MD&A.
Scott Matson: Our quarterly results were released after close of market last night and again, are available both on SEDAR and on our website. With that, I will give a brief summary of our quarterly results. My comments will draw comparisons mostly to the third quarter of last year, and I will also provide some comments about our current activity levels and expectations going forward. Overall, third quarter reflected strong activity levels after a bit of a slow start, with improved utilization and a solid contribution from the Iron Horse division for the full quarter. Commodity prices remained supportive of activity, particularly for oil and liquids-focused producers, and completion programs continue to increase in scale and complexity across many of the resource plays where Trican operates. Overall, revenues for the quarter were CAD 338.3 million, compared to the CAD 300.6 million we generated in Q3 of 2025.
Scott Matson: The increase was driven again by stronger operating activity and utilization levels during the quarter, together with the contribution from Iron Horse for the full quarter of this year, versus effectively 1 month of Q3 2025, just due to the timing of the acquisition. Adjusted EBITDA for the quarter, CAD 87.7 million or 26% of revenue, compared to adjusted EBITDA of CAD 59.5 million or 20% of revenue in Q3 2025. Adjusted EBITDAS for the quarter came in at CAD 87.1 million or 26% of revenue, compared to the CAD 66.9 million or 22% of revenue we printed in Q3 of last year. To arrive at EBITDAS, we add back the effects of our cash settled stock-based comp recognized in the quarter to more clearly show the results of our operations and remove some of the mark-to-market impact of the movements in our share price between reporting dates.
Scott Matson: On a consolidated basis, this results in earnings of CAD 48 million during the quarter, which translates to CAD 0.23 per share on both a basic and fully diluted basis, compared to earnings of CAD 28.9 million or CAD 0.15 a share on a basic and fully diluted basis in Q3 of last year. We generated free cash flow of CAD 66.66 million during the quarter, and our definition of free cash flow is effectively EBITDA less non-discretionary cash expenditures such as maintenance, capital, interest, and current taxes. You can see more details on this in the non-GAAP measures section of our MD&A. CapEx for the quarter totaled CAD 26.5 million, split between maintenance capital of CAD 7.7 million and upgrade capital of CAD 18.8 million.
Scott Matson: Our upgrade capital was primarily directed towards the construction of our first 100% natural gas fueled, continuous heavy-duty hydraulic frac fleet and the purchase of electric ancillary frac equipment. These investments form part of our broader fleet modernization strategy and support our focus on technological leadership, operating efficiency, and the ability to execute larger and more complex customer completion programs. We continue to maintain a strong balance sheet, exiting the quarter with positive non-cash working capital of CAD 139.7 million, net debt of CAD 50.3 million, in line with what we were expecting, and approximately CAD 127 million of accessible liquidity. During the quarter, strong cash flow generation from operations partially offset by a seasonal build in working capital following a spring breakup season, but again, in line with where we were expecting.
Scott Matson: I would expect some of this to unwind as we move through the back half or the back part of the year. With respect to our return of capital strategy, we repurchased and canceled 6.9 million shares under our NCIB program in the third quarter. The weighted average price of CAD 6.09 per share, representing approximately 3.3% of the shares that were outstanding at the beginning of the year. Subsequent to the quarter, we repurchased and canceled about 600,000 shares and will continue to be active in our buyback program when market prices are at levels that provide a favorable investment opportunity. As noted in our press release, board of directors approved a dividend of CAD 0.055 per share, reflecting approximately CAD 11.1 million in aggregate distributions to shareholders.
Scott Matson: That distribution is scheduled to be made 31 December 2026 to shareholders of record as of the close of business on 15 December 2026. I would note that the dividends are designated as eligible dividends for Canadian income tax purposes. With that, I will turn things back to Brad.
Brad Fedora: Okay, thanks. Overall, Q3 came in as expected. It was a good quarter, but believe it or not, our results were again, significantly impacted by wet weather, much more than normal for a Q3. Even though it was very busy, we actually still had a lot of down days, particularly in the two frac divisions. All divisions performed really well. Margins were quite consistent across all four service lines. We pumped record amounts of sand in September. Unfortunately, nowadays much of it is self-supplied by our customers, which is a significant loss of margin for us, meaning that we have to work a lot harder to make the same amount of cash flows that we used to in prior years.
Brad Fedora: We are still experiencing significant pricing pressure in the bidding processes that have been unfolding over the last couple of months, and we are still seeing cost inflation across our entire supply chain, due mainly to higher diesel prices that started earlier this year. It does not look like any of that is going to abate anytime soon. It is still too early to determine the impact of the counter-tariffs against US parts and steel, but we expect that those will be material. As what happened with sand, we got all those tariffs back. But in the meantime, they can be a little bit painful and feel a little bit costly. I think overall, in the long run, that will probably work out much like sand did last year. Q4 has started off great. We are having a record month in October.
Brad Fedora: We do expect, though, that all divisions except cementing will slow down as we approach the end of Q4. We do expect our results to be lower than Q3. I know we have seen some analyst comments out there that they are actually showing growth in Q4 over Q3. I think that is a bit of a stretch. As I think with normal seasonality and budget exhaustion going into year-end, you should see Q4 a little bit lower than Q3, and that would be, I think, the normal cadence going forward. Nothing has changed. Our customers are still very focused on technology and efficiency. Efficiency is king on location now, just given the size of these frac programs. Any little time savings or cost savings that you can provide are significant over the course of a year. Particularly with the opportunity to burn natural gas instead of diesel.
Brad Fedora: The cost savings for that are well over CAD 100,000 a day. Obviously, way lower emissions. Again, natural gas is available right on location in many cases, and so it is a very important part of our frac strategy going forward. Our natural gas assets, combined with our electric backside equipment, are leading the industry in Canada. We get diesel substitution rates well over 90% when you combine our 100% natural gas pumps with our electric blenders and sand handling equipment. We still remain very focused Montney-Duvernay. Probably 70% of our work is still directed toward natural gas plays. They all have, I think, fairly heavy liquids components for the most part, but it is still very much a natural gas basin. We actually see the oily parts of the basin as a great opportunity to expand our services, particularly in cementing and coil.
Brad Fedora: In the deep frac division, it is going very well. We continue to build out our differentiated service offering with our 100% natural gas GMS pumps. We are definitely the leader in this space when you combine our natural gas equipment with our electric backside equipment, combined with our engineering and lab facilities. We view ourselves as a technical leader, and I think our clients do too. Wells are getting longer. There are more stages. The sand per well just continues to grow. I am always referencing sand numbers, but I think this basin could approach 10 million tons any day now. When you compare that to four or five years ago, it is double the amount of sand that is getting pumped.
Brad Fedora: To us, that just means more time on location, the need for more robust, efficient equipment, and certainly we are leading that war on innovation and technical ability in the field. Almost 30% of our work now is in the Duvernay. That is a big increase from even two years ago. Very positive for future frac demand. It is a very pressure pumping-intensive play, and it pumps at very high pressures. The importance of new, robust equipment designed for long pumping rates at very high pressures is just amplified in that play. We are really happy with our position there. Unfortunately, there is an undisputed trend of customer-supplied sand that has been a big loss for us from a cash flow perspective. The only way to deal with that is to increase your last-mile logistics and try to find returns in the logistics value chain.
Brad Fedora: That is not a trend that we see going away. It probably continues to increase. We have really focused a lot of our work in driving efficiencies from our last-mile logistics. We have the largest fleet of sand trucks in Western Canada, and we continue to focus on that division. We have received our 100% natural gas pumps, as I discussed earlier. Those are coming in. They are a little behind, but we do expect to have all of our pumps in the field by year-end. They are performing very well in the field so far, better than expected, actually. Better at burning field gas than the old Tier 4 engines that we continue to use. The more gas you can burn, especially at these diesel prices, the more fuel savings are provided for the customer. So something that the customers are very focused on.
Brad Fedora: It looks like the pumps will be more spread across our deep fleets instead of being combined into an eighth fleet in the near term. What that does, it just makes each of our fleets more technically and operationally advanced, and as a result, a little bit more profitable. You may want to adjust your models accordingly. As we add more of these pumps, then we will evaluate at that time whether or not we want to add incremental fleets or we want to just continue to increase the profile of each of our deep fleets. We need more of these. We simply can't get them fast enough. They're a huge win for our customer, and they're a win for us. This is certainly a technology that we expect to be deploying over the next few years.
Brad Fedora: We're the only company that is now running, in the pressure pumping space anyway, that is now running natural gas-fueled semi-trucks. We've received 2 of 3 so far. They are performing well. They have a great fuel range. There's a significant savings on fuel versus diesel. Even though these trucks we expect that we're going to be getting reasonable returns just on fuel savings alone. We'll be deploying those into our trucking fleet as they arrive. What I would say is, demand for the natural gas pumps far exceeds our ability to supply them, as well as our electric backsides as well, which is composed of the blenders, the sand handling, and the chemical handling equipment. It's frustrating for us that we can't get more of this equipment, but there's basically a global demand for these engines.
Brad Fedora: We're just trying to make sure that we position ourselves in the queue, and we'll get them as fast as we can. We fully expect that we'll be ordering more of those pumps, going forward. On the Iron Horse side, as anticipated, where oil prices went, Q3 was a great quarter for them. Clients were busy in the field. They especially had a lot of weather delays, but they still had a great quarter. Oil price conditions like we're experiencing today really highlight why we thought that was a good acquisition. It's broadened our exposure to parts of the basin that we weren't present in before, and we're looking forward to a really busy 2027 in that division. On the cement side, we continue to be really happy with how that division continues to operate.
Brad Fedora: We maintained really high market share in both Montney and the Duvernay. We secured a Q1 SAGD project twice the size of our 2026 program. In-depth discussions with additional customers, to provide equipment and provide efficiencies in their programs. We currently have almost no market share in heavy oil and SAGD, so as we expand into that market share, that's pure organic growth and incremental to what we're doing today from a revenue and cash flow perspective. Those jobs are smaller, but there's lots of them, and the margins on those are almost as good as our deep gas margins. That'll be an area of expansion for this company in the future. We successfully cemented the longest well in Canada in the summer. It was just over 9,600 meters, so great job to the cement division and the crew that executed there.
Brad Fedora: As wells get longer, more expensive for the customer, they of course, are more and more reliant on companies like us that have advanced blends, a deep engineering program, a deep lab expertise, and years and years of operating experience. Our competitive positioning should just do nothing but improve as wells get bigger and more complicated going forward. We are working on electrification in that division as well. We expect delivery of a hybrid mixing unit in Q1 of 2027. That is delayed from Q4 of this year. But with that equipment, we will see the elimination of hydraulics, which will mean less breakdown, less R&M, and just better reliability for the customer. And especially in the cold, a much more pleasant operating experience for the operators as well. On the coil side, we had a good summer in coil.
Brad Fedora: Again, lots of delays due to weather, but August and September were two of the busiest months ever in that division. This has continued into October as well, which will probably be the busiest month for this division. As with everything, wells get longer, creating challenges for coil. Trican manages all of these challenges with an extensive string inventory, lots of high rate injectors, and our relationships with tool companies that continue to allow us to take on technical challenges and provide a really good service for our customers. This coil division as well, we look at heavy oil and SAGD as a great opportunity for us to expand. Again, we have done very little in that part of the world, just due to equipment and staffing shortages over the past few years. But we see that as a great opportunity to show significant organic growth in that division.
Brad Fedora: I will just make a few comments about our outlook for Q4 in 2027. I would say Q4 is going very well. October is basically a continuation of Q3, probably will be a record month for this company overall. But you should expect things to slow down significantly in December. Financial results will be good, but I do expect them to be a little bit lower than Q3. We are seeing research notes that are implying Q4 is going to be higher than Q3. I think that is very unlikely unless there is significant roll forward of budgets from 2027 into 2026. So I think the normal cadence will be Q3 is probably the busiest quarter of the year, and then Q4 and Q1 are just slightly below it.
Brad Fedora: Again, the loss of sand is a real impact to our operations, and so we have to end up doing a lot more work to show the same sort of EBITDA and cash flows. At this time, we are not seeing any significant budget being pulled forward from Q1 2027 into Q4. I will not be surprised if we see a little bit of that. Q1 2027 is very busy. All of our customers are telling us that they are going to be busier next year. Q1 2027 is almost is almost fully booked. And the conditions for Q1 are improving as the weeks go by. So we are expecting a very busy winter and a very busy spring.
Brad Fedora: Overall, when we look at the basin, we think in terms of, we expect activity probably goes up 5% or so a year, and we probably see a similar increase in pricing to go along with it. This might be conservative, but anyway, I think until we get a much more constructive natural gas market, we are taking, I think, a conservative stance on growth and focusing on getting the right people, getting the right equipment, making sure that even though things are getting busier, we continue to operate at an extremely high level of not just quality of operations, but efficiency of operations as well. It is still a very competitive space to operate in, and lots of pressure from our suppliers and across our entire supply chain.
Brad Fedora: Even though it is growing, we want to continue to operate on efficiencies, providing very good service for our customers, making sure that we have the right people in place as this market grows. I would echo our comments from the last few years. We view Western Canada as a great place to be. We expect that this basin is going to continue to expand over the next four or five years, just given everything that we have seen from an egress perspective on both oil and natural gas. We hope to be a big part of that. We see growth coming from five key areas. Just overall industry activity and pricing is one. Our market share within that market is two, just given our technology and equipment advantage. The third is just well intensity growth.
Brad Fedora: More sand means more time on location for us, which just means higher frac bills, reducing the effective capacity of the fleet in Canada as a whole. That will just, more hours on location, I think is a win. Cementing and coil will have lots of organic expansion just in the heavy oil and SAGD areas. As our last-mile logistics expand, we will start seeing that as a separate operating division that is also providing profits to the overall company. I will just finish off with sort of our view of value for shareholders and return of capital. It is a grind, but we continue to generate free cash flow and maintain a conservative balance sheet. We are not totally debt free, but we are effectively debt free. We do subscribe to a diversified return of capital strategy, a combination of sustainable dividends and the NCIB.
Brad Fedora: Since 2020, Trican has returned over CAD 540 million to shareholders in the form of buybacks and dividends. So, it is a very significant number that I think it is almost getting taken for granted for now. We look at buying our own share as probably the best M&A we ever could have done. So we are really happy with how that has worked out. I think we are, I do not know, Scott, what are we? Almost 55% of the shares since 2017. So, we will continue to flex our NCIB up and down based on share prices and other market opportunities. We are very active in sort of our M&A department. We are combing through deals trying to find the right places to invest, making sure that they are exposed to the markets that we want to be in.
Brad Fedora: It's, as always, very tough to find the right deal, and we'll just keep digging. In the meantime, we'll keep buying our shares, as a form of M&A. Don't expect that to change anytime soon. On a go forward basis, like we've said in the past, give or take, you should expect about 50% of our free cash flow to go to shareholders in the form of buybacks or dividends. I think over the long term, that's probably a good metric, and it'll vary from year to year depending on the stock price environment and what's available from an M&A perspective. Over a 10-year period, I think that 50% number is probably about right. We're not afraid to use our bank lines. We feel a lot better about debt today than we did even a couple of years ago.
Brad Fedora: I think it's no surprise to people that this management team is very conservative from a debt perspective, but just given the stability that we're seeing in the market and how our views of the future for the Canadian market over the next 5 to 10 years, we wouldn't hesitate to use our bank lines to make the right investment. I'll just finish off with saying our priorities have not changed. Build a resilient, sustainable, and differentiated company. Invest in high quality growth and upgrading opportunities to ensure that we're adding value for our customers. It's not enough to just show up and execute. You have to show them why using our services creates incremental value for them, and then provide a consistent return of capital to our shareholders through the dividend and the NCIB when appropriate.
Brad Fedora: Okay, operator, I think I'll stop there and we'll go to questions.
Operator: As a reminder, if you'd like to ask a question, simply press star followed by the number 1 on your telephone keypad. Your first question comes from the line of Aaron MacNeil from TD Cowen. Your line is live.
Aaron MacNeil: Hey, morning all. Thanks for taking my questions. Brad, you highlighted that pricing pressure persisted in Q3, then you had later mentioned the potential 5% inflection in both activity and pricing next year. I am hoping you can just expand a bit more on how you see the competitive intensity evolving into 2027, and maybe just couch it as both on the sort of supply side as well as the demand side. I know demand, you said maybe 5%. Would you characterize the market today as sort of adequately supplied, oversupplied, and what would it take to change your view?
Brad Fedora: Yeah. It is a bit of a quirky market in the sense that, I do not think activity is necessarily, in any particular month, that consistent across all the service providers. I think we sort of take turns having very busy months. But there is certainly some white space present if you looked at the industry as a whole. You have not, even though I think everybody is expecting a much busier next year, I think our customers have played this really well. They are securing longer-term relationships, using today's maybe angst about white space. Even though I think the market is going to be undersupplied very soon, you are not seeing it in pricing today. But it will happen quickly. Is it going to be a huge 20% jump in pricing? No, I do not think so.
Brad Fedora: That is why I think taking a sort of a conservative view of starting with cost recoveries, just given how much our margins have been squeezed. Starting with cost recoveries and a little bit more activity will allow you maybe to inch pricing up a little bit. But remember, this is a very torquey business. We have about CAD 1.2 billion top line. You do not need a big price increase to really move earnings around and free cash flow. So, a little bit of activity combined with a little bit of pricing and a little bit of cost recovery, it is very significant. The exact timing of which, nobody knows.
Aaron MacNeil: Got you. Just to maybe clarify, anything you are seeing on the supply side?
Brad Fedora: Well, I think as everybody knows, supply side has actually improved here. There's chatter about maybe up to four spreads leaving Canada going to the US, and my sense is, once they get down there, it's going to be really hard to bring them back because it's busy in the States too. Maybe I would even say the slope of their recovery curve has been higher than Canada's in some of those basins. So, my guess is some of that equipment's going to go south and not be back anytime soon. So, the number of frac fleets in Canada, it doesn't take, as we all know, a marginal fleet, either additions or subtractions can have a big influence on the overall market. So, thanks for asking that question.
Aaron MacNeil: Yeah. Okay.
Brad Fedora: It's a good point.
Aaron MacNeil: Then, you mentioned, again, back to the supply side, that you couldn't get some of these natural gas pumps fast enough. Maybe in broad strokes, how many pumps do you think you can get your hands on next year? Do you think you'll sort of maximize your ability to do that? I know you said no modeling questions, but to the extent that you'd like to comment on what the 2027 CapEx could look like, I'd be interested in getting your views.
Brad Fedora: I would say, you should assume the same CapEx for next year. I am looking at Scott and he is nodding. But if we could double it, we would.
Brad Fedora: But there is not.
Aaron MacNeil: What does that get you?
Brad Fedora: You cannot buy what they will not sell you.
Scott Matson: Yeah, the other comment I would make, Aaron, is that there is a timeline around these things. We ordered our first set of these natural gas pumps about a year ago, so we have taken delivery of three out of 10. But there is quite a lead time, then there is quite a build slot time. So, even if we could order double them, we would not get them for a full season.
Brad Fedora: Yeah. Anything ordered today is 2028, basically.
Scott Matson: Yeah.
Brad Fedora: It is.
Aaron MacNeil: Okay
Brad Fedora: frustrating, but there is demand for those engines in all parts of the economy, especially in power.
Aaron MacNeil: Right. Well, appreciate the time, and I'll just turn it over.
Brad Fedora: Thanks.
Operator: Your next question comes from the line of Keith Mackey from RBC. Your line is live.
Keith Mackey: Hey, thanks and good morning. Maybe we could just start out on that sand pumping trend that you mentioned a few times there, Brad. What portion of your sand that you pumped in the quarter did you supply versus third-party supply? And how might you expect that to change going forward? Are we in the eighth or ninth inning of that, or is there a significant amount of sand that might be supplied by third parties going forward?
Scott Matson: Yeah. In the quarter, that number was, call it roughly 50% supplied by Trican or customer supplied. That's been a slow, steady trend upwards as we've moved through the last year or 2.
Brad Fedora: We would have been 70-30 a year ago.
Scott Matson: 70-30 a year ago. That trend will probably continue, but there will still be an element of Trican-supplied sand, specifically for certain customers who want us to be able to handle that process for them. And the larger and the bigger demand on sand from a program perspective that you have, the larger the operator, the more likely they are to procure their own sand. We are probably in the sixth, seventh inning of that. We go forward.
Brad Fedora: Yeah, please.
Scott Matson: I think we will see more, but not dramatically.
Keith Mackey: Okay.
Brad Fedora: Yeah. Sorry.
Keith Mackey: Very helpful. Maybe just talk a little bit about business development. You mentioned M&A active. Can you just speak to some of the things that you've, in general, in broad strokes, have looked at? What types of things might meet your return thresholds versus what types of things might not? How do you want to bolt those into Trican as an existing business? Is it about creating more integration or more breadth, or what is the approach in the latest thinking today?
Brad Fedora: Look, we're looking at everything. We're very bullish on not just Canada, but we're bullish on the US as well. Again, we'd never buy fracturing operations or sole fracturing operations in the US. We don't think we have anything to offer there. But we're looking at everything. We're a logistics-based business today. We do have seasonal issues that we have to deal with, so we're always looking to smooth those out. But quite frankly, it's hard to do in Canada. I would say we are underexposed to the oily parts of the basin. Like I said, we're 70%-plus focused on natural gas. Our first foray into the oil world was the Iron Horse acquisition. Frankly, just given everything that's happening from an egress perspective, we're not really participating in the oily side of the market. Look at the Clearwater.
Brad Fedora: It's not going to slow down anytime soon, and there's really nothing for us to do there other than coil. We're actively looking to expand our coil services in that play. But if there's acquisitions that could speed up our exposure to heavy oil and SAGD and things like that, we would look at it. So I'm giving you a non-answer answer, but we're not fussed with it having to be in a vertical integration. We're happy to add business lines on that we're not currently in and where we may be in sort of indirectly in our own operations. I think when people talk about M&A and other service lines, I think you have to remember, we're all calling on the same people, right? Our coil and fracking divisions call on the completions departments. Our cement division calls on the drilling departments.
Brad Fedora: It is very easy for us to make step-out acquisitions into other service lines because you have the same customers. We all know who those customers are. The people that we are calling on, they have a long, positive experience with Trican. They are very familiar with our company and the quality of our service offering. We are not afraid to add what appear to be unrelated service lines, but we all go to the same well, and we all call on the same customer, so they are not actually all that unrelated. At the end of the day, much of oilfield services is can you move lots of people and lots of equipment around efficiently? We obviously know what our core competencies are, and we are not afraid to use them in other places.
Keith Mackey: Okay. Understood. Thanks very much for the color.
Operator: Your next question comes from the line of Tim Monachello from ATB Cormark Capital Markets. Your line is live.
Tim Monachello: Hey, guys. Most of my question has been answered. Just curious on the addition of new 100% natural gas pumps that probably comes in the 2027 budget. Are you seeing inflation in the cost of that equipment, given, I guess, the demand that those OEMs are seeing across different end markets?
Scott Matson: Not a ton.
Brad Fedora: Sure.
Scott Matson: Tim, yeah. The thing that probably keeps me the most up at night would be what potential tariff impact of those things moving back and forth. Any engine is predominantly steel, so there's lots of impact there. But to date, we haven't seen a rapid increase in what we've been getting and what we've seen delivered so far. But TBD for 2027.
Brad Fedora: It'll come in some form, for sure, Tim.
Scott Matson: Yeah. They never get less expensive.
Brad Fedora: Yeah. One way or another, the price will go up.
Tim Monachello: Okay. Have you guys made a decision on that formally, or when do you think that you will pull the trigger on that decision?
Brad Fedora: No, we make a formal board approval on a 2027 budget in early December. But we will certainly be asking for more of them.
Tim Monachello: Got it. So it sounds like the new equipment that you have coming in in late 2026 will be largely complementary to the current frac spreads that you have in the market, adding capacity and some margin there. How do you think about the idle equipment that you have in the fleet? I assume it is largely Tier 2 stock. Does that ever go back to work, or is that something that you think about divesting to other markets or something?
Brad Fedora: Yeah. I will back up a little bit. As we think about the fleet and the quality of the fleets going forward, our goal is to high-grade those fleets and make them as technically advanced as possible to increase their profile for customers. What that means is we will continue to bring in the new state-of-the-art technology and move out the diesel pumps or the old Tier 2 pumps. That equipment is old, really old. It is not just here, it is everywhere. The good thing about the pressure pumping business is, even though we all continue to invest in our fleets, the fleet is not growing, which sets up a good supply and demand dynamics going forward. We have had 3 to 4 spreads parked on the fence now, just make sure we do not ruin the industry by bringing that equipment back to work.
Brad Fedora: But the reality is we may never bring that equipment back to work, and we continue to dispose of parked equipment that we talk very little of. It does not get sold into the Canadian market. It only gets sold outside of Canada. So, you will just see a continuous improvement in the quality of our fleet. It is a totally different frac fleet than it was three to four years ago.
Tim Monachello: Yeah. Okay. Last one for me. I am just curious if you can give an update on, I guess, the profitability and activity levels that you are seeing within the Iron Horse fleet, what is in that fleet in 2027?
Brad Fedora: Yeah. We do not talk divisional margins or anything like that, but certainly that Q3 would be a good indication of how we expected that business to perform. They have more seasonal issues than the Deep fleet just due to road bans and things like that. But, it is fair to say when that equipment is highly utilized, we are really happy with the purchase.
Tim Monachello: Okay, great. I appreciate the details. Standby.
Operator: Your next question comes from the line of Nathan Ritchie from Schachter. Your line is live.
Nathan Ritchie: Hi, Brad. First of all, I just want to thank you for everything you're doing for shareholders. I've been following your story since prior to the Canyon merger, and you guys continue to deliver. First off, thanks for that on behalf of shareholders. What I wanted to speak about is if you can speak more on your application of AI in the business. Some context to why I ask is I was at a presentation this summer that Liberty Energy did, and they spent so much time talking about technology, AI, and data. By the end of the presentation, I had to remind myself it was an oilfield services firm. I know they're not that big in Canada. You're not probably competing with them as much as far as customers go, but you may be competing with them for investors.
Nathan Ritchie: I just want to see if there's a focus. I know the focus right now is use technology to deliver results for your customers, which is obviously a priority and is obviously working for you. Is there also a way that you can talk about your technology a little bit more and promote what you're doing in the market so that you're viewed more as a technology company that's in oil and gas services rather than an oil and gas service company that uses technology, and then from that, potentially be able to trade at a little bit higher multiple?
Brad Fedora: Well, I hope none of the board is listening. We hear you. But first and foremost, my job is to provide returns, not glossy brochures. We are an oilfield services company that uses technology, and that is never going to change in the next few years. I am never going to say I am a technology company that is in the oilfield services business. I should not say I am never going to say that, but in the next 36 months, that is very unlikely.
Brad Fedora: We very much understand what you are saying. We are all fighting for the marginal dollars from investors, and we probably could do a better job talking about the technology investments that we are making, particularly using data that is in the trillions of data points in this organization. We are going through a great big systems upgrade, and I do not want to be a first mover on AI.
Brad Fedora: I am happy to be a number two on AI and let the non-return money get spent by somebody else. Where we are seeing probably the best opportunities in the near future on using AI and data management is on frac automation and preventative maintenance. As that gets more developed and it gets field tested, we will start talking more about it. But rest assured, we understand the comments you are making. I do not agree with all of them, but I certainly understand what you are getting at.
Nathan Ritchie: Yeah. Thanks, Brad. That is the main thing.
Brad Fedora: Yeah.
Nathan Ritchie: Appreciate that.
Brad Fedora: Yeah.
Operator: As a reminder, if you would like to ask a question, simply press star, followed by the number 1 on your telephone keypad. Your next question comes from the line of Colby Sasso from Daniel Energy Partners. Your line is live.
Colby Sasso: Hi, thanks for having me on. Just a quick question from me. You have discussed the trend towards longer laterals, more stages, and higher sand intensity across the Montney and Duvernay. Are you seeing any indication that operators are beginning to reach diminishing returns on completion intensity, or do you expect these trends to continue driving higher service requirements over the next several years?
Brad Fedora: Yeah. Remember, we make sort of blanket statements for the basin as a whole. There is always exceptions from, one, this area versus that area, or this operator's view of how they should do it versus that operator's view. But in general, yes, we expect this trend is going to continue.
Colby Sasso: And then, one last one. You delivered a strong EBITDA margin of 26% in Q3, which is one of the highest levels we have seen over the past several years. As you look ahead towards 2027, how sustainable are these margins, and should we expect this level going forwards, or does Q3 represent a high water mark of sorts?
Scott Matson: Yeah, good question. If you look through the year, this has been our highest margin quarter, probably in the last four, five, or six quarters. I think this will kind of moderate as we go through 2027. There was a bit of G&A stuff in this quarter that gave us a bit of a benefit as well. So, if you are in the mid-20s as we go forward, that is probably a pretty good indicator. Some of that changes the relative proportion of sand in versus sand out work moves that margin percentage number up a little bit.
Brad Fedora: But not the dollar amount.
Scott Matson: But not the aggregate dollars, if that makes sense. So, this is probably a decent run rate to go forward. If you blend this thing out for the whole year, we are probably mid-20s, and I would expect that is pretty safe.
Colby Sasso: That is all from me. I will turn it back.
Operator: That concludes our question and answer session. I would now like to turn the call back over to Brad Fedora for closing remarks.
Brad Fedora: Okay. Thank you, everyone. Thanks for your time and your interest. I know it is a busy time of year. We are available for any follow-up calls that you may have, particularly with respect to the financial models, et cetera. We will not be hard to find for the next couple of days. If we can help you, please reach out, and thanks again.
Operator: This concludes today's meeting. You may now disconnect.
