Q2 2019 Earnings Call
Good morning, and welcome to the Tetra technologies second quarter 2019 results conference call.
The speakers for today's conference call, our Brady M. Murphy, Chief Executive Officer.
And Alico leakage Serrano, Chief Financial Officer for Tetra technologies incorporated.
All participants will be in listen only mode should you need assistance. Please signal for conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone.
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Please note this event is being recorded.
I will now turn the conference over to Mr. Murphy. Please go ahead.
Thank you Robert.
Thank you Robert Good morning, and welcome to the Tetra Technologies second quarter 2019 earnings Conference call all the heel Serrano, our chief Financial Officer.
He is also in attendance this morning and will be available to address any of your questions. I will highlight a few items and then turn it over to Leo for some additional details which in turn will be followed by your questions.
I must first remind you that this conference call may contain certain stem statements that are or may be deemed to be forward. Looking statements. These statements are based on certain assumptions and analysis made by Tetra and are based on number of factors. These statements are subject to a number of risks and uncertainties many of which are beyond the control of the company.
You are cautioned that such statements are not guarantees of future performance and that actual results may differ materially from those projected in the forward looking statements.
In addition in the course of the call. We may refer to net debt free cash flow adjusted EBITDA adjusted profit before tax or adjusted earnings per share backlog coverage ratio or other non-GAAP financial measures.
Please refer to this morning's news release work go to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period.
Well first I'd like to start by thanking the close to 2000, Tetra and CSI compressco employees for delivering a strong quarter in a challenging environment and then my first quarter as CEO of Tetra in a quarter, where the U.S. land rig count dropped over 10% from the recent peak at the end of last year, and the Q2 U.S. land rig count.
Dropped 5% from the average rig count in Q1, we were able to grow revenues, 18% sequentially and 11% year on year, while improving margins in each of our segments.
On a consolidated basis, we achieved a 50 million dollar adjusted EBITDA quarter up 38% from the first quarter and up 8% from the second quarter a year ago.
Well North American rig activity was down in the second quarter, our completion fluids business benefited from improved activity in key offshore markets as demonstrated by delivering 22.4% adjusted EBITDA margins, an increase of 560 basis points from first quarter.
And 450 basis points from the second quarter of last year.
Our compression business set company records for compression service margins at 52.7% and utilization of 89.1%.
And continues to benefit from a long term growth cycle for increased gas production and the use of compression for centralized gas lift Inc. In key shale oil basins.
Our water and flowback revenues declined slightly quarter on quarter, but our adjusted EBITDA margins improved sequentially by 210 basis points on cost initiatives and continued customer adoption of our integrated operations and automation.
On a segment basis completion fluids revenue increased sequentially by 18.2 million to 79.8 million in the second quarter from six and from 61.6 million in the first quarter.
And the second quarter the segment benefited from strong offshore fluid sales in the Gulf of Mexico, and Eastern Hemisphere. In addition to the seasonally strong north European industrial chemicals business.
Excluding the small benefit from Tetra CS Neptune revenue and profit the adjusted EBITDA margins in the segment were approximately 20%, which is our target for our base completion fluids business without the benefit of CS Neptune.
Our differentiation through vertical integration and our long term contractual supply agreement for bromine has served us well during this extended downturn and has us well positioned for improved activity going forward.
Regarding CS Neptune on the last earnings call. We reported that we have reached agreement on the technical and commercial terms for a project and we're in the process of finalizing the contract details that contract has been finalized and drilling is ongoing we realized a small amount of revenue and profit contribution from that contract in the second quarter in preparation for the completion phase expected in the third quarter.
This is the Gulf of Mexico, lower tertiary development project in the field with existing production and were other wells in this field have pressures that require fluid density in the CS Neptune generation one range.
I must remind you however that as with all of these types of complex deepwater wells. The exact timing on completions is challenging to accurately predict we expect this project to be of similar size as our previous Gulf of Mexico see ups CS Neptune wells as we've done previously going to protect the confidential nature of this important project for our customers, we will not disclose the specific customer revenue or profitability of these projects.
We continued to advance discussions for additional CS Neptune projects across the globe. Some of those discussions are directly with operators and some are through our relationship with Halliburton.
Through our Halliburton relationship and with some of our own customer relationships. We have now been able the topic was technically qualify or are in the process to technically qualified tetra CS Neptune completion fluids with six major operators as they plan their future projects. We are also evolving our tetra CS Neptune completion fluids technologies to address higher pressure opportunities as we are announcing our new Neptune monovalent solution.
Excluding very expensive cesium solutions. This new product increases the density range of current model, then vaillant bromine solutions by nearly two times and we are very excited with the new market. This solution will open up for Neptune fluids.
We are already in the testing and qualification phase for a major operator and this innovative product breakthrough.
For our water and Flowback division in the second quarter of this segment recorded a sequential EBITDA improvement of 821000, or 8% or 5.5 million of less revenue.
As we discussed last quarter, our water and flowback services segment went through a pretty significant shift in customer mix from the fourth quarter of 2018 to the first quarter of 2019 as a smaller independents reduced activity, while the major stayed relatively consistent with their drilling and completion plans, we see that trend continuing along with more competitive pricing for the base water and flowback services. In this current environment, we are seeing customer seeking lower cost solutions, which fits very well with our strategy to be the lowest cost per barrel water solutions provider.
A key part of that strategy is our integrated project offering which increased to 25 projects during the second quarter up from the communicated 19 in the first quarter.
It was integrated projects allow us to stay on jobs for extended period of time showcase our differentiated technology more effectively utilize our equipment and personnel and improve margins. Those projects are now meaningful part of our business and we believe a real competitive advantage.
One of those integrated projects is our first Permian basin produced water automated produced water recycling project, which has been ongoing since the summer of last year at the customer's request. We're in the process of expanding the capability for that operation to treat and recycle up to 100000 barrels of produced water per day up from the current capacity of 60000 barrels.
Our automated treatment and recycle solution is a relatively low capital investment that can be mobilized and de mobilized in a few months and can be de mobilized and moved with these to other future locations. We believe that a produced water. We believe the produced water solutions will continue to be the fastest growing segment of a 25 billion dollar industry water segment and we are.
I point $9 million and was 36% above the second quarter of last year. The main drivers for the sequential revenue increase were near record highs equipment sales a nice rebound in aftermarket sales and a steady topline growth of the compression services business.
Compression adjusted EBITDA was up 6.8 million sequentially to $32.8 million and was also up $10.3 million from this time last year.
The compression services business delivered the eighth consecutive quarter of improved revenues and deliver record highs in fleet utilization and compression gross service margins since the acquisition of of compressor systems Inc. in 2014.
We continue to evolve and shift across all segments to work for operators with the strongest balance sheets, a shift that will be beneficial in the long run we do not build new compression equipment on speculative basis as all the new equipment. We put into services is attached to customer contracts. We are building to meet specific client demands and working with our key clients in key basins to satisfy their needs. While also leveraging our infrastructure in the first quarter and for the first time and CSR history active operating horsepower surpass the million the 1 million Mark and we added about 11500 more to that this quarter utilization for the 1000 and higher horsepower equipment focused on the gathering systems and centralized gas lift was 97.1% as of June Thirtyth up 150 basis points from March 30, Onest 2019.
Overall utilization for the entire fleet is at 89.1% up 190 basis points sequentially and a record high since the acquisition of compressor systems, Inc.
Since our Compressco ended the quarter with a backlog of 60 million after $18 million of orders and 52.7 million of new unit sales orders in the first half of the year were slower than anticipated, but we expect customer orders to pick up significantly in the second half of the year.
Our equipment sales pipeline remains strong.
Overall was excellent quarter across all three segments in an evolving and challenging market driven by MP operators capital spending discipline and competitive pricing. In addition to organic opportunities. We continue to evaluate some or inorganic ones, but we are highly focused on cash returns and managing our debt levels as we pursue any future acquisitions, we will only complete those projects that provide the best value to our shareholders have the right price with that I will turn it over to Alico to provide some financial comments on cash flow and the balance sheet and then we'll open it up for questions.
Thank you Brady.
I'll spend a few minutes from Tetra and CSI Compressco free cash flow capital expenditures the balance sheet.
Dan I'll see if I can better capital allocation strategy before providing some come carry on our third quarter. These.
In the second quarter Tetra only generated free cash flow from continuing operations of $3.1 million.
This compares to 34.9 million dollar consumption.
Of working cap cash into first quarter.
We have historically consume cash in the first half of the year.
And generated free cash flow in the second half of the year.
We are following this historical trend.
This is driven primarily from changes in working capital.
In March payment that typically fall in the first quarter.
We expect several factors to contribute towards the generation of free cash flow in the second half of the year.
This includes first the monetization of the receivables from the Northern Europe industrial chemicals second quarter peak.
Revenue historically increases in northern Europe between 10, and $15 million from the first to the second quarter and gets monetized in the third quarter.
Second Brady mentioned that we have signed an agreement with a major operator for CS Neptune project that we expect to be completed in the second half of the year.
If our assumption at this project will be completed and monetize before the end of the year.
Third capital expenditures are expected to be approximately 50% lower.
In the second half of the year compared to the first half of the year.
And finally, we have several internal initiatives to improve working capital are gaining traction that will also benefit the second half of the year.
As a result of those actions and taken into account potential slow down at the year end for the us onshore business.
We expect total tetra only free cash flow.
To exceed that $3 million of cash flow that we generated in 2018.
If the timing of the CS Neptune project changes.
We would expect that it would impact our full year 2019 free cash flow expectations.
Particularly we expect full year capital expenditures to be approximately between 25 million.
In addition to $50 million of equipment that we've agreed to buy and lease to Cfive compressco supporting their high return opportunities.
For the first half of the year, we spent $11 million of the committed 50 million to support CSI Compressco.
As a reminder, most of the profit from this arrangement with the effect Compressco will come to Tetra.
When the equipment is on lease to see if I compressco.
Tetra only capital expenditures in the second quarter were 10.8 million to $10.9 million.
After being $8.9 million into first quarter.
Most of our 2019 capital expenditures are front end loaded.
In the first half of the year to accelerate growth and address our customer needs.
Our 3 million of Tetra only free cash flows after tetra competes.
For CSR Compressco, the $50 million of capital previously mentioned.
TETRAS balance sheet remains strong tetra net debt at the end of June was $200 million essentially that amount being the amount outstanding on our term loan.
This term loan matures in six years in August of 2025.
The term loan B agreement provides us with delayed draw option that can be used to finance tuck in acquisitions.
We have in place in asset based credit facility, who which.
Primarily for working capital needs given the seasonality of our cash flows.
At the end of March we had 18 and a half million dollars outstanding on the ABL.
At the end of June we also had $22 million of cash on hand.
We have a debt structure with no significant maintenance covenants.
And no current maturities, which allows us flexibility to maneuver through any volatility in the market.
I also like to again remind everyone that tetra and CSI compresscos debt are distinct and separate.
There are no cross default cross collateral for cross guarantee from the dead between Tetra and CSI Compressco.
Ill now spend a couple of minutes on Cfive compressco.
For CSR Compressco cash flow from operating activities in the second quarter was $8.7 million.
Distributable cash flow of $15.7 million improved 150% from the first quarter of this year.
And 200% from the second quarter of last year.
Their coverage ratio was 33 times compared with 13 times in the first quarter.
The final cash redemption of the series a preferred units is today August eight.
After which all series a preferred units will be fully redeemed.
At the end of June Cfive, Compresscos total gross debt outstanding was $646 million.
Of which $350 million are the secured notes that mature in the year 2025.
And $296 million for the unsecured notes that mature in August of the year 2022.
No amounts were drawn on the ABL revolver.
CSR Compressco does not have any maintenance covenants to comply with.
TSR compressors those gross leverage at the end of June was 5.5.
We annualize in their second quarter adjusted EBITDA their gross leverage ratio would be 4.98 pints.
Well on our way towards a four and a half times target communicated our investor confidence in May of last year in New York City and also when we announced a reduction in our distribution in December of last year.
CSR Compresscos 2019, adjusted EBITDA guidance is between 125 million and $130 million.
This compares to $99 million of adjusted EBITDA in 2018 and represents a year over year growth of between 26 and 31%.
2019 revenues expected to be between 475 million and $480 million.
This is an increase of between $35 million to $50 million from 2018.
We are very encouraged with the price increases we continue to see as our fleet contracts rollover.
New car new equipment is going out at record high prices and the continued improvements in compression services gross margins.
In the second quarter the improvement in compression services gross profit was greater than sequential revenue increase given this fall through growth margins of 248%.
At the midpoint of CSR Compresscos full year, adjusted EBITDA guidance of 20, 127, and a half million dollars.
And after accounting for cash interest expense.
Maintenance capital expenditures and cash taxes.
Cxi ex CSR compressco expects to generate approximately $60 million of free cash flow.
This year 30 million of that were directed toward cash redeeming the series C.
Preferred units, which are now done and the rest the directed toward growth capital with a small amount toward distribution.
CSR Compressco previously community Qaeda plans to direct 50% of future cash flows towards growth capital on the assumption that the market support the higher margins, we are achieving and generating 20% returns on capital.
The other 50% will be targeted towards returning cash to stakeholders.
Being either debt holders or equity holders.
CSR compressco are committed to improving their leverage ratio to 4.5 times or better.
As a reminder, tetra is a general partner CSR Compressco owns the Irrs and approximately 34% of the outstanding common units.
Returning to comments on Tetra consolidated we expect third quarter profitability.
To be up sequentially for water flow back testing services.
And for completion fluids and products and flat for.
Our compression.
We expect EBITDA margin improvement across all three segments.
Driven by more stable integrated projects.
Cost cutting measures that we're implementing.
The anticipated CS Neptune project.
And higher contribution as a percent of revenue for CSR compressco from aftermarket services.
We expect modest revenue increases in water flowback services, and completion fluids and products and a slight decline in compression driven primarily by the timing of new equipment sales.
I encourage you to read our news release from this morning, NC effect Compresscos news release from yesterday.
For all the supporting details.
With that I'll turn it back to Greg.
Thank you Leo before we open the call for questions I'd, just like to reiterate reiterate for key messages to leave with you first the Gulf of Mexico, well, which we believe will require our CS Neptune completion fluids is nearing completion and we are optimistic we will be able to monetize it on the second half of this year.
Second we are successfully mcgath navigating through an uncertain North America land market and posted sequential increase in EBITDA and EBITDA margins in our water and flowback services business.
Third our traditional offshore completion fluids businesses improved significantly both in the Gulf of Mexico, and international is generating our targeted EBITDA margins of near 20%.
And lastly, we remain very focused on cash flow generation and still expect total year Tetra only free cash flow to exceed the 3 million that we generated in 2018.
With that we'll open the call for questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
[noise].
The first question comes from Praveen Narra of Raymond James. Please go ahead.
Hey, good morning, guys I'm going to get the <unk>.
I guess, we could start on the growth projects like if we talk about CS Neptune It was nice to hear about the.
The six operators that you're either qualified or the qualification process with I guess, given where you are can you can you talk about especially how it regardless when halliburton involved.
How long the qualification process takes and then given what you guys know about where you are when do you expect to see that ramp up in CS Neptune projects revenues is that do you expect that in 2020 2021, how do you how do you think about that.
Yeah, So Brian I'll take that one.
The.
Qualification time can be fairly lengthy because as you know these are.
These are mostly deepwater projects involves the completion designs from the customer what types of tubular metal metallurgy is they're going to use the facilities can get involved if it requires zinc flow back so as you can imagine.
We are involved in qualifying for these projects pretty far in advance of actual seeing the bit turned to the right so to speak.
Having said that you know we've already qualified with several customers and we have some visibility of their of their projects. In addition to the.
The one Gulf of Mexico project, we've talked about in Q3, there's one international project that we are in discussions commercial discussions with the customer that if we finalize those discussions.
That's an ongoing drilling campaign, depending on whether they hit the pressures that require Neptune will determine whether we get a.
Another job this year or potentially next year.
So that's a that's an example of one type of project that we would expect to see some benefit from next year.
There are some other projects that are further out there we could see additional project sanctioned and drilling next year, but it's a little too early to tell at this point until we get into the budget.
The budget seasons, probably near the end of the year.
Okay. That's helpful and then I guess on the fluid side in terms of the integrated project count.
Increased to 25.
19 can you talk about where that growth is coming from is it more customers.
Using the.
The service the integrated service or is it the same customers increasing the number of projects they're doing.
Yeah, it's it's a little bit of both for us in Q3.
We continue to or sorry, Q2, we continue to build some momentum with the the major operators they seem to be adopting it right now faster just primarily because of their their sustained activity levels compared to some of the smaller guys, but we do have integrated projects now in all of our basins.
So we're proud of that.
But yeah I mean, we're really pleased with the momentum for being we're we're getting with those projects.
I guess could you can you give us an idea.
Tell us how many customers who are using the integrated service.
I don't have that in front of me for me not to have to go back and get that number for you.
You know I know, it's approaching double digits, but I don't know exactly right now okay. No. That's helpful. Thank you very much guys, yes. Thank you.
The next question.
Comes from.
Cole Sullivan with Wells Fargo. Please go ahead.
Hi, good morning.
You guys good morning.
Thanks.
You guys mentioned.
The.
Some pricing pressure I guess in the water and flowback can you walk through kind of the areas where you're seeing.
The majority of that and that data in that segment.
Sure.
Yeah, it's a little it's a little bit different for each of our product lines for for our production testing flow back.
It's actually a pretty flat and I think primarily that's because we're bringing some new technologies into the market with some very good acceptance and the customers are benefit benefiting from the efficiencies and some of the automation that we're bringing on that side of it. So we've we've held pricing.
Well pretty pretty firm on the PC side of business, we did see a little bit for the first quarter some pricing pressure on our tetra steel I'd say mid.
Single digits types of pricing discounts in this quarter.
Probably the what the areas under the most pressure is your single jacket lay flat hose and I would say we are probably mid teens down from the from the peak of where we were.
At the peak of the cycle.
Okay and is there any way that you guys can help us at least think about the the level of contribution from these integrated products indicated projects.
Over the rest of the year and kind of support to any seasonality that you guys see.
This seasonality that so you can expect it in the fourth quarter, just help us think about like the support from the.
I guess, the revenue and margin levels from these integrated.
Projects.
So cool I'll take that one.
Brady mentioned that we're progressing one over water recycling projects moving from 60000 barrels to 100000 barrels and that we've been on that project since.
Last year.
The benefit that we have is that were now mobilizing and de mobilizing for projects continuously once we get on some of this integrated projects, we bring out a significant amount of.
And were there for extended periods of time, so the benefit that we get is that we get better utilization of people in equipment, and then we get more predictability to be able to schedule.
Those projects.
That is the the enhance margin that it brings clearly when we drop headcount because of automation customers are asking that we share some of that benefit and we did but we try to improve the margin on it I would suggest that the overall profitability of our integrated projects.
Or better than our single a delivery.
Services that we do because of those factors.
All right.
That's all I had I will turn it back.
The next question comes from John Watson with Simmons Energy. Please go ahead.
Thank you good morning.
Morning, John .
In response to calls question that you Didnt come sooner recycling early here and I'll, let you take that.
Is that a a business, where you're seeing resilient or pricing and margins and can you speak to the opportunity set for tetra to continue to grow that business as more and more operators I look at recycling.
Yeah. So we haven't seen John any any pricing pressure on our recycling projects yet.
And we directed you know we talked about our front end capital loaded. This this year.
A good portion of that has gone to the recycling opportunities that we have it is it is clearly our fastest growing segment in the water and flowback.
We won't discuss how many jobs were on a percent of the revenue I will just say it is our fastest growing and we believe those margins are very sustainable.
Okay, great. Thank you for that.
Secondly, within that segment.
Are you expecting any facility sales in the second half of the year.
Not at this time Tom.
Okay, and then lastly can you speak to the effective increased automation within water flowback, and how that might be able to offset some of the pricing pressure and margin pressure, which I mentioned earlier.
Sure Yeah, I mean, the 25 projects that we mentioned in involve our automation capabilities. So as you as you look at the growth of those integrated projects.
So that gives you a bit of a cadence or the growth in our a and our closed loop automation systems.
I'm just just one one example, where automation was able to help US you know.
Again, a with a new client in the Rockies using our tetra steel and automation, we were able to deliver a 180 barrels per minute frac job.
And as you probably know Fracs typically averaged 100 to 120 maximum barrels per minute types of fracs and through our automation and Tetra steel we were able to achieve 180. So those are examples of how automation is helping us to gain some market share and and reduce people, which ultimately improves the margins for us.
Okay got it thanks, Brady good quarter I'll turn it back.
The next question comes from Stephen Gengaro of Stifel. Please go ahead.
Hi, Thanks, good morning, gentlemen.
Good morning the.
Couple of things for me the first.
When we think about that.
He completion fluids business I I believe.
You said in your prepared comments, a modest revenue increase in the third quarter.
Can can you talk about the big sort of the puts and takes their time because they the European.
Business I think is real strong in the second quarter. So it's a pretty big headwind to overcome but you just don't seem to be guiding towards modest revenue improvement how should we think about that.
Oh very good observation, Steven we do drop $10 million to $15 million or revenue from Q2 to Q3 due to the lack of.
Our European season, Pekin, stopping in the second quarter.
Then we're picking up the Neptune project that we think is going to impact.
The third quarter, but were also believing that the traditional bromine.
Activity will continue to improve so the combination of.
Means continuing to improve the completion fluids offshore.
Plus the Neptune project impacting third quarter will allow us to be up modestly Q3 over Q2 on a revenue cycle.
Okay. Thanks, that's helpful detail. Thank you are we as you know and.
As I think about the.
The overall entity and if you think about compression seems to be doing well. It seems like your outlook is continuing to be pretty strong.
How do you think about just sort of the structure of the of the entire tetra entity going forward.
And how that.
Impact sort of your longer term return.
Capital expectations.
Well I'll start and then I'll, let Tom Brady comments too so you've seen that we have been.
Very active in trying to align the portfolio towards those segments that are predictable and get.
Good returns for us.
We disposed in divested our offshore decommissioning and then maybe take business early last year.
When thinking that's maintenance with water last year and then late last year. We also did a small tuck in acquisitions in the northeast.
We believe that.
Directing our resources toward the high returns.
Water treatment water transfer when we got the technology differentiators that separate us from the competition.
It will give us 20% week or EBITDA type margins and we're working back toward those numbers on the water and the flow back testing site.
Then on the completion fluids I briefly mentioned some of the newer technology that will evolve in CS Neptune.
Yes, our deepwater activity keeps ramping up.
We're seeing the benefit of that.
Completion based fluids are starting to ramp up.
And you know that we've got our chemical facilities in our distribution network fully built out we do not have to add capex too.
Drive more volume.
Through those facilities. So we think that we're going to get high fault lose from that part of it.
And then on the compression side, you've seen that all the growth Capex that we directed has been strictly on the high end a big gathering unit in the centralized gas lift.
And we've mentioned very high flow through margins you see that we are achieving.
Record high gross margins on those.
You're also seeing that the aftermarket services and equipment sales that required capital.
Also growing nicely. So we've tried to align all our investments or dose to the area.
Pinpoint technology to differentiate us and then take advantage of a built out structure.
Okay No that's that's.
Good detail and just one final one when we think about a three Q.
In aggregate.
Are we going to be profitable at the bottom line.
Oh, so if you follow the commentary that I made that we expect improvement in EBITDA margins and we expect NIPT into come across a were very.
Positive off where ours third quarter numbers are looking for.
Okay. Thank you.
The next question comes from Thomas Curran with B. Riley FBR. Please go ahead.
Good morning.
Good morning Thomas.
Brady for for Neptune.
Turning internationally, which country currently looks the most promising for Neptune is commercial debut outside of the U.S.
[noise] certainly on the not the North Sea is a wood would probably rise to the top in terms of the near term opportunities.
And is.
Is the major that you've you've technically qualified with.
And are in advanced commercial discussions.
For a project that if I understood correctly scientific could materialize as early as for Q.
Is that a different customer then.
The one you've been working within a Gulf of Mexico.
Yes, it is a different customer a and again, it's it's possible for Q4, we still have to finalize commercial negotiations and obviously it has to be drilling in the right part of the field, that's going to require a neptune pressures. So.
Okay.
Does it sound as if though.
That.
That project.
If it if it ends up having to write pressures.
Would would likely.
Lead to a revenue generating event before you might.
Advance whatever is the most promising up the next opportunities in the Gulf in other words.
Beyond this project you will.
To be executing in late Threeq Q.
Does it currently look as if the next.
Revenue event is most likely to be international before you would then get.
The next job in the Gulf of Mexico.
That that progression.
Makes sense, yes, what's what's you're laying out correct.
Great and then just turning to water and flowback.
The sand side clone.
Equipment fleet.
Could you share with us help us size that somehow what is it as a percentage of a flow back or of the entire water and flow back Division and then.
What do you estimate ease your your your market ranking share forward that sand cycling equipment service.
Yeah, I don't have the share numbers are probably in front of me now we we would estimate across North America. We would think we're in a strong second position on that but I'd have to double check the numbers on that.
We're still in the early days of Rolling out there, there's two different technologies on the sand a piece.
One of them is a automated San flushing, which again, reducing people saving efficiencies for our clients that we're rolling out and the other one is just a and news site clone technology. That's more that's probably more advanced stages than the automated San Flushing system that we have in terms of the number of units we are deploying but fortunately for us we've come up with a modification that we can modify our entire cycling fleet or most of our cycling fleet.
To achieve the the second generation capabilities and efficiencies that we're seeing up to 95%. So we're very optimistic about the market penetration, we will achieve with that going forward and Thomas I would suggest that it's not.
The that technology in isolation, that's the benefit to us it's that that allows us to differentiate from our competitors and brings more of the flow back testing opportunities in our favor.
I see.
Thank you for taking my questions and providing the detailed answers. Thank you.
Again, if you have a question. Please press Star then one.
[noise].
[noise].
[noise].
Yes.
I guess this concludes our Q and a session.
We appreciate your interest in Tetra technologies and thank you for taking the time to join US. This morning that concludes our call.