FTSI - Earnings call transcript Q2 2019

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Operator

Thank you and good morning, everyone. We appreciate you joining us for the FTS International Conference Call and Webcast to review Second Quarter 2019 Results.

As a reminder, this conference is being recorded for replay purposes.

Before we begin, I would like to remind everyone that comments made on today's call that include management's plans, intentions, beliefs, expectations, anticipations or predictions for the future are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those expressed in any forward looking statements. are and the company in the uncertainties on annual filed and SEC. XX-K Form other risks discussed Company's in report with These reports the obligation Company required looking forward not law, as update the Except undertake revise by statements. any to any publicly or does filings obtained SEC.gov. website Company's available the are by Company SEC's SEC The the on Company's the contacting and on website, may be ftsi.com and

non-GAAP financial conference measures. discussions call This also of includes

as reconciliations Our measure. financial well earnings release measures, their to about further GAAP these non-GAAP these of most includes information comparable measures non-GAAP as directly

now Mike Mike? I'll turn FTSI's the to call Doss, over CEO.

Mike Doss

Thank you, morning, and good everyone.

Lance with cover here our business financial I'll and Turner, I'm Q&A. first some go before through Company's CFO. updates, and I'll then technology highlights to going

we our had operationally X.X% quarter, pumping that quarter from was day. their increase second first announce crews to in million quarter. strong as stages hours per up the $XXX.X Revenue another to pleased the continue in I'm

Our offset revenue stage source sand count increased pricing. that and more lower lower their revenue, by was customers own average the as of impact sand by X%, but mostly

had first We have East Texas, Today fleets average one Basin, fleets quarter, in Texas/TMF. the Midland the in three in three XX Northeast, in with Delaware quarter. working nine we Mid-Con the one in and XX the XX up from South in second Basin, active the in in three

for are are the private fleets, and XX and for single zippers. working three the XX E&Ps Of small are ups E&Ps, and a are rest well, for locations are cap mid-cap working Three E&Ps. working seven large

volume, of in first concessions first million, in $XX.X that we full quarter up impact million was pricing the Adjusted a quarter quarter. higher on the by $XX.X offset gave the EBITDA from

million adjusted $XX.X income down million in our the from second between third in $X.X of second in quarter. $X.XX million $X.X the was per million the $XX.X fleet expected June, $XX.X first a million second compared quarter would million. share loss EBITDA the a idled quarter, and net annualized. to quarter from quarter. Excluding is the of in million was first or the wireline have business SG&A or for million been per $XX SG&A be Net the quarter was end at to $XX which $XX in loss

the $XX.X The and loss was commitments related of asset supply in due impairments. quarter first primarily to to million charges

down a lose dropping We due fleet we million of with currently we As to to quarter fleet average work XX few try XX to is XX or We're XX fleets fleets per going million. adjusted customers for points expect between free. the to to and for $X average in on us fleets, due upper the on EBITDA EBITDA slight guide expecting expect with $X guidance, quarter fleets. The won't to active pricing. place those exit to but third to third

is million adjusted $X fleet. off cut Our about EBITDA per

the and in $XX.X was CapEx for $XX the year. $XX second in to million full expect million between up spend from quarter. million first We $XX.X million quarter, currently the

best million pumps, of pumping high structural our due today's of $X.X active advantage million and designed are one $X.X intensity fleet, manufacturing cost maintenance annual Our between increased and in which is handle are to work - in CapEx lowest is the That industry. requirements modular hours. to perfectly per the the one which and

payment was accrued $XX.X cash by to impacted second million commitment related supply a quarter the Our in flow previously charges.

year. it paid for in prepaid amounts as this assets. partial That's fees Additional reservation year included were

are remaining year. for. settlement Next will for annual year, and be million $XX payments fully fees the payment full All with the occur in first along reservation settlement accrued quarter, five the

the sale quarter, XX proceeds to We net Sinopec cash debt million. our In third close XX% $XXX.X total in China, of our the we and in million of of million. on $XXX.X for interest in second ended the joint expect quarter SinoFTS of venture to

we release, to higher proceeds. $XXX It assets our track that in including than mentioned XXXX. are be generate cash on As could approximately slightly flow million in of

repurchases, for $X.X back shares bought million plan quarter. opportunistically. approximately small to second for share purchase in continue As XXX,XXX amounts we We the to

stage achieved as second and single highest per outset, times footprint, of are especially gears, I fleet. Shifting well our XXX XXX average stages operationally. Note of stage depending this treating considering are since on record which the fleet, not had mentioned a is have fleet quarter by differences per a at we amount XX% comparable good pressure remarkable quarter companies. we ever, ops. completed the the per There XXXX stages necessarily stages versus the times, geographic second We when increased between quarter zipper

Despite industry-wide due efficiencies previously the announced Higher given is budgets. a environment factor. the to that exceed CapEx Contributing to the live traded strong pressure reducing completion fleets to especially operational are challenging E&Ps E&Ps, and oversupply. within cash our flow not performance, publicly also commercially, to

fleets lost competitors I We've few below to For competitively us, believe already value we at are offer in proposition the recently bids between bid. released, XX% spot prices that are and and to far customers. market an opportunities XX% attractive and to

projects. Next, like to a of I'd highlight few technology our

the closely manufacturer, than implement available third follow our a faster we do to improvements technologies That we on if said, we parties. much platform new market. on believe As relied us allows

focus and of cause One fluid are remains area common NPT. relates failures our ends. a R&M fluid to ends of ends our fluid XX% expense About

improve efficient years, for few changes to flow a to past the of to Over our number changing from have made ends allow fluid geometry metallurgy. we more the

We've others XX% our expense by over These two last pumping hour end also the have improvements per technology. average years, period. of by fluid the and has pressure same while our XX% over increased sleeve the reduced trading use employed about

month per were per project We for built more to per and today's blenders another improve jobs, operating Most day, our of durability with blenders. significantly have along underway for intense year. the not hours

of of blender and are points the our to related We goal the frequency events. NPT pinpoint blenders deconstructing with reducing fortify weak

which another we've is sensor useful example Upgraded capitation the equipment which built, the redesign of how vibration missiles, designed we pumps, has reduce accumulation. are life. data to and damage of our This risks reducing in to improved used

make automation. towards to strides continue We

We equipment risk at where which and reduce completed. one least software the declines, will point now By of of to along action software of the quality improve stages of expected take the operator at the on recommended both with actions. NPT unless failure year at are the our notifies is end operator the the fleet, automatically

Alito operations and in skids use We project fluid system. a control ancillary as such in have that center all as other real the diverting involved part restoring of a projects our these national projects and of is engineering many team time of

to $XX of work me Lastly, let share electric thoughts simply don't fleets. $XX At economics a this the million, on in environment. a cost million

design We the been also think that not discovered. innings early are best has we yet and in the

watching However, are closely. developments we

the emissions. customer, savings and are twofold. the For benefits Fuel lower

runs All burn fleet Tier provide fleets, on cost unavailable. gas million diesel. of of month would operate like one to about million on An our gas fleets flexibility per costs, to electric are a to rate alternative customers to about We with our average. displacement of save natural retrofit if also diesel which fleets a about $X XX% fuel X fuel on the can becomes per at continue $X which money dual to

[Indiscernible] specifically engines particularly fleets. to We dual or rate as three Blending advertised operate designed of DGB are higher fuel have such Dynamic are average, having diesel currently about appealing. XX% them Gas a on as displacement and making

existing of evaluating with We our one fleets upgrading whether and more engines new are or currently commercially makes sense economically. these

to like hard recognize our Before working Q&A, the we go contributions I'd employees. to of

We the and perseverance cyclicality best people dedication of have dealing some with the the have industry, true and our business. of shown service to in in quality incredible they

for So well to you done. a those listening, thank job

now for I'll to it over the turn Q&A. operator

Operator

Simmons from [Operator John our line Please ahead. And the with comes first Energy. go Instructions] of question Daniel

John Daniel

- you QX know I you for XX, dropping maybe the probably point. have the am fleet of I XX background Quick the fleets early, question it's count end mean, noise, on to are I When airport. this you I and and the about talk but at the at guys on

someone work. us fleets is holiday what are who at might kind going just you happen customer look just could those losing as underbid you or that as to Firstly - down if the your might ball, - them thoughts of give into you're because then you crystal the been And count your season? shutting happen that's QX are what through

Mike Doss

we third dropped further far a on quarter, of the one did cutting Sure going activity. have reason you good that well, in typically a being to see customers lot year. fourth war quarter, are there with and And competitor. the that some as of as just a uncertainty, December, the bit is we budget won't fleet a in which price we to I fleets but we're see as a really don't go, exhaustion, November, the out But no lose back think we think this due estimate. far see We as

John Daniel

impressive Okay. performance it’s reasons. And customers are but of is budgetary or mean, look the really not count, spec, I - stage weight which you because the when because dropping at the of

be hey, assuming will we're returning, like So going budget or last an is or like rates also in Mike, the telling it refreshed Are year Lance, coming be you there they quarter, - to first as most right. dollars that's expectation is purely? back

Mike Doss

absolutely. Yes, no,

capital about just and of it discipline within lot budgets. a very strict staying being companies so And is are

And some earlier ahead that almost due to are, gets they're as January releasing the so, to the of as then entirely. on your plan, quarter. the and that's comment everything many softness customers going budget fleets, in far it's lead X to And to extent constraints which fourth reset

John Daniel

all I you but more on us specific one you needed that know - your the how guess latest consolidation on Can might I final like, just playing we give how is thoughts And more at where and you you your know can and sector. that? get don't that and me this, see from

Mike Doss

with could are before, expect larger those yes, you costs some get industry. we've platform across combination, hasn't makes it, could position see absolutely diversification customer more a now We this I which to your some in additive clear but a we benefit, you which Also, base, we've, if provides sense think that. get right be of consolidation in commented the to of of benefits think changed. this terms It lot on associated Sure, and another allocate

pressure think the do I under consider - for sure. not open-minded to we're interested, any right are we're we opportunities but deals, in we what And

Operator

the Taylor proceed Tudor, with Our question. Wleczyk with your Please Pickering, next question Holt. comes from of line

Taylor Wleczyk

average just fleets annualized specifically the coming and last EBITDA the come fleets here QX. then two call those by to in three start that three on in were What to fleets are to to fleet. of likely wanted you the plays on a handful per down I called think basins and or down two asking I that are out underperforming,

think I those somewhere $X bucket? around into fleets three that fall with million

Mike Doss

No, really not necessarily, related. they're not

think I moment. them couple for West probably in the area fleet's Northeast some one or replacement dropped, weakest in And then, the the a two of work those. but being finding Texas, of we're our at that's

would of which in would some the Texas. them mostly then in be Northeast you what So of about others other offset million? the activity that West by and question And X was for two be had the the wins

Taylor Wleczyk

Last and three out you per that I asking. annualized just to around bucket. those that $X fleet price two were the was around, fleets I were fell three curious million called that basically of into at was right fleets quarter, EBITDA

Mike Doss

couple ever And grading mentioned able Oh were fleets contract that them no, of just of on those they through a high renegotiations. or we I've last the to remediate didn't. call

success so, say remains could had we that, with but still overall the some weak. market I And pretty

Taylor Wleczyk

in you And then there? you're of about definition talk could $XXX the for - you XXXX, what proceeds flow then the And interest refresh million just in are JV JV us coming that does sale the include minority that using your for cash when from QX?

Lance Turner

cash our the the which it. operating going add minus cash definition expenditures. are will year from of venture to And flow flow basically joint sale capital Sure asset think be I is free this to disposition, proceeds, because yeah, activities larger

including asset over So, be proceeds. bit on a scenarios, sale we million $XXX our could

Operator

question America/Merrill Please with Lynch. from with of Instructions] question. of your comes Collins Bank [Operator the next Our Harry line proceed

Harry Collins

For of what for the you XQ? X you million pricing in pricing to be and commentary pricing, the write-down do EBITDA the X kind per XQ million down will regarding quarter. think What's do think fleet driving bottom another the next

Mike Doss

average the the bottom with have Hard nothing first industry, uncertain customer but little I'd and will be been think we're territory just there say if price It's decreases given a I a say that softer some material an that yet war not at don't it's saw second on in have given. price like base. a to our think half this been of expectations quarter the as at point. we I and concessions what the

Harry Collins

to And so or stacking that fleet? of in does rest are to fleet - two the this you higher three the XQ drop if imply priced than in

Mike Doss

No, through the fleets, a you've on not the upper, middle think that got think necessarily. in When end lower mix the of I one middle, broad some pack. was And three got the go spectrum. I that got of you've you've kind we're I

they're So, I'd probably say that average.

Harry Collins

the half And end then have you guys but towards and more in single back slowdown? the competitors efficiencies. guys zipper a mix of Are the kind see the a the couple pad fracs that you impacting mentioned about to shift is then seeing of talked is mix, half you the call this, well back of and shifting

Mike Doss

that's vary zipper seasonally, course, point bit operations could lower be little operations. more or time, anything seeing but know not zipper we being from to any noteworthy, we're you done seeing. kind we other really customers, of a a what It things at equal, does they shift a tend of less nothing have prefer No, price,

Harry Collins

guys about your did in the beginning of kind percentage mix give a you then frac of zipper was? XQ, And call

Mike Doss

this We about not, quarter so, did year. XX% but up that's from last it's and

Operator

from Our Please line with R.W. Andrew proceed comes with Pressprich. question. the your question next Ginsburg of

Andrew Ginsburg

flow to on wanted just $XXX I comment. follow-up million the cash

included and that annualized if $XXX us we're Sinopec to $XX the So cash in it it million cash looks free divestiture like seeing isn't flow first flow, would million guidance. about half, we get basically since

Just around but half the commentary basis disconnect the half, an second reconcile million. softer trying that? on $XX first a to Can you to at from - annualized coming some provide

Lance Turner

the Yes, proceeds. so million JV the I you mentioned, expect $XX the half would excluding channel in first this

half, if stabilized but included conversion second should it you of cash be have QX in a $XXX come it over year a have down add EBITDA about a the just then over bit half first the and softer our JV, on because be well last would since And QX. The little little think the numbers you China million. -

the fleets try Obviously kind about cash in there the that's of if is a cash to it's the model think then happen. I how out, on [Cobia] that payment. going timing impactful way and capital. of on of a annualizing And but variables the the we working is thing capital including so other from general Obviously, lot there's perspective And that's to working flow. that you're the flow

Andrew Ginsburg

that And earlier that was the on payment. $XX million or Cobia mentioned you so the

Lance Turner

Correct.

Andrew Ginsburg

to how competitive. because just buyback? question, looking at then equity the pretty And Okay. utilization we you - are dropping ask and I’ll one things have think getting do guys So more more you more follow are

that the drive terms depending and on if you in forward of well. some or buybacks, commentary back So just metrics looking as on we that equity to with are could on the really utilization that for maybe casual provide pull year,

Mike Doss

don't at outlook. in amount is small pretty a up it executed We're that look term significantly going QX buyback be expect going our we liquidity. way The continue and to and that. also significantly. ramp loan, looking The to the is yes, We've we so got equity balancing one to consider Yes, we're we've so at down I be brought avenue. the which to we'll

market. in the in past, then notes, we've utilized open repurchasing of notes also the kind And

And at focused look we'll you cash that. on bump for we'll of our against So and then balance know, all generation allocation choose that returns the we're best and liquidity, the up options, kind outlook. ultimately

Operator

Stan question. Please comes Research. question Independent of the with [Operator Instructions] Our with proceed Manoukian next from your line Credit

Stan Manoukian

- utilization the buying on different the your mind capital do mentioned, - decision that stock, market is the it you the relate going your the the sort back buying of was future allocation on to have allocation return sort or capital or to make your your outlook on this in to feet capital the of of capital? what's between how to how loan related up cap you sale - in on allocate wondering does best bond variables and term regards In - on just to decision I the

Mike Doss

Yes, so to I'll Stan I'll question. answer that - try

So mean, in that. flexible think in allocation, I we're capital I terms of do pretty we how

into some outlook all the uncertainties execute prudent despite it against we're that does our the softer that and an account have take business views definitely so, I be think of I in. So on we to outlook we with the mean, we're going market

we share and We repayment then nibble going just as repurchases. the that not Lance at just basically debt far think, that. continually to make that point I versus levels, this sufficient the to all on we're we liquidity sure allocation That's going capital handle liquidity have at to at large to decisions as as be mentioned, to scenarios. other share, a want least continue assess

Stan Manoukian

I to fracking be fuels this customers you're confident just but by capital And by a you going lot offshore trend. of some in or sort the allocation percentage oil may. that spot the follow on industries There of of highest in there's are to maybe that market permanent What cyclical your this, noise of downturn the trailing that of allocations more And companies, of market. sort sources is a and still other trouble if your confidence on sort of slowdown towards versus of drilling. have sort bit is

second, market. market companies? the you of Or, do So fuels your more spot oil large number know, in you with where see in is, softness your the confidence. question one And the about

Mike Doss

of market, always I strength an weakest. I and spot let out you the markets. And Yes, is a of just the mean, of the market weakest what’s that's overall But the the indicator as, for far So I'll sure, try to as piece, answer know, that some me leave know. of segment if the

the average and market it's above If of below pricing market weak. spot is the its strong the

And a And I we're element this customer definitely an there's in there. pricing to can at but tends definitely have time converge impact that also that well. so spot, Dedicated as position on point. think to base

that's I shale think the the I industry think, so don't of is, market any the condemned ahead. And don't I sense by is means.

I incredibly sort to think I extent. economy. productive of think just own of our yeah, victims for been some the been success we've And it's

they And efficiently getting fleet get rigs. more drilling efficient, work are we have. more ever and with lateral more their than to more Completion crews continue doing wells, more

need you of less And just certain so to level a production. equipment maintain

So transitional but maybe through really XXX industry the is for think a period takes. was that it going I built all where we're rigs, XXX

And so I the don't as don't risk mean, it's and just scenario more a was really discipline I main theme rig a it efficiency of a and commodity much are bit see to the see where capital downside then day. a lot capital like of definitely topics of efficiencies. material lower and But the drops could count. out driver back today bottom prices XXXX slide the discipline

are kind on those my thoughts so of quick just And it.

demand that attrition. I improvements lead just is supply horsepower think rate another thing of frac in of and could the to the

has kept They're the bucket. So, drops. warm of amount marketed for time. they been certain a drop as come of kind activity of have fleets down, eventually out But

It's But in tighten that say. of activity when tighten up at some will so quarter resumption have will to enough the pricing power. happen. And up point, will to expect too see variations we like we we the expect see currently market that we early that the spending, and in first increase

what through cycle to attrition happens in natural response going the one and two we're given the periods of like now. weaker kind Just

Stan Manoukian

Now, very much appreciated. that's

other as to the related I part It if is companies integrated were as secret of Just is oil far pricing know, and derive from you they [indiscernible] comment the a I one sort of main competition have sources of pressing quick problems, is, to sort if accretion the frackers? that from but not the expect may. or - from them independent get question the revenues do that from

Mike Doss

their going come hard same you returns generate years, couple as You the onshore it's investments. I and they're same of have the the flow on the to to integrated majors, back economics the cash mean, pressures think know. last independents, know, the to know, that I face oils

I the are drilling don't are magical the majors wells think any that way. in

think this spending And they're that are single-digits, same no the experience the doubt I they're independents pretty facing. to maybe. so there's down some tend XX% going onshore, whereas of year significantly But and the by up to that independents the majors impacts are be that

my But growth continue. that expectation. while will don't of continue rates are a going so that shift. I Those for seeing integrated. further And you're to just think kind That's

Operator

Our the Bank question up next of Please America/Merrill your question line proceed a Collins Harry question. follow of is with from with Lynch.

Harry Collins

two And major. as fleets. dropped are XQ, are those kind large they spots customer they the For in are are far mid-cap, cap fleets as three - to likes what dedicated of

Mike Doss

count. dropping think But activity that two may in Let is ahead of privates. comes one are the me the we Yeah, think exact I turnover others, gain are terms others or mentioned and of one public for E&Ps. two a that's Lance. think And them that the minute. that the in I three off Two And that is just two where or uncertainty lose privates, independents. go I are

Lance Turner

I or think been have One operating a were was less. the dedicated, right. and more others on spot dedicated basis, would one

Harry Collins

And mix? I whether dedicated spot of a land kind guess. Pro guys on forma that you to

Lance Turner

the around dedicated. XX% mark.XX Probably

Operator

no showing are turn time. back at conference this the I'll questions further to we Now you. over

Mike Doss

everyone, well, to All look again, updating you and joining we today thanks for forward next quarter. right, us

Operator

lines. and this for We Ladies call. you conclude conference that does and thank your kindly gentlemen, today's you your disconnect ask participation

FTS International (FTSI) 31 Jul 192019 Q2 Earnings call transcript