NINE - Earnings call transcript Q2 2019 | Nine Energy Service, Inc.

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Operator

Greetings and welcome to the Nine Energy Service Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the presentation. [Operator instructions] And as a reminder, this conference is being recorded.

I would now like to turn the conference over to Heather Schmidt. ahead. go please you, Thank

Heather Schmidt

Ann Thank appreciate you. Service for to Energy Chief today and second Officer; Chief and Clinton participation. morning, conference call everyone Roeder, are me earnings With results Officer. of welcome President to and quarter Executive We Nine Financial XXXX. Good Fox, your discuss the our

statements about future views of comments Some Nine's our today reflecting may include forward-looking events.

number These Forward-looking are of and subject statements a risks which actual control. our to many expectations. We cause materially beyond uncertainties, can review advise our differ listeners the and filings discussed from risks risk release current and uncertainties in of the to with to are results earnings factors our our SEC.

or any statements any revise update We publicly reasons. undertake for obligation forward-looking no to

include Our financial non-GAAP comments measures. today also

section the be and also are release in financial details reconciliation Additional in a found directly the our and comparable GAAP quarter measures most Relations our of press can website. second included to Investor

I the call Ann to will now turn Fox. over

Ann Fox

Thank Thank discuss you, joining for results for everyone. XXXX. you morning, second quarter to our today us Good Heather.

operations quarter, approximately anticipate revenue continue This XXXX and increase fell original from guidance quarter-over-quarter. adjusted within XX% and throughout both the EBITDA, remaining cash flow cash generation of quarters in range We increased the and will the management’s to by into XXXX.

approximately million. our position is cash $XX current up at fact, X, [quarter on of close two] from August In to Friday, business significantly

$X.XX. and for was significant net quarter be million. million, to adjusted cash was CapEx anticipate in million, revenue share earnings which per $XX was lead we materially the $X.X EBITDA income was Basic free Additionally, XXXX, should flow. Company down to $XXX.X

the QX back earnings throughout lines per ROIC in about was or began quarter, and $X.XX will per I see half the WTI the quarter in remains quarter in speak Despite during during volatile with which of the $X.X Adjusted second Northeast, the the net greater throughout majority adjusted the to outlook. for X%. exception quarter was our activity share. market steady of regions the weakness income QX. second moves service for million detail of the this basic

Our all our increased service have quarter from customers our cementing with lines We across with the E&P tools, again, activity [oil outperform remained cementing, their activity of saw strong which this plans. completion larger division levered] market. X% continue to and Once performances receiving U.S. was by quarter-over-quarter activity job increase quarter. while by any increasing not the This approximately drilled, X% by approximately unit quarter-over-quarter simultaneously new and profitability during incremental despite increasing revenue average X%. approximately by the wells increased declining consistent per

we the an consecutive share increased In rate maintaining industry second while on-time for above Permian, leading quarter, the XX%. market our

our stages tools, X%. by As stages increased number completed completion a of completions by X% company, the total we In XX%, by quarter-over-quarter. approximately U.S. XX%, only increasing total by completed approximately despite increased revenue approximately we and

in Our utilization low hoping U.S. on market due profitability. share to approximately activity and did breakup X% see putting West revenue In to QX we of had wireline at trucks end which seasonality. QX, effects June, business, slowdown generate growth wireline quarter-over-quarter. in work of new received and we the four performed Texas the of winning well Canadian to Northeast typical our with the associated a to headwinds Despite Spring begin

memory our and the to tools part well. at QX, with the technology, side. expertise data in performed our In tubing large along coiled due is execution collection, This division well and downhaul including

the largest not one more enabled complexity market. approximately lateral time multi-well utilization of with days including can to differentiate has This large of in contributors pad complex executed and quarter-over-quarter extremely difficult, non-productive coil increased and longer Our completions, work with our if development X% and diameter us drill-out quarter-over-quarter be flat the by perfectly. remain

priorities for in and highest cost lower wellbore As a legacy of new science many IT design markets, vast to to hole NINE both as a Northeast Magnum of new as the down lower been bottom plug low-temp low to for which XXXX you with a teams collaboration manufacture, a bring between development than dissolvable penetrate a environment. the every dissolution to design and development dependable, consistent temperatures Permian temperature of has shorter well unit materials, type create our This ensure NINE’s to through basins. material overall is of have predictable cost, one know, other in

We successfully teams for of R&D that to in we track. QX coiled timeline confident products to run our tools. multitude test commercialization downhaul the remain with XXXX remains of also on customers. in-house date, utilized have tubing have our We After data design begun from the successful

We companies such are who to results. performance are E&P share and leading information partnering treating willing analysis, deployment water clean as [fees], with on pressures, out

of for are on of other anticipate With in Both similar working we the low-temp two design low-temp cost having acquiring ultimately NINE these similar shorter leverage simultaneously will the to vast and customers. commercialization for our products lowering we dissolvable, a XXXX. technologies, for ready for that manufacturing the which also materials,

The will first utilize and which is proven flawlessly. a consistently have high-temp high-temp materials, are our dissolvable existing performed plug, which

confident while like can shorter materials new Ford four and over a so maintaining environment. will remain We the in years markets move International plugs, us the they been in successfully cost from consistent of the we’ve hybrid that and that to dissolvable very for Bakken, allow for Haynesville, reliable This operators high-temperature lower other basin performance design in dissolutions. continued running wellbore the to Eagle

already design, changes is for be plug not variable clear, To the the high-temp plugs, the proven materials. that the

and while can there market market future, plugs compositive a still all for we a is composite continue Second that will large the plug, and access we are addressable gain cheaper dissolvables be to shorter share.

and from Stinger with similar product plug performance utilizing the anticipate be be with current design will this known continued the Scorpion as line different will We new This line. similar high-level from Scorpion materials product. our of design applications

in and abroad. technologies, Canada, to be three composite all Permian entire plug able market the be U.S., North America will in the low-temp addressable growth market plug. NINE With will largest the both and the with service

could market all of international be low-temp completed a customer multiple both potentially unique the the plugs. should channel anticipate as significant major wellbores. and also By dissolvable having high-temp the run trials and for basin, low-temp we in plugs for for trials Northeast well So, the be composite yield mid-QX, growth including Permian with

field field trials XXXX. mid-to-late composite We completed and high-temp for completed be QX the be in QX anticipate in for plug to the early plug trials

based plugs or first XXXX time, are we expect QX growth for be ready low-temp XXXX the providing consistent tools, commercialized technologies we for E&P today, what any even current know are we outlooks market very spend QX. remain healthy these rates on At XXXX but all growth CapEx We in level. the this with and for three and if conditions being expecting will with these not new

flow simultaneously this a EBITDA spend. North faster overall the cost reduce resulting cost only complete a consistent fundamentally to will we way XXX% win As our lower drive in which and cash product new able is company’s free better, conversion to for reducing cheaper, and will and and almost has the for our To revenue while manufacture, American to reliable growth, margin, be CapEx line conclude, and tools, reminder tools, cash flow our customers, in a technology to overall shale. provide

segments for turn walk through to I call that, other Clinton, over quarter. the and the to like the financial to With detailed information would

Clinton Roeder

our totaled segment, compared of X%. In million, quarter Ann. million, you, of approximately an $XXX.X to second Thank Solutions revenue Completion quarter $XXX.X first increase revenue

$XX.X profit $XX.X first of quarter quarter, Second million, an adjusted our compared adjusted million, gross gross X%. approximately profit to increase of was

approximately over $XX.X approximately During X%. Cementing the quarter-over-quarter. per The completed we jobs, of average the by job X% X% was an quarter first revenue an the increase increased quarter. of quarter, million, second X,XXX blended increase for revenue cementing approximately

receive QX. the cementing pay During not but for was CapEx two number units, in an which quarter, did did for we reflected the units, incremental

stages, per per of the the the pricing declined blended higher typical quarter, revenue stage stages stages a slightly, mostly approximately it average has approximately we X%. blended which an by revenue but U.S. versus wireline During increased completed due of around due despite XX%, the less Canada, be stage X% in Wireline out approximately in to stage seasonality increased break-up. pricing. to wireline spring down increase The XX,XXX quarter, Canada first second

an at for increase $XX.X revenue quarter. of our count bringing the increase of We increase capital growth the an XX quarter. million, unit of X%. wireline incremental an XX,XXX quarter two revenue approximately million, of In the end completion units we stages, tools, received approximately versus of QX X%. Wireline the XX% XX.X was back half tool was to Completion the completed approximately first towards

was quarter we by XX.X During which quarter, the Coil rate X%. approximately parked. worked Coiled for tubing diameter tubing during second utilization unit days second increase our by approximately small coiled The include day does blended average was decreased of tubing increased revenue X%. approximately QX the the an have million, X%. XX%,

Solutions million. Production second profit first quarter our XX.X XX.X quarter gross compared million, for revenue second to In segment, revenue compared quarter totaled to of the gross X.X Adjusted of adjusted million. first million, was profit quarter X.X

second of XX%, services quarter-over-quarter. During was well which quarter, the had down utilization approximately X%

for increase comp X%. during largely hours of quarter. and per reported million, was rig was selling, The Total approximately of million expenses the an increase the of revenue stock-based general XX,XXX, XX.X an expense XX.X compared was Average X%. increase to professional and hour rig for first This fees. administrative quarter quarter company due $XXX, to the

non-U.S. The in impact tax Depreciation valuation first effective second expense resulting million tax to income well million, approximately million and negative year-to-date our year year company quarter income state XX.X in of in XX.X% X.X benefit against benefit X.X XX.X income to as second of approximately taxes the million components quarter. as positions, of amortization an results. XXXX date The overall position. rate are allowance the of our tax in and the quarter, an tax primary of the was current compared recognized

quarter, reported million, provided increase activities net compared which XX.X was to approximately average the operating quarter, DSO was XX Total approximately by of an second expenditures XX% days, were XX quarter of million, the the XX% cash During of days capital approximately CapEx. The maintenance for quarter-over-quarter. QX. XX.X second in company

of million to Our guidance the reiterate comments, XX of XX Also, million expect original considerably range. year-to-date approximately be in we remains using to XXXX. provided to Ann’s full-year the CapEx with CapEx XX% midpoint down spent unchanged

of borrowings we facility ABL quarter, full. repaid credit all second During in our the outstanding

As of under and with revolving a in were facility, of cash million equivalents credit XXX XXXX. of position as liquidity NINE's June resulting cash XX, XX.X total ABL XXX.X million June XX, XXXX, availability million of

As significantly XX. has since our balance increased June Ann cash mentioned,

with This August caused we certain that customers customers, to by related of close issue million. as As business with X, as of portals. is to position due payment collections changes on our approximately MSAs receivables online past cash vendor is increase Friday, XX well of set-up our

I our will to QX back outlook. discuss to it now Ann turn

Ann Fox

with Thank XXXX, you, NINE, anticipated so rate. With market relatively At conjunction never flat volatility for Clinton. in the a and and we we run much uncertainty in about half both an stronger operators back a from capital quarterly commitment talked the staying service will year and activity rest specific especially and of the within choppy for unwavering regions we to do lines. perspective, be budgets, believe pricing

QX approximately could of you of is suspend number gas for been the in And $X.XX XXXX. spot know, this summer, be since with This many activity difficult As operators prices [indiscernible]. summer the market total and our than gas natural the to frac QX. and extremely is that from of pricing average and lowest XX% EIA temporarily Northeast a crews expected reduced has the demand in causing projecting lower revenue sub comes

QX, estimating crews could more to as QX following approximately from] end [draw are decline of frac the the at the holiday. XX potentially approximately follow low XX XX to and in region. This frac as to crews of we crews that We the affects XX% active Thanksgiving XX

work pressure decline to for a We work around. proactively activity new amount increases But this revenue with of customers. this less and on back-half from decline perspective will have numbers as with activity working been navigating our and pricing both grow affect profitability looking

with tool Northeast have wireline exposure. of both a our we revenue of As reminder, and out approximately coming the completion XX%

of wireline both for are this drop We region tools. estimating quarter-over-quarter XX% revenue for and

which tubing team. could and we coiled is our in actual QX revenues coiled Our do declines QX very in for for anticipate tubing division both this as well, active affect and Haynesville region

comes our Today, approximately from of revenue Haynesville. total X%

price try forward our other we moving in and the as does well our win appeared prices as regions, top with but of regions, also today in activity to pressures customers potential Our declines current activity have due plans begun as Northeast, to anticipated, environment tools composite pricing facilitate in the [gassy] within be lowering their see market competition specifically the to less plug share. to On Permian, not increases. the

made margins the We higher order have short-term and is wellbore these as to feel prices relationships customer and to margin temporarily, regions new, eventually for decision that lower our to it customers in early our strategic XXXX. XXXX. maintain look these we tools a and feed We into conscious we for imperative and in cheaper, transition

a strategy facilitate XXXX. new We are will maintain in adoption margin still technology able and to of our this strong

QX, XXX million total With and degradation revenue Haynesville Marcellus, EBITDA region. This that, the margin loss XXX between for we in expect between to and XX decline XX adjusted and revenue million, and consolidated is million and due million. Utica,

Our priorities remain unchanged. XXXX

net flow Stinger XXXX plug are accretive debt-to-EBITDA cash cash the service geographies they and the flow, line, on and delivering generation existing our free our one-time focused QX and lines to by and goal reaching ROIC. and margins, are We development of to of of company new evaluating through our commercialization ensure Scorpion

to generate service in capital free for anticipate our market conditions. help their to We see a We positive difficult blend for helping as reduction good being and forward. significant still cost free XXXX, committed We strong trajectory our a flow flow GAAP that of moving overall and ROIC cash expansion, the spend will lower and XXXX stewards significant medium-to-long as technology, asset-like our customers our cash generation in despite shareholders. a term, which margin models remain complete pathway to in beyond and increase well CapEx for our

for call the up Q&A. open now will We

Operator

Our is with Instructions] Sean from Meakim [Operator of line first you. Thank question the JPMorgan.

Sean Meakim

you. Good morning. Thank

Ann Fox

Good Sean. morning,

Sean Meakim

maybe to gave for I could a more idiosyncratic been and detail plans cementing like you’ve on but customers? amount in after would build I drivers growth on in now, think your given MidCon [AP] confidence tools, your this good Ann, of also about focus So, for some the the that of you landscaping investing XXXX, the you among the talk year

Ann Fox

Sean. question, eight we’re Yes. new of business the the market just That’s spreads you a those cement be as MidCon and know, great Texas half. back will demand largely is in the We’ve delivery Candidly, the for in watching our closely, extraordinary. to remind West cement been expecting and

time. We are short and present [indiscernible] at the

has a in cement, in So, I for us ship – of the see revenue Texas not been year think West you some this some to meet [tons] only of those will and record really also possibility. us demand, but

wells is So, Texas. we’re drilled out market share really I gains declining all environment and hitting think new this and fronts on West there in

going you that I that slow think can and to of Texas walking wait operators So, walking majority bank spend we carefully specifically MidCon [year see as West to the and plans in the build-out on of the XXXX].

Sean Meakim

you and service geographically if we lines those complex pricing ready you for That of on, that you'll just in differences those you you can composite market it you we Could the completion even out are each is what simple jobs work like, pricing wireline, also to lines? update. Okay. seeing sense. see of for the about mentioned service to you between way try within are characterize get more in it, that talk that Thank maybe spread cementing, but in the focus product to you best how can update an but maybe through are think plugs, you you lines, coiled know makes you do tubing, talk seeing

Ann Fox

meeting just entry and then and Sure. about barriers deep since around talked us, really start you capital. been the just and notes queries, very I'll great. we the with proprietary times what. our the labs And with couple year, cement, off been so cement execution, it’s lightweight both just we’ve many to and developing having again, we’re helpful technical with some that And to forward that’s this the left business tremendous success

from that the so demand timely]. execution And queries, differentiation well both price allowed us as as for operators, to [on the and

the where tracking to looks is at obviously I too you it of is for Permian change if analysis budget. operators would much look from the specifically, are market watching. our there, CapEx most QX, the like good of pricing say Sean. kind We expect of don't XX% spend the whole that

saw perhaps pronounced, as that I budget. cautious think I that having we the said to On year But base is that, ever not have as their be do So, may seen this they. coming our more within customer living them be. think than cliffs focused I well be want capital as we them

you so panning So, the great. That spend, of in a we the cement spend see I’m some increases service [self] out, pricing could if budgets really that increase dollars work or QX, I tremendously here. put those those baring pace reason line but is is capital that, for think pleased the

few [indiscernible] half. Our American shift we like the specifically land any that lot a that pricing means in Certain in to they coming are incremental in North very fierce of have very XX% given average making of [indiscernible] basin companies public upwards down. tubing, their changing units becoming into hundred a on coiled the of kind Haynesville pricing, back [indiscernible] with EBITDA quarter and

I challenges, model the but OFS life are differentiate, side really through next slowdown we that to and fighting off to folks have So, are that going will couple I on real there call to for support companies what is in not something are ability of on or our quarters. think it’s the

just that So, we or to recapitalize be sustainable have don't see flow the their don't some companies equipment entities. cash

capital-intensive we’ve dealing to lines equipment of entry. barrier business. you think one talked a in land, in certainly wireline that service lower So, lot about When a A it’s North is of that. this American call. we’re with also about obviously the And saturation pricing, more the not has but that

need down still because return don't more can business maintain you you CapEx in beat into hurdles that those you just can have So, units. the bit going a and your margin

the the our Northeast, and instance to a quarters I in take the in where in say market challenging of where for for remains a because would need that’s very position markets] So, in [gassy pricing see we’re something of couple there. the we willing but XXXX, market

significant and would is customer that [defect] would a the from very seen pricing. been but by is and commodity operators conjunction you of ever them our toughest in of just the haven't premium the It increases efficiency are base have probably I wireline from mentality and much I pricing specifically without with kind demand the anticipate zero to in we any able What would mean in suspect, the and increases prices not prices that, the move model half think volatility I would not garner back we in prices I given there, for XXXX. that in

composite tools, the have a side. Completion we on [indiscernible] plug unique

We again see people as you the of look gives share but not for tools, people reflective if margins are aren’t a to and idea some share. that there really in new market not the going entrants that approach generally have have you has and profitability. you an at Sean, tool so seen And and pricing completion been competitor market where seen hold gain we degradation massive fight can companies,

are because margin rate to are get doing corporation my where the temporarily have could run from we think next points of said, put as going I shift that to be mid-point profitability we able be wouldn't the we of if Now, we we products year, surprised a basis on and guidance. XXX the once I we [indiscernible] going the fundamentally wellbore

certainly given we're big of potentially tools, with company, with what my well the lines be do the well certain and midpoint touch back our And to the us in of margin. as gave [diving to] that profile consummated EBITDA focus lever, doing this service plus is about doing the platform foundation transactions flow to XXXX for generation, geographies while adjusted CapEx. in profitability guidance a will And the as that. of the So, couple really as certain as we XXXX XX% cash

and Scorpion We which some progress geographies confident hope relates businesses, the very in see we certain then the the line, again, have – we year Stinger execution will to we as line. on, in some hope strategy you service the cleanup again in and it are of

then very excited couple of taking XXXX. quarters So, easier for of in and

Sean Meakim

that helpful Thanks Very Ann. recap. for

Operator

from question next with Our Wells of is the [Chris Fargo. Roy] line

Unidentified Analyst

morning. Good

Ann Fox

Good morning, Chris.

Unidentified Analyst

Just wanted first. to CapEx on ask

XX rate quarter, mentioned projects did this an of You it I and rate mind annual be right, if I XX%, CapEx? top kind I about last of math that growth for was year, the could million down it year, this had quarter next kind underlying CapEx XX% you next about maintenance what on think think in year you’re considerably on maybe of

Ann Fox

before, you. we’re capital we capital. business Chief really be to months, I’ll lot tools, we’re the know, looking really love, You We’ve cement into XX wireline, profitability which next out completion in growth building greatest driver will be the the we business maintenance candid that My and XX I’ve of over at business, need Operating look when growth I, doesn’t at capital put XXXX, the in XXXX Officer which into put we CapEx. a as mentioned of with

my So, going CapEx a to be for this XXXX is, you and likely to story maintenance answer for XXXX. is

Unidentified Analyst

give up, helpful. to at couple I for regrouping, $X in you to the this can follow year? maybe Thanks. maybe operations a then obviously it of that’s And think target, market target flow share $X like cash the to quarters update for quarter of an taking you're you environment, next due looks kind from in talked about last Okay, that

Ann Fox

we the a sell think cash this declining forecast. through building the and part the that time year, QX a price don't what looks and to so great think in environment, obnoxious, you a unreasonable flow from from tools you and it’s this the is at it capital technology, has it’s we activity need generation part to of of of what and of purposeful and so us CapEx QX a crews but range. year. And because looks, that wireline XXXX, that’s the into the cash within it’s coming bit a of but bottom-end we help very where can next those environment about in the look is cash these the positioning we can pull of reasonable teams spend flat perspective, again think margin the market flow what been see model for our to back that And this like And half I be know detrimental transformation of generate I think still lot Yes. we spend could you we business a story business. generative when

And EBITDA and so, very to this cash think between when spend that flat, you go. that’s CapEx margin about we normalized remains and $XX where a business, differentiated. North is American high And plan $XX WTI teens, want is business generative, and very we

So, $X [indiscernible].

Unidentified Analyst

the Turn color. back. for Thanks it

Operator

next Daniel of Simmons Our the question line Energy. from is John with

John Daniel

them Ann, Hi, raise and potentially your guys. struggling you they some willingness speak your from divest assets to of cash? need to to peers buy to

Ann Fox

I my and on something have equipment that businesses, every the workforce. exclusive am intensive consider be it interested everything have folks assets be certainly the capital John. compelling because they like you is, enough is two and number and not feeling we turn there with very, that real value capital never would [rust], one deeply, and number over know growth probably differentiated very but in that our discounted is, in as to I here rock got so collection of Yes. we’ve to literally again OFS

be think for So, about me challenging it would that. to

John Daniel

for in rebound choppiness, go to just the headcount utilization, can XXXX? an then just as expectation into second-half you balance, how but Fair speak you we enough. given then just And software

Ann Fox

very about And talent, about and XX% and and not so margin on path to we’re that that debt-to-EBITDA cash mean, in the balance would impact we you the business, right around first focused you think the ability one-times or business target sitting net we profile, I level think think obviously generation crazy the and see of liquidity foremost about think get QX not success although margin sheet at that there. for see you you’re about XXXX. would sizing a really our I felt when our looking to headcount we anything we’re XX% hitting XXXX, by Sure. the

impede rebound that to in want fundamentally to capability or market QX. don't the we So, our with

So, XXXX no work. we’re cost had to and on were when they in would back not ever every operators some held holding that your have whether onto clue XXXX we coming to

that you would what they make say, very already for plans the to when we're So, them to balancing know which your have you’ve do but not decisions, been I QX. the making team is customer's built those entrust field for I dismantle wisely, my carefully. message and years certainly

John Daniel

That’s [indiscernible]. Okay. just

Operator

is line of O'Leary Our Pickering Holt. next George with question from the Tudor

George O'Leary

Good morning.

George O'Leary

Good morning, George.

George O'Leary

left know a the you Talked and little comments customers about things with you last checking bit think I that on intently guys know was call, very there the metrics, you guys I your metrics, monitor monitoring, what’s metrics improving efficiency most improving and were on out stopwatch, operational different to do are acutely wonder areas could ops operational share customers there and for what very closely, if efficiencies, you focused you all? quarters

Ann Fox

Sure.

there number American the is primary cementing, uses, but is time. the may of primary industry with And everything start North rate. you mean shale now I reality indicator is performance the a is, metrics key that is a but there if the metrics, sound simple, So, on-time in

all late way the base the And effects the completion of ripple job, significant. through you so, are cement a are well the if for

I rate. metric We on-time have some that’s think So, competition the that. mark, XX% that we over prove we XX% highlighted is can't of where although the down our in

And metric. think on beating we really so, that we’re particular

[do re-head of the cables? take which it does efficiency more good all things the and time, I in complete times, you lines rates, line for they has wireline to think, you do related in they so measuring that, look last efficiency in just [indiscernible] all If guns customers at call, our are over but measuring a XXX are in and efficiencies How your measures of it that. one fire]. to are getting of and us certainly are service stage, said long a flat and wireline, not the items, industry, really actually measuring the they they one times, on So, quite [scorecarded] what great my to you non-productive is at I been of there cluster takes you number we’re the

Completion of the of a tools, drill thing of that’s not anymore, time it’s kind plug past. the really

in drill-out a time, good really amount it’s better on or call plug Your stump-to-stump plug-to-plug of time. we what

different move So, entire blog that [indiscernible] drill are about the to tool drill they right every like with tools floating I'm it pieces back? a your how burst stage out, other it talking well and different to the look from What obviously what is pressure. and for targets. of pieces stage need course the up does casing are how and So, come when obviously metric, does

huge efficiencies and think dissolvables think on get but And go efficiencies, are any could to course metrics, in you has your will at I folks saved North just commodity Shales are it completion and is product more they factor because I flatter drilling days parallel think time right be I much environment they for and every the it with and different that drive of efficiency a price American operators these and now been contributor about looking market. time to big everybody a know, on huge can't can of efficient, So, how folks deciding does. get and

George O'Leary

Great. then… helpful super That’s And and thank you.

Ann Fox

on point other george. that One

say or dissolvables of U.S. is next XX% of the environments. about just XXXX, call, makes often and XX% Permian Permian think And stages efficiency, think stages year are about, cold in if about up the the you in North we American about If count that. what temperature about and of the we XX% low said, you will you market XX% Basin, think think think between is anywhere we’ve stage XXX,XXX

we think bulk still the the low-temp of largely basically is dissolvable environment, untouched by So, technology. which

per a days is well. lot for out efficiency to of and there So, there room drill

that excited to come that I’m So, evolution for our market. for to customers

George O'Leary

you. Thank interesting. very That’s

designs it guys different construction pad the and year-to-date, curious, are what all have me interesting or anything touched guide in to the you the completion guys seems the well you just there they a of with designs all couple been like side you various curious after noticed of ways Given re-visit in have issues equation, [indiscernible] seeing? changes basins if and way respect just well

Ann Fox

wells. those about and I heads E&P and Frac I down-spacing a is community down-spacing the optimizing the something age-old mean on talked Yes. think have lot the

thing is, folks, X well seen pads. we one to have to move well seen were kind we some three pad operators, of think X have I who

we wellhead has kind you nearby design but better I changing are I revolution you're facing from number from or would plug and they me, If operators think down change of that fleet wellbores going. like, seen they production been So, in biggest are shift with the see for to ensuring that the than any change talking and E&P are they shift. pad, I stealing the increase frac but think where continuing design. tell and per if to community we’ve not say, about that’s you're perf], that’s completion, [plug their perf and massive notable, not But

George O'Leary

Okay. Ann. Those helpful. you, Thank were very

Ann Fox

Thanks George.

Operator

J.B. are next Citi. line from Our of the [Operator Instructions] you. Thank questions Lowe with

J.B. Lowe

Hi, Clinton. good morning morning Ann, good

J.B. Lowe

lower a of it on market the of guys shorter in into guys are space, what kind into ask is uptake there it is been, are dissolvable struggling up the on high-term working new it about with you Has you entire the working the you across matter, is to Wanted technologies dissolvable – version? the competition reason high-temp kind is general the concept of of now. dovetails and cost of kind a behind coming was was what dissolvable guys the variance, the are wellbore, to it, kind coming more methodology push the using that

Ann Fox

and cost. switching to question is specifically great to a It’s reduce it Yes.

engineer at So, the that looking upfront back completions to AFE, completions we trying engineer. are that’s get

wellbore dissolvable do to XXX% point to that fast, product launching. at the have much to to over the [indiscernible] trying IRR and price that need am market say, considerably is I found going I we that with get I hey are because the we and for which to because get We her fill to

J.B. Lowe

recently been on? any into existing from new entrants that or dissolvable notable the maybe space has So, there you an eye new are keeping guys offerings players

Ann Fox

is if the players, XXXX. of October Same time Magnum in acquisition

J.B. Lowe - Q

side? your market Can metallic position you Okay. non-metallic share talk on the both about and

Ann Fox

a and share, working Yes. launch bit we And significant And really once have a a where low-temp, be are the these are on obviously [indiscernible] we the quite player to [palmers] we not J.B., that our there hoping plug the obviously market really out also is is we products. composite remains same we given so in roughly are jut we deciding market market year the while, with lot, there pressure on and to new for turn in button. more had been that we a entrants, have had have competition pricing composite folks more more a as plug completion share I lot entrants a in have this significant market said, from not lot new the

J.B. Lowe

have of money amount the of Got you I units to the to and gears understand the you. is you shifting pushing guys what spent built-out but those in mid-comp And any spending, most be one Permian, on just spreads out last shifting the are significant of MidCon that rationale towards those Permian? the quick one, if status more going the of to facility behind

Ann Fox

of be by it’s and amount should capital. of with the is sure The and significant done We year real end for pump. capital immaterial state very the Yes. that in

J.B. Lowe

Thanks. Alright. it. Got

Operator

of is Our Bank next Mulvehill from America. Chase question with the line of

Chase Mulvehill

I you on talk fragmented of kind and the maybe in the MidCon little is bit just guess follow-up just how on maybe question J.B.'s about morning. can Good MidCon? market Hi. landscape build the a a out, competitive cementing the there,

Ann Fox

actually not, that one of really It’s and fragmented Chase beauties Sure. not that’s of cement. it’s the

where choices we share long and lot are want large there that because incremental a to that in have with has it. of a pumps some ahead need we gain we just to are continue of those market to we areas way we very driving profitability Our customers run think

those is not from incremental or lower the then in there customer is there because than to tightly deploy and think assets specifically anticipated organic is because Texas to competition on choice our in could be spend also we fragmented. really So, more MidCon us the West the base

really good in You count area, of on once a can cap your again there’s area that but know, a in small area large it’s cementer the of competitors you play kind where that and number fingers. the

Chase Mulvehill

wireline more and so wireline back be integration have it integrate kind wireline preassembled also push maybe on to Frac to guns like wireline a talking that and and a bit, of to impact you to of used the your kind of and with is of seems Appreciate little Coming Okay. players, talk some big larger of business? were what’s color. you're frac to thought the having the your

Ann Fox

consistently that strategy the has and for previous The been Frac decade is we one that in been the and that they has the patch operators it as have have downturn, that the concept faced a some through take. bundling constantly as Sure. and well is one oil that I think

know company don't as reasons the that previously As like a the intend am Frac highlighted relates I it have capital put just to for in differentiated to you I all – model.

So, it do do better it And something your won’t be question? time. contended that the of that’s than second part but certain we’ve that is that what something but and we’re pursuing, whole with others so, something that but and again to some companies the it, was

Those integration. take you building, potential human and the hands of out risk or err. reduced you We anytime misfire for Oh, them can are gun great. love just

further lot like like but really has know integrate think really to I year we question assistance]. had We on it So, to a this, completion. don't And the if [guns this contributed assistant. a we in efficiencies you

Chase Mulvehill

of to the for other of related clean came number, should a we R&D up little rest statement number and through year? run Okay. questions SG&A the more Great. QX A of that in for that higher, model. was income kind in that the couple

Clinton Roeder

was some including at when you that [indiscernible] for if at you that XXXX, issuance end the as declining not and you one total increase and through SG&A, in about one-off if with year So, you until October to look the would when December. as you are of some we the look That related I from through of look go QX items that. an continue so bonuses QX, is it we also the November before, end will think transaction the but talked drove Magnum flowed of to in at it there. That be that are things comps, there was increase, of because the the get

Chase Mulvehill

back if stuff that, step if there out? some But big of we removed kind is SG&A, even of up in still that And so… we a all

Clinton Roeder

you The fees. was professional other the item highlighted

ongoing, second year. of half one-time get So, continue to fees some there latter few related to the will were that projects we not those the are the a or professional half as

So, that well. decline will as

Chase Mulvehill

go on just inventories year one, the into the we Last half the how should think Okay. first of of completion tools? inventories and the build-out as about with we

Clinton Roeder

in-house build we assembly, part to inventory the in the the of had talked So, so was was from we year had our a suppliers. in one our of of first in first remaining the inventory things bringing purchased that and we the quarter about the that related some as

the to continue throughout will as we that of We the work end go down year.

if point above you look look quarter, you in it of days at was our sales If first the XX. at one inventory

get so continue to XXXX targeting get are into days, that we to to We see XX as you that will down decline.

highlight we year early will build would as through thing launch of timing we [XXXX]. products, and will we the work in Now, through that the the an have one we the that I part the as is launch build will that initial new new as products incur

Chase Mulvehill

over. Thanks. turn Okay. That’s I’ll back helpful. it Great.

Operator

you. Thank

have We Ann for floor the Fox, the now comments. turn back session. closing reached end to of to question-and-answer like CEO would I the

Ann Fox

your want the our to thank for employees. I call participation you in Thank today.

and partners, E&P investors. Thank Our you.

Operator

This concludes the teleconference.

your lines You participation. at your time. for this you disconnect And may thank

Nine Energy Service (NINE) 12 Aug 192019 Q2 Earnings call transcript