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Edited Transcript of TCW.TO earnings conference call or presentation 14-May-20 4:00pm GMT

Q1 2020 Trican Well Service Ltd Earnings Call

CALGARY May 23, 2020 (Thomson StreetEvents) -- Edited Transcript of Trican Well Service Ltd earnings conference call or presentation Thursday, May 14, 2020 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Dale M. Dusterhoft

Trican Well Service Ltd. - President, CEO & Director

* Robert Skilnick

Trican Well Service Ltd. - CFO

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Conference Call Participants

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* Daine Biluk

CIBC Capital Markets, Research Division - Associate

* Ian Brooks Gillies

Stifel Nicolaus Canada Inc., Research Division - Director of Institutional Research and Research Analyst of Energy Services & Infrastructure

* Jeffrey Eric Fetterly

Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst

* Keith MacKey

RBC Capital Markets, Research Division - Analyst

* Taylor Zurcher

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Oil Service Research

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to the Trican Well Service First Quarter 2020 Earnings Results Conference Call and Webcast. As a remainder, this conference call is being recorded.

I would now like to turn the meeting over to Mr. Dale Dusterhoft, President and Chief Executive Officer of Trican Well Service. Please go ahead, Mr. Dusterhoft.

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [2]

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Thank you. Good morning, ladies and gentlemen. I'd like to thank you for attending the Trican Well Service conference call. Here is a brief outline of how we intend to conduct the call. First, Robert Skilnick, our CFO, will give an overview of quarterly results. I will then address issues pertaining to current operating conditions and near-term outlook. We will then open the call for questions. Mike Baldwin, our Executive Vice President of Operations, is also available to answer questions.

I'd now like to turn the call over to Rob to provide an overview of the financial results.

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Robert Skilnick, Trican Well Service Ltd. - CFO [3]

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Thanks, Dale. Before we begin, I'd like to point out that this conference call may contain forward-looking statements and other information based on our current expectations or results for the company. Certain material factors or assumptions were applied in drawing a conclusion or making a projection as reflected in the forward-looking information section of our Q1 2020 MD&A.

A number of business risks and uncertainties could cause the actual results to differ materially from these forward-looking statements and financial outlook. Some of these risks and uncertainties are further amplified due to the current global health crisis caused by the COVID-19 pandemic. Please refer to our 2019 Annual Information Form and the Business Risks section of our MD&A for the quarter ended March 31, 2020, for a more complete description of business risks and uncertainties facing Trican.

This conference call also makes reference to a number of common industry terms and certain non-GAAP measures, which are more fully described in our first quarter 2020 MD&A.

Our first quarter results were released this morning and are available on SEDAR. The results of efforts to improve the profitability of our business continue to be seen in the first part of Q1. January and February and the start of March, all saw strong equipment utilization, and therefore, strong margins as we had better alignment of our fixed cost structure to accrued equipment levels.

Despite lower revenues compared to Q1 2019, our adjusted EBITDA would have been $24.8 million or 13% margin which was net of $4 million of fluid end expenses. This compares to Q1 2019 adjusted EBITDA of $26 million or 11% margin, which was net of $1.6 million for fluid end expense. This normalized Q1 2020 margin improvement was a result of reducing our fracturing crew count and fixed cost structure to better align with anticipated activity levels. The higher fluid end expense in the quarter was a result of a number of fluid ends becoming due for replacement in the quarter and not necessarily reflective of a typical run rate quarterly expenditure level.

However, as we noted in our April 6, 2020 news release, adjusted EBITDA was negatively impacted by COVID-19 and the announcements in March by Russian OPEC to increase production. These events required us to reevaluate our cost structure. We have implemented substantial cost reduction measures, which resulted in more than $4 million of severance costs. Additionally, the dramatic drop in oil prices required us to establish a provision against our receivables. Initially, we anticipated an allowance of approximately $5 million. However, one of our customers with a current account receivable entered into a court-supervised creditor protection process. Although this individual customer account may still yet be collectible, the speed with which the banks acted required us to reevaluate our initial assumptions for our provision against our portfolio of trade receivables. This resulted in a recognition of an incremental $5.5 million of receivable provision.

The effect of these 2 items resulted in reported adjusted EBITDA being $9.5 million. These market events also resulted in Trican evaluating the carrying value of our long-lived assets, as anticipated in our April 6 news release, a $131 million impairment of goodwill was recognized in the first quarter. The company also identified approximately $10 million of specific asset impairments. Totaled, these Q1 charges of approximately $157 million were the primary driver of our net loss of $155 million. Absent the effect of these items, and despite the fact significant levels of parked equipment continues to be depreciated, Trican was beginning to see a path to positive net earnings, as evidenced by our positive earnings in January and February prior to the fall off in March, when COVID-19 began affecting the market.

Our continued focus on our core businesses, disciplined pricing and equipment activation strategy and ongoing optimization efforts have been resulting in improved overall profit margins. Even in this challenging market, we will continue to focus our efforts on improving our business.

The company's business continue to see positive cash flow generation. Before considering changes in working capital, operating cash flows was approximately $10.5 million in Q1 despite continued significant Canadian industry headwinds that were prevalent even prior to the COVID-19 events. Positive operating cash flow combined with $8.5 million of positive cash generating investing activities as a result of our divestitures of noncore assets allowed Trican to build a cash surplus of approximately $28 million at March 31 and further improved our liquidity position. Our 2020 capital expenditures of $5.9 million were approximately 3% of revenues. This spend was comprised of required sustaining capital and infrastructure expenditures. We will continue to limit capital expenditures in 2020 to those expenditures necessary to sustain our equipment. While we do not anticipate spending on any growth items, our strong balance sheet affords us the flexibility to invest if an appropriate opportunity is available.

During the past 24 months, we have monetized nearly $60 million of stranded and noncore capital through our ongoing asset disposition program. By recognizing the Canadian industry was generally overcapitalized, the company was able to monetize significant amounts of equipment, which has contributed considerably to our relatively strong financial position. This has also helped us purchase more than 22% of our shares over the past 30 months, including approximately 4.8 million shares repurchased in Q1. Substantially, all of these purchases were made in January and February.

The company continues to view share repurchases as a good long-term investment opportunity for the use of any excess capital. However, the near-term market uncertainty will result in us being very cautious in deploying our modest cash flows. Approximately 40% of our allotment under the current NCIB program remains, which corresponds to be approximately 40% remaining time until our NCIB expires at the end of September.

We entered this latest downturn in a strong financial position. At the date of our MD&A, our cash position approximated $23 million against a debt balance of approximately $15 million. This combined with our noncash working capital balance of $80 million results in our forecast showing compliance with our covenants despite expecting the lowest well count in recent Western Canadian history.

I'll now turn the call over to Dale, who will be providing comments on operating conditions and strategic outlook.

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [4]

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Thanks, Rob. As we noted in our press release from April 6, we have already taken a number of steps to ensure the safety of our personnel. We have had no cases of COVID-19 in our company and have implemented a number of procedures in the field and in the office to ensure the safety of all of our staff. Although second quarter activity is light, the safety protocols we implemented in our field operations for COVID-19 to protect our people and our customers has allowed us to continue to perform jobs safely and successfully. Additionally, all support functions continue to operate effectively from remote operations, allowing us to continue with our business while ensuring the safety of all of our people during these unique times.

As Rob alluded to, we have already made significant adaptations to our business due to this significant industry slowdown. We have reduced our fracturing, sands and coil crew counts and adjusted our fixed and overhead cost structure. Additionally, we have made seasonal cost structure adjustments, which should help mitigate second quarter negative operating results, before considering the positive effects of the Canadian Emergency Wage Subsidy program. This Q2 will be the most challenging for the Canadian market we have seen in a very long time. Although there were some work in April, most of our customers are planning very little work in May and June. So revenue for the quarter will be the lowest it has been in a number of years. We have, therefore, been very focused on lowering our costs in all areas to minimize the loss in the second quarter. We're utilizing the federal government Wage Subsidy program and are also having numerous discussions with our clients with respect to remedial spending work in relation to the federal well abandonment program.

Although the well abandonment program is not likely to be material to the overall business, this program will help offset some costs and keep some of our people working in our cement service line. A positive event that we are seeing is that natural gas prices have shown relative strength to oil, in particular, compared to last year. Curtailed North American oil production is reducing associated gas supply and is positively affecting the supply and demand balance for natural gas, which when combined with improvements in Western Canadian storage and transportation infrastructure is providing for a constructive natural gas market. While we do not expect this to add significant work to the second quarter, we do expect gas prices to support a baseload of activity in Western Canada in the second half of 2020. This activity, combined with our first quarter, should allow us to cover necessary sustaining expenditures through 2020.

Pricing for pressure pumping services was competitive prior to entering this downturn. For this reason, we do not anticipate significant pricing pressures. We believe companies will park equipment rather than electing to cannibalize our own market for wear out equipment and negative cash returns. We will remain focused on working with our customers to improve daily pumping efficiencies, which will reduce their cost far more than minor pricing concessions.

Through our partnership with a number of clients, they are achieving pumping efficiencies of 20 to 22 hours per day and we have operations teams within the company working to move all of our clients to higher pumping efficiencies. This effort will also generate more profit from our existing asset base. The North American pressure pumping business remains competitive. And companies that can improve efficiencies and offer low cost, high efficiency, safe service will retain the best customers, while generating the best relative returns for our shareholders.

Currently, we have low visibility of our client second half programs, but expect to have them confirmed in the next month. At the moment and based on discussions with our long-term clients, we expect to run 3 fracturing crews as compared to 8 that we ran in the first quarter, with similar reductions in our cement and coil service lines. We will finalize our operating equipment complement as customers confirm their programs.

Our company's cost structure is much improved heading into this downturn and we continue to make cost reduction gains throughout our organization. We have a number of Lean Six Sigma projects underway, that will lower our costs through automation, data tracking, better efficiency in our operations, and as previously discussed, better pumping efficiency on location. Despite all the market uncertainty, the strong balance sheet Rob noted, will allow our company to continue and invest to pursue permanent business improvements. Since 2015, we have made a conscious effort to significantly deleverage and restructure our business and have remained focused on our strengths in our core market. A big reason for the focus on returning funds to our balance sheet through debt repayments and share buybacks was due to our strict economic hurdle thresholds for investments.

These thresholds helped ensure we did not continue to pursue a strategy of further overcapitalizing in an already overcapitalized industry. This discipline now uniquely positions Trican to come out of this severe downturn in a position of significant strength with the added benefit to be opportunistic through this severe downturn.

We anticipate that, like the downturn that started in late 2014, there will be significant fracturing equipment attrition within the industry as equipment is older and more likely to be retired and brought back into service after this downturn. The ability to replenish and replace equipment will be significantly diminished for many in the industry, which will be an advantage for organizations with relative financial strength and will provide the potential opportunity to improve business performance significantly coming out of this incredibly challenging market.

Despite these market challenges, our primary goals for 2020 remain consistent with those we presented previously. First, we will continue to focus on how we top quartile returns in our sector, by increasing the returns of our core business lines through strong utilization and a permanently lower cost structure. This will improve the return on invested capital we generate from our active equipment. We will continue to pursue opportunities to generate funds from parked equipment or idle assets that can no longer be used in Canada. Maintaining a healthy balance sheet is still our top priority. We will continue to evaluate returning capital to our shareholders through our NCIB program while monitoring cash flow from operations and not compromising our financial strength.

Our strong financial position affords us the flexibility to evaluate investment opportunities that may permanently change the industries such as funding, cost reducing technologies and programs. This ensures we can continue to improve our efficiency and cost structure in a highly competitive market, and at the same time, lets us explore investments in our existing business and potentially new service lines that yield short-term financial returns combined with long-term improved return on invested capital for the company.

On behalf of the Board of the Trican executives, I want to thank all of our staff for their hard work and dedication. A silver lining around the challenges we face as a company has been how our team has taken to heart the company's overarching guiding principle of safety. Our employees have adopted their approach to work and continue to deliver at a very high level in all areas of the business.

Additionally, the challenges faced by our team has bonded our people more strongly together. So once again, thanks to all of our valued people for staying safe and working hard through this downturn to make us a better company. I thank you for your attention today and your interest in Trican. And I'd like to turn the call back to the operator for any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question is from Taylor Zurcher with Tudor, Pickering and Holt (sic) [Tudor, Pickering, Holt].

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Taylor Zurcher, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Oil Service Research [2]

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First question, I just wanted to ask on the competitive environment up in Canada. I mean down here in the U.S., we've seen a number of players just shut down completely or either repurpose their pumping equipment for some other purpose. And I realized that the Canadian market as a whole lot more consolidated than it is down in the U.S. But just curious if there's anything you're seeing of note from a competitive dynamic or positioning standpoint up in Canada? And you made the comment on pricing that there really isn't much more room to give to the downside. Do you see your competitors following suit with that sort of pricing discipline mantra where pricing sits today?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [3]

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Yes. I guess, 2 parts to that. The first part is, we've had -- we've seen some competitors basically shut down their operations here in the second quarter. But I can't say whether they're going to refire up again in the third quarter, it's probably dependent on how much work comes into play for them at that point in time. But there's been a little bit of equipment shuttering this quarter. The -- I would say though, the majority of our competitors are still intact planning to operate going forward. So we don't really see a material change in our competitive environment at this point in time. That may evolve as we get further in the year.

On pricing, I would say the response we're seeing in the marketplace is consistent with our approach that people are more willing to park equipment rather than to chase prices down at the levels that we're at right now. And so we've seen that approach from all our competitors, no one is really trying to grab market share in this environment.

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Taylor Zurcher, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Oil Service Research [4]

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Okay. That's helpful. And it sounds like the frac fleet side of the business has been resized about 3 fleets for the back half. I realize that the visibility into the back half of the year is super limited, if not 0 today. But with the 3 fleets in place you have today and similar sort of activity reductions on the other side of your business, and if we think about some of the cost reduction initiatives that you've now put in place, with that size business, can you -- do you expect to maintain positive EBITDA in the back half of the year? Or is that just something you can't comment at this point?

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Robert Skilnick, Trican Well Service Ltd. - CFO [5]

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I think just as really -- as we kind of said in the prepared remarks there, like we're targeting for full year to have a business that sustains our capital expenditures, which includes Q1 and it's pretty tough to see the whole second half. But I mean that's really as best we can provide at the moment here. Q2 is going to be tough still, right? We've done seasonal cost adjustments, as Dale said, but it's still going to be a pretty tough Q2 from a financial perspective.

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Taylor Zurcher, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - Director of Oil Service Research [6]

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Okay. And last one from me. You talked in the prepared remarks about some of the macro tailwinds on the natural gas side, and maybe that's a longer developing tailwind. But as we think about the back half of the year, I think you said that some of these natural gas opportunities would support a baseline of activity. Are these jobs or projects that were already there 2, 3 months ago? Or are these things that are just come into light in light of some of the recent macro developments on the gas side?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [7]

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I'd say that our core customers basically have had it in place for a couple of months that was really around natural gas prices holding in and the forward strip through the summer and some hedging going on where gas is in the $2 range. And so at that point of time, some of that natural gas and in particular, dry gas players firmed up their programs. And then we've seen some increases in the last month to even a couple of weeks to those same players that are just adding a few more wells because the gas prices are holding in well. And there's -- I would say there is a view with some clients that gas prices will actually improve as we get into October-November time frame with storage levels where they're at and associated gas falling off. And so that is also driving some of the decisions our clients are making.

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Operator [8]

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Our next question is from Daine Biluk with CIBC Capital Markets.

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Daine Biluk, CIBC Capital Markets, Research Division - Associate [9]

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So I guess just starting off, granted, I guess, the visibility is really tough right now. But when you look at the back half of the year and the relative strength in the gas market, is the current expectations for Q3 to bear the majority of the year-over-year softness relative to Q4? Just kind of curious in -- you kind of mentioned this a little bit, but if you expect to see similar dynamics where customers try to time some more completions for the stronger gas market?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [10]

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Well, it's hard to say right now really. I think our customers' plans for Q4 are just not yet defined yet. So I don't want to go out and say that we'll see a ramp-up as the year goes on yet. I would say that if gas prices continue to move upwards going into the winter, then we are going to see that. Our view is that we're probably going to start with -- in July with kind of relatively muted activity as customers are still pretty cautious. And then if commodity prices hold on the gas side, in particular, and even on oil, if you see an increase at all in the second half as the year goes on, then you are going to see some increased programs. But it's very dependent on all the things that are out there related to commodity prices.

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Daine Biluk, CIBC Capital Markets, Research Division - Associate [11]

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Right. Okay. That's fair enough. That's good color. And I guess just following on some of the earlier comments on pricing concessions. Can you share -- was there any pricing discounts in the first quarter either by yourself? Or did you see any of your competitors engaging in price discounts through Q1?

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Robert Skilnick, Trican Well Service Ltd. - CFO [12]

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So we didn't see anything in Q1 at all like relative to (inaudible) .

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Daine Biluk, CIBC Capital Markets, Research Division - Associate [13]

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Right. Got you. Okay. And then just last one for me, and I'll turn the call back. Any sort of color you can give on working capital harvest over the balance of the year?

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Robert Skilnick, Trican Well Service Ltd. - CFO [14]

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Yes. I mean we kind of gave a little bit of a sideline with the disclosure we provided showing our April 30 working capital there in the news release. The -- given the low activity 3 hydraulic fracturing crews, we are certainly not expecting a massive rebuild in receivables. So it's going to be a net cash inflow for the year for sure.

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Operator [15]

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Our next question is from Ian Gillies with Stifel.

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Ian Brooks Gillies, Stifel Nicolaus Canada Inc., Research Division - Director of Institutional Research and Research Analyst of Energy Services & Infrastructure [16]

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Rob, I wanted to start with the bad debt expense. I know there's probably still some chance of recovery there as you go through the bankruptcy process with your customer. Can you maybe just provide some insight on how that process works, and how you go about doing that? And then maybe as a follow on to that question. There's been a few other E&Ps that have entered into forbearance agreements rather than CCAA. And I'm just curious of whether that charge you took in Q1 was just trying to be really conservative for things that may happen or whether you're expecting any more bad debt expense, given what you know right now?

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Robert Skilnick, Trican Well Service Ltd. - CFO [17]

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Yes. I think it's all to do with the timing, we did all the work at the beginning of January, February and then mid-March, late March, you get these events. So we've collected a ton of receivables. So we obviously have a sightline on that. And the one that you know they're actually not bank -- in bankruptcy yet, but it's an important protection process. We're still able to lean the wells. So there's maybe some avenues to -- that puts us in a reasonable position to collect that later. So call it conservative, just call it prudent, I guess, is just the approach that we wanted to take with it.

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Ian Brooks Gillies, Stifel Nicolaus Canada Inc., Research Division - Director of Institutional Research and Research Analyst of Energy Services & Infrastructure [18]

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And I guess just going back to the second part quickly. I mean as you look around and you look at the receivables piece, I mean, how are you feeling about that right now? Are you seeing your customers try and stretch even further? Or I guess, how is behavior?

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Robert Skilnick, Trican Well Service Ltd. - CFO [19]

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No. I mean it's kind of reflected in our cash balance. Like we were expecting it to be stretched out a little bit more. I got to be careful if customers are listening, and they'll decide to stretch us, but we haven't seen it. So I think it's come along as we would have expected. Like our April collections were right in line with what we were planning.

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Ian Brooks Gillies, Stifel Nicolaus Canada Inc., Research Division - Director of Institutional Research and Research Analyst of Energy Services & Infrastructure [20]

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Okay. Dale, with respect to operational parameters moving forward, given lower equipment demands, can you do much from a fleet set up standpoint to reduce R&M expense and perhaps even maintenance capital just through less wear and tear on the equipment by bigger frac fleets?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [21]

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Yes is the answer. So we'll be -- I mean there's a number of initiatives we have underway right now that are part of our kind of a lean program that will help us reduce our repair and maintenance expenses, but also just the amount of equipment complements that we have in the company allows us to rotate things through not stretch it as much, basically lower our R&M probably to a much lower level than we normally would have.

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Ian Brooks Gillies, Stifel Nicolaus Canada Inc., Research Division - Director of Institutional Research and Research Analyst of Energy Services & Infrastructure [22]

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Got it. I could have a broken record. But strategically, as you think about M&A and the strength of the balance sheet, and I know things are pretty dire at the moment across the industry. But how are you thinking about that part of your job in the context of the strength of the balance sheet?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [23]

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Well, we -- #1 is we wanted to maintain a strong balance sheet. So facing on a whole bunch of debt, which I've said before, isn't something that appeals to us. But absolutely, we believe we're in a position that we could do something if it makes financial sense and we're accretive. But this type of market, we have to be very accretive to our shareholders. There can't be a small accretion level. It's got to be something that really makes a lot of sense before you move on it. And a lot of strategic sense for the company down the road. And so I would say probably not much like it did before that we're open to it, but it has to meet our hurdle rates and it has to ensure that we don't put ourselves in a bad debt position.

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Operator [24]

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(Operator Instructions) Our next question is from Keith MacKey with RBC.

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Keith MacKey, RBC Capital Markets, Research Division - Analyst [25]

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Just a question, and apologies if I missed it. Do you have an indication of the amount of funds you might expect to receive from the Emergency Wage Subsidy?

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Robert Skilnick, Trican Well Service Ltd. - CFO [26]

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We didn't put a number out at this point. We're not doing it. We just -- we want to see a couple of payments coming to make sure we've got everything dialed in there.

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Keith MacKey, RBC Capital Markets, Research Division - Analyst [27]

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Got you. Okay. Okay. And just the reductions of equipment and the 60% expected activity reduction you mentioned, should we be thinking about that as relative to Q1 or maybe relative to second half of last year?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [28]

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Yes. Essentially to Q1 is our base level there. I mean, technically, we were running about 8 crews through the back half of last year. So I guess you can look at it with that, too.

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Operator [29]

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Our next question is from Jeff Fetterly with Peters & Co.

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Jeffrey Eric Fetterly, Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst [30]

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Just two random ones for you. The assets held for sale as current assets, what's your expectation or visibility around those dispositions?

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Robert Skilnick, Trican Well Service Ltd. - CFO [31]

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Well, I mean -- so the requirement to remain there is 12 months. Given its real estate, we felt it was reasonable to keep it there. We'll obviously evaluate it quarter-by-quarter to see if that changes. But that was the primary reason we left it there, Jeff.

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Jeffrey Eric Fetterly, Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst [32]

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It's safe to say you don't necessarily have any agreements in place to sell it at this point.

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Robert Skilnick, Trican Well Service Ltd. - CFO [33]

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Not with a third party, although there's still been -- you still get calls on it even through this type of environment.

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Jeffrey Eric Fetterly, Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst [34]

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Okay. And then as you said, thank you for the updated debt and cash commentary as of the end of April. Just curious, when you look at May and June, given, as you said, Dale, the activity is going to be fairly low. How much more working capital do you think you could harvest from the balance sheet before the end of Q2, given you still have $80 million sitting there?

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [35]

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Yes. So the $80 million includes that $14.5 million or so of assets held for sale, Jeff. It's really tough to say like we're -- April and the beginning part of May is always best time frame for that. So if -- even if we trade it in water, we'd be sitting at a plus 10 position, but you're obviously -- you're then still sustaining a pretty strong working capital balance that's in existence. But given how slow it's going to be, we may further unwind than we've already seen.

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Jeffrey Eric Fetterly, Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst [36]

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Okay. And Rob, your comments earlier about expecting to remain compliant with the -- with your covenants in 2020. Did I hear that correctly?

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Robert Skilnick, Trican Well Service Ltd. - CFO [37]

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Yes. I mean it's -- yes.

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Jeffrey Eric Fetterly, Peters & Co. Limited, Research Division - Principal and Oilfield Services Analyst [38]

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And to remain compliant with those covenants, should we be thinking that your bank debts, you're not going to have any bank debt? Or is that contemplating all the adjustments that would be reflected in your Q1 EBITDA number?

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Robert Skilnick, Trican Well Service Ltd. - CFO [39]

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I think, Jeff, what I'd say is most of the largest organizations (inaudible) to answer on your question, most of the largest organizations of the globe aren't providing guidance. So that's the maximum level of guidance I'll give at this point.

Dale clarified though to one add backs through the banking debt agreement, there are certain things like severance that have always been added back. And there's other items that we present in the statements to kind of give a little bit of color there.

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Operator [40]

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There are no further questions registered at this time. I would like to turn the conference back over to Dale Dusterhoft for any closing remarks.

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Dale M. Dusterhoft, Trican Well Service Ltd. - President, CEO & Director [41]

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Yes. Thank you very much for your interest in Trican. We hope that everyone remains safe. We ask everyone in the public to continue to practice safe COVID-19-related precautions. Even though we're starting to come back to work, it's very important that we get through this virus as a country and as a province and as a company, in our case. So thank you very much, and we will look forward to talking to you at the end of July. Thanks.

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Operator [42]

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This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.