Nabors Industries Ltd (NBR) 2007 Q4 法說會逐字稿

Good day ladies and gentlemen, and welcome to the fourth quarter 2007 Superior Wells Services earnings conference call. My name is Latasha and I will be your coordinator for today. At this time, all participants are on a listen-only mode. We will be facilitating a question-and-answer session towards the end of this conference. (OPERATOR INSTRUCTIONS)

I would now like to turn the call over to Mr. David Wallace, Chairman and CEO. Please proceed sir.

Thanks Latasha. Good morning everyone and welcome to the Superior Wells Services fourth quarter and year end 2007 earnings conference call. Joining me today is Tom Stoelk, our Chief Financial Officer. I would like to remind all of those participating on the call today that a replay of our conference call will be available to listen to through March 25, 2008, by dialing 888-286-8010, and referencing the conference ID number 74358557. The webcast will be archived for replay on the company's web site for 15 days. Additionally, our Form 10-Q will be filed today, after the earnings release. Before I begin with comments on our fourth quarter and year end operating performance, I would like to make the following disclaimer regarding our call today. Except for historical information, statements made in this presentation, including those relating to acquisition or expansion opportunity, future earnings, cash flow, and capital expenditures, are forward-looking statements within the meaning of section 27A of the Securities Act of 1933, and section 21E of the Securities Act of 1934. All statements other than -- other than statements of historical facts included in this presentation that address activities, events, or development that Superior expects, believes or anticipates, will or may occur in the future, are forward-looking statements. These statements are based on certain assumptions made by Superior based on management's experience and reception of historical trends, current conditions, expected future developments, and other factors that are believed appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainty, many of which are beyond Superior's control which may cause Superior's actual results to differ materially from those implied or expressed by the forward-looking statements. These risks are detailed in Superior's Securities and Exchange Commissions filing. The company undertakes no obligation to publicly update or review any forward-looking statements.

Let's begin. Revenues in 2007 increased 43% over the prior year to $350.8 million, our tenth consecutive year of revenue growth. Net income also increased rising 18% over 2006, to $37.8 million, or $1.63 per diluted share. Revenue increases were driven primarily by increased activity in our Appalachian and Southwest regions from new and existing service centers. We also made significant progress towards a goal of increasing our capabilities in gaining market acceptance for our higher tech completion services. As is described in our year-end press release, we were presented several challenges in the fourth quarter. Unexpected delays in the start-up of our new service centers, longer than anticipated holiday shutdown, and greater pricing discounts in certain markets all resulted in lower-than-expected profitability. As a result, net income in the fourth quarter was $7 million, down 29% from the same period last year.

Let's walk through each of the factors having the most significant impacts on our fourth quarter profits. We opened four new start-up service centers in the last half of 2007, with three of them opening in the fourth quarter. Historically, we have opened new service centers in the late first or second quarters, however, delays in receiving and commissioning equipment resulted in opening these new service centers later than we desired. It has been our experience that new service centers take 12 to 24 months to become profitable, however, these delays push back the time when these centers could commence operations. Delays in obtaining regulatory permits prevented us from constructing bulk material handling facilities at several of our new service centers. For example, the lack of bulk handling capability at our Artesian New Mexico center required us to truck in blended cement 470 miles from Alvarado facility, which is inefficient and expensive. Utilization in nearly all of our service centers was negatively impacted by a longer than expected holiday shutdown. Many customers shut down from the Friday before Christmas, until after New Year's Day. We have not seen this significant of a drop over the last several years. This type of dropoff in activity usually indicates that our customers were close to spending all of their 2007 CapEx budget, or that they wanted to avoid the extra costs associated with working in bad weather. For example, in Appalachia, poor weather can increase the cost of a well by 15% to 20%, which is significant.

Turning the focus to our regions, our Appalachia region had 2007 revenues of $158.9 million, up 34% from 2006. This region accounted for 45% of the company's total revenue. New drilling and completion technology have made the development of deeper horizons commercially viable and large operators in the basin have announced their intentions to ramp up drilling activity in 2008. As many of you are well aware, well results in the Marcella Shale play have many operators building acreage position. In response to increasing activity, we have added a high rate frack crew in Pennsylvania consisting of 30,000-horsepower, along with the support equipment needed. Our experienced gained from working at other shale basins, is helping us penetrate this market and we have been involved in Marcella's wells to date, both in the hight pressure and low pressure areas. In 2008, we expect to secure business from most of the operators active in the Marcella's. We plan to add equipment for increasing all of our service lines in Appalachia, as operators ramp up their drilling activity.

Our southeast region had revenues of $66.7 million for the year and rose 14% on a year-over-year basis. The southeast region was our second largest region, comprising 19% of total revenue for the year. Service centers in this area serve some of the largest clients and provide cash flow for financing future company growth. We were awarded a large simulation project for Danbury in Mississippi and we are winning more business related to the Floyd Shale play. In Bossier city, we secured cementing work for Ancona and GoodRich Petroleum, who are running approximately 14 drilling rigs in the play. We are also working to gain market acceptance for our super high-tech capabilities in this region for 2008. The southwest region posted revenues of $37.6 million, contributing 11% of total revenues. Year-over-year revenue in this region grew an impressive 450%. The bulk of this revenue was realized from existing service centers as their newest service center in Artesian, New Mexico, opened later in the year than planned as a result of delays and commissioning equipment. This region remains one of our most attractive growth markets, as roughly half of the active drilling rigs in the US are located here. Although we have experienced pricing pressure for low-tech simulation jobs as competitors move more equipment into the area due to a slowdown in other regions, our cementing capabilities differentiate us in this market and have helped us win business in other service segments. The Alvarado service center continues to mature and learn how to make acceptable profits in a highly discounted market. Our new service center in Artesian experienced the usual start-up challenges of gaining customer confidence and increasing utilization. We are working diligently to obtain approval for our air quality permit, which will clear the way for erecting our cement blendings facility. At this time, we are blending and hauling cement blends from Alvarado which is inefficient and costly. Once the new cementing blendings facility is operational, profits at Artesian will improve. Increasing phone calls and bid activity in Artesian which is primarily an oil play gives us optimism for improved profitability for 2008. For example, revenues have increased every month since we opened the center, and our January 2008 revenue was almost equal to what we generated from this center in the fourth quarter last year. We have also increased our customer responsiveness in the region, with the recent opening of the Dallas-Fort Worth sales office.

The mid continent region contributed $56.1 million in revenue for 2007, and represented 16% of total revenues. Year-over-year revenues for this region grew 29%. Our service center in Clinton, Oklahoma, out performed all other service centers added in 2007 on a revenue basis. Our strong presence and excellent service quality of customer projects has resulted in a consistent backlog of work for many leading EMP companies. At our Clinton service center, we have been awarded large track packages for new customers, including (Semorac's) and (Len) Energy, in addition to our usual customers. Clinton is strategically positioned to efficiently serve the active plays in the Anadarko basin and rig count remains Steady in this region. In 2008, we plan to extend our services in super high-tech cementing and simulation jobs. Superior has been attempting to make inroads into the super high tech segment by increasing, the technical expertise of our people, equipment and products because fewer companies are capable of successfully performing super high-tech work, the margins are significantly better in this segment, but the ability to perform these more challenging jobs isn't enough to succeed in the market segment. Customer acceptance is also required. To that end, we completed two super high-tech jobs in 2007 and have several more planned for 2008, including jobs in the Anadarko basin.

Moving on to our final region, the Rockies which has been one of our most challenging areas. The Rocky mountain region added $31.6 million in revenue for the year, accounting for 9% of overall revenue. Year-over-year revenue growth for the region was 88%. In the second half of the year, well completion activity dropped substantially in response to low regional natural gas prices. Extreme natural gas pricing differentials resulted in sporadic demand, making pricing more competitive, and difficult to match our cost structure to demand. Net income from this region was negatively impacted with the addition of two new service centers located in Brighton, Colorado, and Rock Springs, Wyoming which opened late in 2007. At Brighton, delays in receiving equipment, resulted in occurring operating costs well ahead of revenue generating activity and demand at our Rock Springs center was lower than expected. Currently, regional natural gas prices have recovered as a result of colder weather, and the openings of the Rockies express pipeline. Our brighton center captured its first job in January, and our job performance has been excellent, resulting in setting increases in monthly revenues. In addition, regional market acceptance for our high-tech services is increasing, and we're now being awarded more challenging profitable jobs. Our outlook for Brighton is very positive, given their excellent job performance, technical testing lab, and increased drilling activity in the area.

In the fourth quarter, we further expanded our footprint in this region, with the acquisition of Madison Wire Line. As previously discussed, this acquisition gives us access to the busy (inaudible) play of North Dakota and Montana. As with our other service centers that began with the acquisition of a wire line company, we will look to add additional services to the area in the future, as activity and demand increases. And now I will turn the call over to Tom, to discuss our financial results.

Thanks, Dave. As Dave mentioned, despite some challenges in the last few months of the year, Superior turned in another year of solid performance. As previously mentioned, net income for the year increased 18% to $37.8 million, while earnings per share, remained at $1.63 per diluted share. EBITDA increased $20.2 million in 2007 to $87.9 million, an increase of 30% over 2006. Revenues were up 43% in 2007, to $350.8 million, and this year marks our 10th consecutive year of revenue growth. Approximately $20.3 million or 6% of this revenue growth was contributed by our new service centers. We defined new service centers as organic start-up locations and acquisitions that have less than 12 month of operating history with the company.

During 2007, we established seven service centers, two through acquisition of wire line assets and five start-up service centers. All operating revenue and all service lines have revenue increases in 2007 as compared to 2006, revenue by operating region increased by $40 million in Appalachia, $8.2 million in the southeast region, $30.7 million in the southwest region, $12.5 million in the mid continent region, and $14.8 million in the Rocky mountain region. Revenue from our technical pumping services accounted for 87% or $305 million of the total revenue. That was up 39% or $85 million from 2006. Approximately $11.9 million of the technical pumping services between 2007 and 2006 was attributable to new start-up centers. Stimulation services accounted for 54%, nitrogen 12% and cementing 21% of our technical pumping revenues in 2007. Down hole surveying, responsible for the balance of our revenues in 2007, contributing $46 million. Down hole surveying increased 83% or Approximately $20.8 million, as compared to 2006 and this increase was primarily attributable to wire line acquisitions made in the second half of 2006, as well as the acquisitions made in 2007. As a percentage of revenues, sales discounts increased by 4.8% in 2007, as compared to 2006, due to increased capacity and increased competition in certain of our operating regions. Cost of revenues was up 52% to $252.5 million, and the aggregate dollar increase in the cost of revenues was due to the fact that these costs vary with revenue and the higher activity levels. As a percentage of revenues, cost of revenues increased to 72% of revenues for 2007, up from 68% in 2006. This percentage increase between periods was primarily due to higher labor, depreciation, and material costs associated with the growing number of service centers. Labor expenses as a percentage of revenues increased 1.7% to 19.9% in 2007. Increases -- the increase in expenses is primarily attributable to delays in equipment and permits, which lowered our utilization at our newly established service centers. Material costs as a percent of revenues increased 0.9% on higher transportation costs as well as greater cement trucking costs that Dave referenced earlier. Depreciation expense as a percentage of revenues increased 1.3% to 7% in 2007, as compared to 2006, due primarily to higher amounts of capital expending in '07, as well as lower utilizations. SG&A expenses were $36.4 million, in 2007, compared to $25.7 million in 2006. That's an increase of $10.7 million, or 42%.

Approximately one-third of the aggregate dollar increase between 2007 and 2006 relates to our new service centers. As a percentage of revenues, SG&A was 10%, which was essentially flat with that percentage in the prior year. Operating income was $61.8 million for the year ended December 31, 2007, compared to $53 million for the year ended December 31, 2006. That's an increase of 16.6% between periods. As a percentage of revenues, operating income decreased by 4.1%, from 21.7% in '06, to 17.6% in 2007. Primary reasons for this increase -- or decrease were higher discounts for our services, costs incurred for the five start-up services centers, due to the delays in opening these centers as well as the increase in SG&A and cost of revenues I've just described. Operating income in 2007 was reduced by approximately $5 million due to the five start-up centers that were established during the year. It has been our experience that when we establish a new service center -- a particular operating regimen, it may take between 12 - 24 months before the center has a positive impact on operating income that we generate in that relevant region.

Taking a look at the fourth quarter results, net income for the three months ended December 31, totaled $7 million, which was a 28.8% decrease as compared to the fourth quarter of 2006. And a 40.2% when comparing to the third quarter of 2007. As Dave mentioned in his remarks, the fourth quarter of 2007 was impacted by higher start-up costs at the newer service centers due to delays in receiving equipment and regulatory approvals as well as longer holiday shutdowns. Additionally, higher sales discounts due to increased competition in certain operating areas impacted the quarter. EBITDA for the three month period ended December 31, 2007 reached $19.8 million which is a decrease of 6.2%, when compared to the fourth quarter of '06 and it's a 22.6% decrease when compared to the third quarter of '07. Fourth quarter revenues were up 26%, year-over-year to $94.9 million for the quarter, and they were essentially flat sequentially. Increased activity levels as well as the down hole asset acquisitions made during '07, led to the increases between quarterly periods. Increased activity in 2007 was partially offset by higher discounts in 2007, and also the longer holiday shutdowns that Dave talked about. New service centers accounted for 10.4% of 2007's fourth quarter revenue. Revenue by operating region in the fourth quarter was $45.6 million for Appalachia, $17.5 million for the southeast region, $7 million in the Rocky mountain region and $10.4 in the southwest region, and mid continent at $14.4 million. Compared to the fourth quarter of 2006, fourth quarter 2007 revenues were up 31% in Appalachia, they were up 11% in the southeast region, they were down 2% in the Rocky mountain region, up 99% in the southwest region and up 18% in the mid continent region. Sequentially, fourth quarter revenues were flat in the Appalachia region, down 10% in the southeast region, up 4% in the Rocky mountain region, up 12% on the southwest region, and up 7% in the mid continent region. Revenue from our technical pumping services increased by approximately 26.3%, to $84.7 million for the fourth quarter of 2006, as compared to the fourth quarter of -- or for the fourth quarter 2007, rather, as compared to the fourth quarter of 2006. An increased 4.1% when compared to the third quarter of 2007. Stimulation, cementing and nitrogen revenues accounted for 52.5, 20.8 and 16% of the net revenues respectively during the fourth quarter. Approximately $7.1 million of this increase between the fourth quarter of '07 and the fourth quarter of '06 was attributable to our new service centers. Revenues from down hole surveying increased to 27.9% to $10.2 million for the fourth quarter of 2007, as compared to the fourth quarter of '06, the revenue increase in the fourth quarter of '07 as compared to the fourth quarter of '06, was driven by new service centers that were acquired during 2007. New service center revenue increased down hole surveying revenues in the fourth quarter as compared to the fourth quarter of '06 by $2.7 million, down hole revenues decreased $2.7 million when you are comparing it to the sequential third quarter of '07, and that's primarily due to the seasonal slowdowns that have historically impacted the Rocky mountain region. In the fourth quarter of 2007, we experienced higher sales discounts as a percentage of revenues, discounts increased 5.2% in the fourth quarter of 2007 as compared to the fourth quarter of '06 and increased 1.3% when you are comparing it to the third quarter of '07. Although commodity prices and drilling activities remain at relatively high levels the increased capacity eroded pricing in certain of our operating regions. Costs of revenues increased 42.3% to $73 million in the fourth quarter of '07, compared to $51.3 million for the fourth quarter of '06. The $21 million aggregate increase in these costs was due to the fact that these costs vary with revenue and higher activity levels, as a percentage of revenues, cost of revenue increased to 76.9%, for the fourth quarter of 2007, from 68.2% for the fourth quarter of 2006, and 70.1% from the third quarter of 2007. The percentage increase between periods was primarily a result of higher labor, depreciation and material costs as a percentage of revenue. Labor expenses as a percentage of revenues increased 3.5% to 21.4% in the fourth quarter of '07 as compared to the fourth quarter of '06 as a result of lower utilization, our newer service centers established during 2007, due to the delays mentioned earlier, as well as longer holiday shutdowns. Additionally in the fourth quarter of 2007, labor increased due to increased staffing, as we began servicing the Marcella Shale activity in Appalachia. Material costs a a percentage of revenues increased in the fourth quarter of 2007 to 42.7%, an increase of 2.4%, compared to the fourth quarter of '06, and it was up 3.6% as compared to the third quarter of '07. Higher sand transportation costs were the primary reason for the increase, as well as greater cement trucking costs for our new centers without bulk handling facilities. Depreciation expense as a percentage of revenues was 7.9% in the fourth quarter of '07 and increase of 1.8%, as compared to the fourth quarter of '06 and it increased 1% sequentially from the third quarter of '07. This was really due to the higher amounts of capital equipment that we placed in service between the periods as -- to a lesser extent the lower utilizations and our newest service centers. SG&A expenses increased to $9.8 million, that was up 35% compared to the fourth quarter of '06. And it's up 5% sequentially as a percentage of revenues SG&A expenses increased to 10.3%, for the fourth quarter of '07, from 9.6% in the fourth quarter of 2006 and 9.9% in the previous quarter of '07. The establishment of new service centers led to the increases in labor, office expenses and depreciation which led in turn to an increase in SG&A. Operating income for the fourth quarter of '07 was $12.2 million, that's a decrease of 26.6% compared to $16.6 million in the fourth quarter of '06, and it decreased 35.3%, compared to $18.9 million of operating income in the third quarter of 2007. The five start-up service centers established in 2007, reduced operating income in the fourth quarter of '07 by $3.5 million, compared to the fourth quarter of 2006, and $2.7 million comparing it to the third quarter of 2007. As a percentage of revenue, operating income it decreased from 22.1% in the fourth quarter of 2006, to 12.9 in the fourth quarter of 2007, margins were hampered by a more competitive pricing environment, as pressure pumping companies sought to maximize utilizations in regions that experienced an influx of equipment. Additionally longer holiday shutdowns than experienced in the prior years and delays in opening service centers cost higher operating cost during the fourth quarter of 2007.

Turning to the balance sheets, we ended the year in a strong financial position, with approximately $5.5 million in cash, and $38.4 million of working capital. Total debt at the end of the year was $9.6 million, and the company's debt-to-capitalization was approximately 3%. We invested $117.8 million in capital expenditures during 2007, to equip new service centers, expand our national presence and add equipment at existing locates. The higher levels of capital spending in the fourth quarter, reflect the expansion of our servicing fleet, servicing the Marcella Shale play, initially this expansion was a planned 2008 capital expenditure, but given activity levels we decided to accelerate these expenditures, given the accelerated 2007 capital spending we adjusted our 2008 capital expenditures to $65 million. Over the last three years, we've spent over $227 million on expenditures for property plant and equipment and we believe we operate one of the newest fleets in the industry.

In 2008, our capital budget will be focused on expanding our service lines and our existing service centers for continued growth. We have added 14 new service centers in the last two and a half years and they are all at various stages of maturity. Many of the faster maturing service centers are requesting additional equipment to meet growing demand within the market and we will pursue these growth opportunities before contemplating new service centers and acquisitions. At this point, I'd turn the call back over to Dave for some additional comments.

Thanks Tom. With the challenges encountered in the fourth quarter behind us, we're excited about the opportunities ahead. We believe the long-term industry fundamentals are in our favor as declining well productivity requires our customers to increase their drilling and completion activity just to maintain and grow production. As we enter 2008, we are seeing increased demand and bid activity has rebounded since the end of the year. Most of our larger EMP customers, have announced stable or increased capital budgets. Although we expect improvements in business activity, we do expect continued pricing pressure in certain markets and will act to improve profitability, even if it requires reallocating assets between basins. Some of the pricing pressure and weather-related utilization softness we experienced in December carried over to January which may impact our first quarter results. We expect revenue growth in 2008 to be driven by higher utilization across a larger fleet for an entire year, as we expand our customer list to include more majors and large independents. We expect profit improvements by working diligently to obtain the permits required for installing cost-saving bulk handling facilities, as well as moving the mix of our services up to more profitable, super high-tech work and operating a high-performance fleet. preferred by customers, regardless of the business cycles. In summary, demand has rebounded, we are acting to improve profitability, and our balance sheet remains strong to support our growth plan. We will now turn the call back over to the operator to open up the lines for Q & A.

Thank you. (OPERATOR INSTRUCTIONS) Please stand by for your first question. And your first question comes from the line of Victor Marshton with RBC capital markets. Please proceed.

Thank you, and good morning. The first question I have is just on pricing, Dave. Sequentially the sales discounts increased a little bit over 1% in the fourth quarter. I wanted to see if you could sort of take us through this year and how you see the discounts, you know, as you make your way through the first half of this year and into the second half.

A lot of the discounting pressure we see is still in the low tech areas of the market. And it doesn't apply to all service lines. It's mainly simulation. And so we see out west in some of the shale play as still having a little bit of discount pressure. As we turn the corner into early 2008, we have now kind of reestablished ourselves with our expected activity. We saw a little pricing pressure again in some of the shale areas, but we see overall that its kind of flattening out from there.

Okay. So that's -- is that more of a second half event, or is that something that you are seeing right now?

Most of it's going to be a first half event. We think second half -- we see that utilization versus the equipment out there is going to come back into balance, and we think that pricing will kind of level out for the second half of the year.

Okay. Got it. And second question was just on the -- the issues related to the new facilities, is that pretty much all behind you now? Obviously some of the first profitability, or expected profitability has been pushed back a little bit, but all the new facilities in the fourth quarter are generating revenue and, you know, the equipment, you know, coming to each are essentially behind the company now?

The only one that's not generating revenue yet is Rock Springs, and that's one that we delayed a little bit because of the severe winter that they get and we'll start generating revenue there in second quarter, but as far as the other start-up facilities, they are generating revenue. They are definitely having stronger performance over fourth quarter and they continue to ramp up each month. As we mentioned earlier, a good example is like Artesian, which basically first quarter was equivalent to everything -- or excuse me, January was equivalent to everything they did in the fourth quarter and it's continued to ramp up from there. So, we're excited about the new -- the new start-ups. They're in the higher tech areas. Our service quality is excellent. It just takes a little while to get the customer confidence and satisfaction and then once you do that, we just see activity continuing to ramp up. So, all those we're very excited with going into 2008.

Okay. Thanks. And then just one quick one on CapEx. Did I understand it correctly that the CapEx number for 2008 does not include any new facilities?

No. Its basically -- that's what we have based on equipment. We announced that -- what Tom mentioned earlier is, we're looking to back fill the current locations initially. That means that we haven't ruled out new locations for 2008, just -- we are seeing a lot of these are now starting to get the maturity point where they need more equipment. You know, especially with the gas prices looking really strong and customer EMP budgets. All of these new service centers that are getting to be 1 to 2 years old are saying we need more equipment. So, we are going to concentrate on that first, and then -- but we still look at opportunities to continue to grow our footprint.

Okay. Great. That's all I had. Thank you.

Thanks, Victor.

(OPERATOR INSTRUCTIONS) And your next question comes from the line of Joe Agular with Johnson Rice. Please proceed.

Good morning.

Good morning, Joe.

You all -- I guess you ended the year at -- with 260 something thousand horsepower?

Yes, 266,000.

Okay. And I guess that would -- that -- if my numbers are correct, sort of, if you looked at the full year '07 on average, that would have -- you would have been around 210,000 or so?

We started at 153, and then -- the goal was to add about 100,000, and as Tom mentioned earlier, we saw with the Marcella's activity coming on, we saw the opportunity to pick up some extra equipment late in the year. So, we ramped that up to 266,000.

Okay. But specifically, I guess, when you look at '08, you have mentioned repeatedly, I guess, adding some equipment to service locations that are maturing now. What -- how -- translate that into a horsepower number, if you could for us, where you think you'll go to -- which level you will reach in '08, excuse me.

If you look based on the $65 million planned for -- currently in '08, that relates to roughly 40,000 horsepower. One thing that we're seeing, that's different in the past is we can add equipment a lot quicker than we could in previous years. So, we just increased our budget from 50 to 65. We also see that if things continue to develop in Marcella's and some of these other markets, that the opportunity is there to continue to increase capital, add more equipment a lot quicker than it was in the past. Currently based on the $65 million, that's roughly another 40,000 horsepower.

Okay. And you mentioned, if I could just focus on the Marcella's for a second, you mentioned that you added 30,000 horsepower there.

That's correct.

And is that from moving from other regions or was that a delivery of new equipment that you just directed there? To get it that quick, it was a combination, we added some equipment -- had some extra build at the year end and basically we had to pull some equipment from some of the other regions just to get to the 30,000 real quick. So, equipment coming online in early 2008 will kind of help backfill some of the stuff that we pulled out of the other regions. And -- but we pulled some equipment out of other regions just to get the 30,000 real quick. Okay from an infrastructure standpoint, how many service centers do you have that could -- you know, that are close to Marcella's? And could you compare that maybe to your competition?

Really, you look at all of our service centers in Appalachia, the Marcella's will -- it basically runs from New York down through Virginia. So ,we have a lot of service centers in the northeast. So, our infrastructure is really strong to take advantage of this growing market. And it's still in a evaluation, kind of exploratory mode. We are seeing that there's different job types being ramped in certain areas who run the straight nitrogen -- high rate nitrogen fracs. Other areas are running lower rate water fracs, and the reason we moved the 30,000 horsepower in, is they are running high rate, higher horsepower water fracs in the northern part of the basin.

Okay. And just I guess just one more follow-up on just sort of your equipment moves and/or adds. You know, it sounds -- it's sort of different markets seem to have different demands. You were mentioning, you know service centers where your field personnel are asking for more equipment, and yet there's some areas where there's pricing pressure. So, could you kind of, I guess, square those two with us, where it seems like if you have the need for more capacity, you have demand there, that those areas should be, at least on a pricing basis, doing relatively better than the others, I guess, out west?

I think -- I think your question was how do the margins -- or pricing kind of compare between basins, is that correct?

I guess that's it, yes.

Okay.

And Dave, I guess along with your -- the adding capacity into these markets without affecting pricing.

Right.

Okay.

We continue to stay focused on moving the equipment into the super high tech markets because there's a lot less competition. We've worked really hard at expanding our fluid expertise and really our -- our ultimate goal is to compete in the higher tech markets which has a pricing premium and less competitive. And the new service centers that we just opened, when we talk about Rock Springs, Brighton, Clinton, Oklahoma, southeast New Mexico, Artesian, all have those types of markets. So, the areas that we are seeing that have a little bit of pricing pressure would be like the Barnett Shale, Woodford Shale, (inaudible) some of the shale plays. Slick water, lower technology, that we continue to -- that we've had the equipment in those areas. We -- the equipment is all compatible. So, we are looking at it that the Barnett Shale, some of these shale areas where we've seen the pricing increases -- or pricing discount increases, that the margins may not be quite as strong and that we may shift equipment to some of the higher tech areas as they continue to improve.

Okay. Thanks, I will follow-up with some other questions later. Thank you.

All right, thanks, Joe.

There are no further questions. I would now like to turn the call over to Dave Wallace for any closing remarks.

Thanks, Latasha. Again, we'd like to thank everyone for participating in the call today, and we look forward to talking to you next quarter. Thanks.

This concludes the presentation and you may all now disconnect. Good day.