Natural Gas Services Group Inc (NGS) 2020 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group Fourth Quarter 2020 Earnings Call. (Operator Instructions) Your call leaders for today's call are Alicia Dada, IR Coordinator; and Steve Taylor, Chairman, President and CEO.

I would now like to turn the call over to Ms. Dada. You may begin.

Thank you, Paul, and good morning, listeners. Please allow me a moment to read the following forward-looking statement prior to commencing our earnings call.

Except for the historical information contained herein, the statements in this morning's conference call are forward-looking and are made pursuant to the safe harbor provisions as outlined in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements, as you may know, involve known and unknown risks and uncertainties, which may cause Natural Gas Services Group's actual results in future periods to differ materially from forecasted results. Those risks include, among other things, the loss of market share through competition or otherwise; introduction of competing technologies by other companies; and new governmental safety, health or environmental regulations, which could require natural gas services group to make significant capital expenditures.

The forward-looking statements included in the conference call are made as of the date of this call, and Natural Gas Services undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Important factors that could cause actual results to differ materially from the expectations reflected in the forward-looking statements include, but are not limited to, factors described in our recent press release and also under the caption Risk Factors in the company's annual report on Form 10-K filed with the Securities and Exchange Commission.

Having all that stated, I will now turn the call over to Stephen Taylor, who is President, Chairman and CEO of Natural Gas Services Group. Steve?

Thank you, Alicia. And Paul, good morning, and welcome to Natural Gas Services Group's Fourth Quarter and Full Year 2020 Earnings Review. In spite of the time mix up this morning, thank you for joining us.

We released our fourth quarter 2020 results this morning and plan to file our annual report on Form 10-K for the 12 months ended December 31, 2020, with the U.S. Securities and Exchange Commission on Wednesday afternoon. 2020 is well in the rearview mirror, and I don't know many oilfield operators who were sorry to see it go. However, as mentioned in our release this morning, given the pandemic, the economic shutdown and the most precipitous decline in oilfield activity in my 40-plus year oilfield career, NGS not only survived but posted solid results. Before discussing our detailed financial and operating results from 2020, a few high-level comments are in order.

As I consistently indicated on the unprecedented challenges of the past year, protecting our balance sheet and liquidity position has always been our top priority, especially in the most challenging of operating environments. In 2020, we did just that. In fact, our cash position grew, and our overall financial position is amongst the strongest in the industry and historically strong for NGS.

Our cash balance increased from just under $12 million at year-end 2019 to nearly $29 million at the end of 2020, an increase of nearly 150%. On a year-over-year basis, our operating cash flow increased nearly 11% to $32.6 million. This means that for every $2 of revenue, we generated approximately $1 of operating cash flow. We accomplished both in spite of lower overall revenues.

While sales were impacted by the pandemic and customer decisions to defer purchases, our rental revenues were robust, increasing nearly 7% compared to 2019, even with the slide in oilfield activity. It is clear that the global and domestic energy markets will improve as economies reopen and demand for energy expands. Commodity prices are beginning to signal the need for more capital spending and production growth. While such signals will result in immediate acceleration in activity, we believe 2021 will provide growth opportunities throughout the year, including the continuation of our penetration of the larger horsepower markets.

That said, it is important to recognize that the impact of the coronavirus pandemic is not entirely gone and continue to alter both how we work as well as workflow from our customers. While the market continues to move forward as vaccines become more ubiquitous, the impact of the pandemic on the oilfield, while some are reduced, will likely linger throughout most of the year, resulting in continued challenges and costs throughout the business, especially related to our working environment as well as service and safety.

I'm proud of how well the NGS team accepted and continues to adapt to the challenges of the year of COVID. As we look more specifically at our operations in the fourth quarter 2020, while sales and service revenues declined in the quarter, our rental revenues were solid and grew on a year-over-year basis and were only modestly affected this quarter. Total adjusted gross margins came in at 48% and adjusted EBITDA was 33% of revenue. Although not unusual, and especially not in downturns, we experienced a high degree of volatility in compressor sales.

The significant decline in sales in the second half of 2020 was largely the result of a serious reduction in our customers' capital spending budgets and an unwillingness to commit capital in a time of unprecedented uncertainty. While sales were slowly recovering, it will take time for capital programs to be rekindled. We are beginning to see more inquiries regarding compression purchases and expect that trend to slowly continue in the coming months.

Of course, while sales may have slowed, producers still require compression assets on existing projects, which supports our rental business, which remained firm in the fourth quarter. With that overview, let's review the fourth quarter and full year results from the year just completed.

NGS reported total revenue of $17 million for the fourth quarter 2020 compared to revenue of $19.7 million in the same quarter of 2019, a 14% decrease. Sales and rental revenues both declined with a 58% decrease in sales revenues, but only a 4% decrease in rentals. We did experience a 33% increase in service and maintenance activities when compared to the same quarter of 2019. Sequentially, total revenue increased by 8%. Sales revenues more than tripled, a 210% increase. Sequentially, our service and maintenance increased by 62%, while rental revenues slightly decreased by less than 1%. In the comparative year-to-date periods, our total revenues decreased approximately $10.4 million or 13%, exclusively due to a drop in sales and service and maintenance revenues. Conversely, rental revenues increased by over 7%.

Total adjusted gross margin for the 3 months ended December 31, 2020, slightly decreased to $7.8 million from $7.9 million or 1% compared to the same period ended December 31, 2019. Adjusted gross margin, which does not include depreciation or various noncash, nonrecurring items as a percentage of revenue for the 3 months ended December 31, 2020, was 46% of revenue, an appreciable increase of 40% of revenue for the same period in 2019. Sequentially, adjusted gross margin for the fourth quarter of 2020 slightly decreased from $7.9 million to $7.8 million, approximately 1% from the prior quarter. This is driven by lower rental revenues and margins and higher costs in our fabrication business, but an appreciable increase in our aftermarket product line, which includes parts sales and rebuild activities.

Adjusted gross margin as a percentage of revenue was 46% in this quarter compared to 50% in the prior quarter. Selling, general and administrative expenses were $3.2 million in the fourth quarter of 2020, a year-over-year increase of approximately $488,000, an increase of approximately $739,000 sequentially, a decrease of 2% or $160,000 when compared to year-to-date periods. The year-over-year increase was driven by increased insurance premiums for liability insurance, directors' and officers' insurance and long-term incentive compensation accruals, while the sequential increase was related to the same compensation accruals.

For the full year, SG&A expenses decreased due to a decrease in deferred compensation expense and expenses related to long-term incentive compensation. Not including the inventory write-offs and fleet equipment and rental equipment retirements, adjusted operating income for the fourth quarter 2020 reflected a loss of $1.8 million compared to an $882,000 loss in the fourth quarter of 2019. Adjusted operating loss this quarter was primarily due to higher depreciation expenses on our large horsepower equipment and higher SG&A expenses. Sequentially, adjusted operating income decreased $822,000, primarily due to higher SG&A expenses.

Adjusted operating loss for the full year 2020 was $3.1 million compared to income of $156,000 in 2019 due to lower gross margin dollars related to lower sales, unabsorbed fabrication cost, lower service and maintenance revenues and higher depreciation expenses. NGS reported a net loss of $1.9 million in the fourth quarter 2020 compared to a net loss of $1.7 million in the fourth quarter of 2019 and a net loss in the third quarter of this year of $562,000. The decline in net income for the year-over-year comparative periods is primarily attributable to the decline in total revenue, a higher level of unabsorbed cost in our fabrication facilities and an increase in depreciation and SG&A expenses, but was somewhat mitigated by higher overall gross margins.

Sequentially, higher SG&A and inventory adjustment of $184,000 and fleet rental equipment retirements totaling $291,000 contributed to the majority of the increase in losses. In spite of the yoyo effect just mentioned in quarterly comparisons, when comparing full year net income, NGS reported positive net income of $1.8 million in 2020, including an income tax benefit of $4.8 million. This compares to an adjusted net loss of $318,000 in 2019. Loss on earnings per diluted share was $0.13 for the fourth quarter 2019, which compares to a loss per share of $0.04 last quarter and $0.14 loss this current quarter.

Earnings per share for the full year 2020 was a positive $0.14 compared to a loss of $1.06 in 2019. EBITDA, which is earnings before interest, taxes, depreciation and amortization, and our adjusted EBITDA, which also includes the noncash effects of goodwill, inventory write-offs and fleet retirements, for the 3 months ended December 31, 2020, was $4.8 million, down from $5.2 million in the fourth quarter of 2019, an 8% decline. Sequentially, EBITDA decreased $800,000 from $5.6 million to $4.8 million.

Adjusted EBITDA for the full year ended December 31, 2020, was $22.7 million compared to $24 million, a decrease of 6% for the full year 2019. Total sales revenues, which includes compressors, flares and aftermarket sales, decreased $2.3 million from the fourth quarter of 2019 to $1.7 million for the fourth quarter 2020. The decline is almost exclusively attributable to a lack of compressor sales. Sequentially, sales revenue increased to $1.7 million from $536,000. These gains were driven by increased activity in flare sales and aftermarket activity, which includes parts sales and rebuild services. We did not have any compressor sales this quarter, but our fabrication facilities continued to build new rental compressor units, flares and overhaul [railing ends] for pending rail contracts.

On a full year comparative basis, sales revenues for the year ended December 31, 2020, were $5.7 million, a decrease from $19.8 million in 2019. The extreme dislocation we experienced in our compressor sales business were not unusual in the fact that a downturn always brings a decrease in capital equipment sales. What was unusual that the severity of the decline happened in 1 year. This was not surprisingly due to the knock-on effects of COVID-induced demand destruction and a simultaneous and abrupt drop in activity due to the precipitous decline in crude oil prices. We have, however, seen a recent increase in sales inquiries and hope that this translates into an increased level of sales this year.

Our sales backlog as of December 31, 2020, was $1.75 million compared to $1.7 million last quarter. Year-over-year total sales gross margins declined from $358,000 in the fourth quarter 2019 to $48,000 in the current quarter with sequential gross margins increasing from a negative $460,000 in the third quarter 2020 to a positive $48,000 in the current quarter. For the full year 2020, total sales gross margins decreased from $3.7 million in 2019 to a $554,000 loss. The quarterly and year-to-date losses were primarily due to lower sales revenue levels and a higher level of unabsorbed costs due to underutilized compression fabrication facilities. These unabsorbed costs derived from the underutilized nature of our pad facilities with the excess capacity due to the severe contraction and the need for capital equipment in the industry.

The overall strength of our rental business has been exceptional over the past year. Rental revenues in the fourth quarter of 2019 were $15.3 million, compared to the current quarter of $14.7 million. This is only a 4% decrease over a year that was unprecedented in severity. Sequentially, rental revenues were off less than 1%, but on a full year comparative basis, rental revenues increased 7% from $56.7 million to $60.8 million. Compared to the fourth quarter 2019, our average rental rates on a per unit basis increased 7% and were down 1% on an average per horsepower basis. The slight decrease in per horsepower rates is not uncommon as larger horsepower equipment costs less per horsepower, which translates into lower rental rates for horsepower. Sequentially, rental rates were essentially flat. Our average active unit increased to 225-horsepower per unit, an 8% year-over-year increase.

Reported rental gross margins this quarter were 51% of rental revenue, a decrease from our third quarter 2020 rental gross margins of 55% and an increase from last year's fourth quarter of 47%. Rental margins this quarter were impacted by a large amount of scheduled maintenance, but on a full year comparative basis, rental margins increased from 51% to 53%. Fleet size at the end of December 2020 totaled 2,224 compressors or almost 439,000 horsepower. As of December 31, 2020, 42% of our utilized horsepower is classified as large horsepower machines, which we designate as units that exceed 400-horsepower per skid.

Over the past 12 months, we've added 42 new fleet units totaling 23,000 horsepower, with 89% of those units classified in our large horsepower category. We added 11 units of the fleet during the fourth quarter. In the fourth quarter 2020, we retired 216 units, totaling a little over 21,000 horsepower or an average of 98-horsepower per unit. 198 units or 92% of the total units were classified as small horsepower, that is skids less than 125-horsepower per unit. The average age of these units was over 14.5 years and we're within 6 months of the expiration of their book life. The noncash expense that impacted our net income was $291,000 or approximately $2,300 per unit.

Our horsepower utilization was 66% in the fourth quarter and unit-based utilization was 58% as of December 31, 2020. This reflects an increase of 200 to 300 basis points from Q3 2020. In 2020, we spent a total of $15.3 million on capital expenditures, with $13 million of that dedicated to rental equipment. Last year at this time, I had projected we would likely spend approximately $15 million in CapEx on rental equipment. So we were pretty accurate in that respect.

Looking ahead to the full year 2020, we are projecting that capital spend on rental equipment of approximately $15 million to $20 million. We will have another $2 million to $3 million allocated for service vehicles.

Moving to the balance sheet. Our total bank debt was $417,000 at December 31, 2020, but we have since retired that debt. Our cash balance remains strong at $28.9 million. Our present line of credit is set to expire tomorrow, March 31, and we are in the process of negotiating a replacement facility that should be in place by mid-April with what we believe will be favorable terms. We continue to possess ample liquidity for any conceivable scenario we might encounter. We generated positive net cash flow from operating activities in this quarter of $4.7 million. Our operating cash flow in 2019 was $29.4 million and increased to $32.7 million in 2020. This is an 11% increase in operating cash flow despite a 13% decrease in revenues.

Our conversion rate of revenue and operating cash flow in 2019 was 38% and increased to 48% in 2020. Simply put, for every revenue -- every dollar of revenue generated, NGS convert half of its operating cash flow. There are not many companies in the OFS space that have a recurring rental revenue stream, no debt on the balance sheet, cash reserves in the bank with a strong cash flow yield while trading at a meaningful discount to tangible book value.

Before we open the call to questions, I want to thank the entire NGS team for the remarkable effort during the past year and as we have entered into the new year. The challenges presented over the course of 2020 were unprecedented, unexpected and frankly, unfriendly. Yet every member of our team responded to the call to be flexible, adaptable and to focus on providing the best service possible for our customers. As a result, while it wasn't always easier or pretty, we continue to build customer relationships through exceptional service and care for our customers and each other. We exit 2020 with a strong balance sheet, lower customers. And the best team in the compression business. We're looking forward to the balance of 2021, something that resembles a more normal world and the opportunities ahead of us. We continue to see new opportunities in the larger horsepower market with both existing and prospective customers. An industry-leading liquidity position provides us with the flexibility to swiftly respond to prospects to grow our company both intrinsically and through other strategic opportunities.

Paul, that's the end of my prepared remarks. So if you would, please open the phone lines for questions.

(Operator Instructions) And our first question comes from Rob Brown from Lake Street Capital.

Just wanted to get a little more color on the new business pipeline. I think you talked about increasing your CapEx spending next year. Maybe, where are you seeing kind of demand growth? And have you seen orders come in yet? Or is that still, [one moments' hurt]?

Well, the CapEx, $15 million to $20 million. So we spent -- that's for rental. That's compression equipment, and we spent $13 million last year. So it's modestly up. It's not a whole lot, but we're seeing probably more of a back-end loaded year on some of it. Some of the projected CapEx we've already identified as equipment being needed. And then the other balance of it, we feel confident we'll develop throughout the year. So we think that's a pretty good number, and we'll probably be right in there. But it's a mix of committed projects and then some future expectations.

Okay. Great. And then on the high horsepower market, I think you were obviously way through getting those prior orders, a little bit, being shipped out. Are those sort of in the fleet now? And where are those add in terms of generating cash flow?

You're kind of breaking up just a little, but you're talking about the units that are on standby?

No, I was talking about on a high horsepower units that you had ordered and you were filling to deploy out. And I just wondered if those were up and out yet.

Yes. No, they're being -- they're in the process -- some being built right now, but then the others will be received probably through third quarter, maybe first part of fourth quarter. They were spaced out to be some customer requirements and then there's a little bit of spec in some of that. But no, there -- some of them have gone out, but I would guess, probably at least have them still or still need to be built and will be placed out throughout the next couple of quarters.

Our next question comes from Tate Sullivan, The Maxim Group.

And just on the average horsepower for rented compressors, I think you said it was 225 in 4Q. And then just going forward, where can that go, taking a mindful quarter of those smaller horsepower retired units and what you're planning to build already?

Well, I think it'll just increase. If you go back, yes, I was going to look, and I didn't. Probably 3 or 4 years ago, average horsepower was close to about half that. So it will go up for a couple of reasons. Number one, the continued penetration and strategic direction with the large horsepower that we're taking. And then over time, some of the smaller stuff will be retired too. Is it either comes off contracts in the future or we otherwise dispose of it. So both those factors will increase the average horsepower over time. I don't know if it'd go quite as fast, but it's up about 8%. I think it's around 205 or 208-horsepower about a year ago. So it's not a real fast climb, but we certainly expect it to continue up.

Okay. And service and maintenance margin, and can you comment a little bit on how compressors fared with the weather in Texas in February? And does that usually imply more service and maintenance work for you? Or is it force majeure on your units? Or can you just give a backdrop on -- since it wasn't the news so much?

Yes. Of course, wintertime is always a little more of expensive time to operate just because it's colder, equipment stays down longer and stuff like that. But looking at the very severe weather, at least for Texas we had in February, we actually came out of that pretty good. There were no force majeures. We didn't declare any and none were declared on us. But we were able to keep the vast majority of our equipment running now and that's through no small feat of our guys in the field because it's -- the problem is when a big unit like some of these 1,500 horsepower units go down, and if they're down very long, they just get cold.

And warming up and -- a unit that big either from the block itself or getting the oil moving with a little less viscosity and everything else takes some time and some effort, some brains. But our guys did a great job. I don't think we had more than, out of numerous units out there, probably more than 4 or 5 that were down, really, probably more than 24 hours at any given time.

So now we've got all that stuff monitored electronically. So we know right when something happens. And in this case where you have cold weather, it pays dividends and that you're able to get out there quicker than if it was just somebody just [thawing] during the day. So we did a lot better, from what we can tell, than some competitors in these areas. And I think the customers recognize that, too, but I certainly want to we'll give a shout out to our guys in the field because that's not an easy job when it's that cold out there.

And your service professionals, are they -- is it extra costs when they have to -- is it extra overtime? Or is it included in the service contracts for the units? Or, really, it was normal for the winter since it was only 4 or 5 units you mentioned?

Well, it's extra over time, but it's -- that's an expense we absorb because we give a fixed rate contract on our equipment. So unless there's some sort of externally induced or customer induced mechanical issue. That comes to us. So we'll have -- we'll see a little higher labor expenses on some of that stuff. But it bounces out throughout the year. Summer times are a little easier and things like that.

So you always have a little higher expense in wintertime. This is extraordinary, obviously. But yes, we got through it in pretty good shape. And like I mentioned, the customers recognize the effort our guys and the company expended to keep them online.

Great. And just last one for me. You mentioned the sales mix in the fourth quarter, do you have sales backlog currently? Or how -- could you say how quickly might that come back into the mix? Or can you talk about that?

Our compressor sales backlog was about the same in Q3 as in Q4. Since we didn't have any compressor sales in Q4, that kind of makes sense because we didn't add in it either. We've seen a higher level of inquiries from the sales standpoint. Now generally, that will translate into higher level of actual sales down the road.

Now it's hard to say how long that takes a quarter or 2, but we're somewhat encouraged by that. And we'll build out this $1.7 million, it doesn't take long to build that out, probably over the next quarter, and hopefully be able to replace some more of that in there. This is the first time in our history we've had 2 quarters of no compressor sales.

Now again, the aftermarket parts and rebuilds, and flares picked up quite a bit in the fourth quarter and helped tremendously cover like compressor sales. But pretty unprecedented that you go 2 quarters without any compressors sales compressors. Now we've built some rental compressors, obviously, but you need sales compressions going. So we think with the oil price being up, people getting a little more confidence in their own economics and quality of projects. We think that, that'll be continually increasing throughout the year. So I would hesitatingly forecast that our sales should be higher this year than they were last year.

(Operator Instructions) We have a question from [Seth Barkett], an individual investor.

Steve, congratulations on navigating a pretty challenging year. You guys did a nice job.

Thanks, appreciate it.

A few questions from me. One, and I guess there's a comment in the question here. In the press release, on the balance sheet, I did not see the federal income tax receivable, the $11 million there. I think it was captured in the current asset total. But I didn't see it broken out anywhere on the balance sheet. So just wanted to point that out. And then also I'll ask a question, any update there on when that might be received?

No. No, we check on it periodically, but you typically get no answer. So it's just -- it's the queue somewhere. I would certainly think it'd be this year, but we don't have any indication from them. In fact, the $4 million we got last year was kind of -- sailed in one day as a surprise. They don't even tell you is coming. So it's filed, it's in there. We'll let government get around to it.

Got it. And then as it relates to your small horsepower and maybe even to some extent, your medium horsepower units that are either underutilized or not being utilized at all, is there any opportunity to, I guess, here in 2021 as we see strength in oil prices and potentially more activity in oilfield, do you see an opportunity to sell any of that underutilized or nonutilized small and medium horsepower equipment?

Well, we've commented in the past on our small horsepower that we intend to morph more so each year into a medium to large horsepower organization and deemphasize the small horsepower. And certainly, some of that was driven with the fleet retirements we did this quarter and a couple we've done in the past have been predominantly lower horsepower. From an opportunistic standpoint, it's hard to say in some of the stuff -- I mean, we -- every once in a while we talk to people that might be interested in things like that. But when you're in a depressed market, people want to, I guess, I could say, to be correct, I don't want to give you the value you deserve. But realistically, they want to steal it, and we're not looking at that.

We still make money with it, still contributes, still okay with it. But we do look for opportunities. And we talk to people, every once in a while. So hopefully, maybe with the whole industry perking up a little bit this year, we'll see a little more up. From the point, if you got a small horsepower guy that runs a small horsepower fleet, and maybe he's looking to grow, they've had just as much trouble, if not more, actually probably more than us in these kind of markets. So they're not well placed to go out and buy something. We don't have to sell it. Obviously, we're good cash wise. So we're going to be prudent about it. But if opportunities come up, we'll pursue them and see what they look like.

Got it. And then the last question for me. The company is sitting on a strong cash position. Hopefully, more cash will be generated here in 2021, possibly collection of that $11 million tax receivable. Do you guys see yourselves potentially buying back any stock? Obviously, the stock is pretty inexpensive here. You're trading at roughly $0.40 on the dollar. I would think there would be an opportunity here to really drive shareholder value by making some investment in the stock. Any discussions there internally about maybe allocating a few million dollars towards that effort?

Yes. We will this year. We've got -- we reauthorized the amount of buyback we had originally put in. I think we -- originally 2020, 2019, so 2019, I think around August, September, we had initial authorization there. Obviously, not much was done with that because then we ran into 2020 head on. We didn't want to do any in 2020 because the first quarter or 2, you didn't know what was going to go on. And then we've got some certainly solid footing and came out of the year good. So yes, we still got the authorization there. And I don't want ever want to guarantee anything, but as far as the capital allocation tool goes, we think that's a good one to use, and we're looking at that pretty seriously.

Great. Glad to hear that, Steve. And again, congrats on being really successful on how you navigated last year. I think you guys have done a nice job.

Okay. I appreciate it, Seth.

Our next question comes from Greg Weaver from Invicta Capital.

Could you talk a little bit about the rental rates and the price concessions that you gave last year? I mean, does that roll off over time? Or you go back and renegotiate, obviously with oil up?

Yes. Everybody gave some in the first, second quarter, about March, April when oil was going down overnight, essentially. And then we put a time limit on the majority of them, we're going to negotiate that. And we're in the process of going back through those and gain those back up to those -- the rates they were before. And we'd mentioned to customers that even before the downturn we saw coming into 2020, oil was around $40 to $45. And of course, it dropped -- the futures went below 0, but the physical commodity was down around, what, $15, $20, something like that. So we remind them that now we're up at least $15, $20 to the good on that stuff and looking to get some of that back.

Now it's a funny deal, not unusual, but a funny deal, that you approach everybody and all of a sudden, they think that, "Oh, my gosh, you're raising prices on me," when, actually, you're trying to get your price back. But we were lucky enough that we didn't have to give concessions. We didn't -- number one, we didn't have to give debilitating concessions. And number two, we didn't have to do it across the board to a lot of customers. So we -- and in fact, most of our large horsepower stayed intact from the point of being contracted long term. So we actually came into -- nobody wants another 2020, but we actually came into it pretty well protected from the contract standpoint. But we are going back and trying to get some of that back and maybe a little more if we can.

Right. I was just trying to wrap my head around, if I look at fiscal '20, rental revenue, right? It was down some, but some of that impacted, I'm assuming by some of these price concessions that hopefully would come back.

Well, not just that, but we had equipment come back. So there was no concession on that. It went to 0. So some of that -- that's probably the biggest impact you're seeing because now rental revenue year-over-year was up 7%. But in the quarters, when you look at it, we did lose utilization kind of troughed in the middle of the year and start coming back up. So we still got a little lower utilization than we had about a year ago. And so you won't ever get that back. That's just revenue that was lost because people are just shutting wells.

Right. How about on that topic in terms of some standby equipment, any color there in terms of trends and things coming back online, is that mostly all back?

No, it's not mostly all back, but it's coming back. We're seeing more -- as mentioned before, more confidence from the operator in the crude price and what's going forward and things like that. And just as important as the price itself is the operator's confidence is going to hold because nobody is going to go out and do something for price holds at $60 per quarter and goes back down. I think people are getting a little more confident in that. In fact, this margins for -- Saudi has come out and said they still want to hold production lower for the next quarter or 2. So it seems like everybody's playing the same game right now. That doesn't mean it doesn't change in the quarter as we've seen it do too many times in the last 2 or 3 years. But I think the confidence is coming back, and we'll see more and more equipment come off standby and go back to full rate.

Okay. Great. And just last one for me in your press release talking about your liquidity. You mentioned it gives you the flexibility to swiftly respond to prospects to grow our company, both intrinsically and through other strategic opportunities. Any color on the other strategic opportunities?

Well, we're always approached, and not just us, but other people, with people who want to sell something, companies or business opportunities or stuff like that, so we always look at those. Now we don't execute on any of them. I was going to say hardly any, but any. Because typically, when they're selling the company, it's -- there's a reason they're selling it. That's been the case quite a bit the last 2 or 3 years. But we always look. I mean, there's one up last month that we backed off. We didn't really look at it beyond the initial plans just because the fleet didn't fit ours. And there's always some issue out there on that stuff. It is either the equipment itself or the financials of the business. But we're usually a recipient in the industry of anybody trying to -- recipient of the information that people are trying to buy or even privately contacted on some deals. So we're always looking at them. And that's -- I guess that's -- right now, it's kind of a catch-all. If something comes up, we've got the liquidity to do it.

And we have no further questions in queue at this time.

Okay. Paul, thanks. Thanks, everyone, for joining me on this call. I appreciate your time this morning and look forward to visiting with you again next quarter. Bye.

This concludes today's conference call. Thank you for attending.