Natural Gas Services Group Inc (NGS) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Natural Gas Services Group announces its fourth-quarter 2011 conference call.

At this time, all participants are in a listen-only mode.

(Operator Instructions).

Your call leaders for today's call are Leann Conner, IR coordinator; Steve Taylor, Chairman, President, and CEO.

I will now hand the call over to Ms.

Conner.

You may begin.

Thank you, Erika, and good morning, listeners.

Please allow me to take 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 they 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; the introduction of competing technologies by other companies; 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 this conference call are made as of the date of this call, and Natural Gas Services Group 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 they 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 turn the call over to Steve Taylor, who is President, Chairman, and CEO of Natural Gas Services Group.

Steve?

Okay.

Thanks, Leanne, and thanks, Erika.

Good morning and welcome to Natural Gas Services Group's fourth-quarter and full-year 2011 earnings review.

2011 was a very successful year for NGS.

We continued to grow our rental fleet, utilization improved, and we gained more exposure to the oil and liquids-oriented plays.

Total sales grew as well, and in fact, each of our three product lines grew by between 20% to 30% for the year.

While our total revenues climbed significantly, our operating income, net income, and EBITDA grew at an even faster rate.

Looking at total revenues, we saw a 21% increase when compared to 2010, with 2011 revenues hitting a little over $65 million.

For the sequential quarters of Q3 '11 compared to Q4 '11, total revenues rose almost $1 million or 5%, primarily due to increased flare sales and rental revenues.

Our gross margin grew from $29.2 million in 2010 to $34.8 million in 2011, a 19% increase.

Sequentially, gross margin increased 13% from $8.8 million in the third quarter of 2011 to $9.9 million in the current quarter, with overall margins at 53% of revenue compared to 49% last quarter.

In these sequential quarters, all of our product lines increased their gross margins.

In comparative full-year periods, SG&A increased by less than 1% in 2011 and fell from 11% of revenue in 2010 to 9% in 2011.

SG&A decreased 5% in the sequential quarters and moved down to 8% of revenue in the fourth quarter 2011.

Operating income for the full year of 2011 was $14.9 million compared to $11.4 million in 2010, a crowd-pleasing 31% increase.

As a ratio of revenue, it grew from 21% to 23%.

Sequentially, operating income increased almost $1 million or 28% to $4.7 million, and moved from a margin of 21% up to 25% of revenue this quarter.

Our improvements in gross margin, SG&A, and operating income all reflect the efforts of our employees in controlling expenses, and I want to compliment all of them, field and staff, on those efforts.

Full-year net income grew 39% to $9.8 million or 15% of revenue in 2011 when compared to $7 million in 2010.

Comparing the third quarter of 2011 to the fourth quarter, net income increased 36% to $3 million, an increase from 13% of revenue to 16%.

EBITDA of $23.4 million in 2010 grew 27% to $29.7 million in 2011, with a corresponding increase from 43% of revenue to 46%.

EBITDA grew from $7.2 million in the third quarter of last year to $8.5 million in the fourth quarter of 2011, a 19% increase.

This is the fourth year in a row that NGS has delivered EBITDA margins in the 40% to 50% range.

Fully diluted earnings per share increased to $0.80 per common share in 2011, a 38% increase when compared to the $0.58 earned in 2010.

EPS this quarter was $0.25 per common share compared to $0.18 in the third quarter of 2011, and $0.16 in the fourth quarter of 2010.

I want to point out that revenue, gross margin, operating income, net income, EBITDA, were all at their highest levels this quarter than in any quarter since the first quarter of 2009, which was our previous record quarter.

Total sales revenue, looking at the segment comparisons, increased 25% to $15.4 million for the full year of 2011.

Sequential quarterly total sales revenues were flat at $4.8 million.

However, margins moved up from 33% to 43%.

Compressor sales in the current quarter were $1.8 million with a gross margin of 21%.

Our compressor sales segment continued to have limited visibility in this low-priced market.

I think that will continue to be a variable on a quarterly basis until prices firm.

Our backlog, however, was approximately $7.5 million at the end of the fourth quarter of '11.

This includes a couple of million dollars in projects that were delayed from the third quarter of 2011.

Compressor rental revenue in 2011 increased to $48.6 million with a full-year gross margin of 57%.

This is a 20% revenue increase compared to 2010.

Gross margin last year was 60% with a year-over-year difference being continued cost pressure from lube oils, parts costs, and labor costs.

Sequentially, rental revenues were up 6% from $12.7 million in the third quarter of 2011 to $13.5 million this quarter.

Gross margin also ticked up from 56% to 57% of revenue.

Average rental pricing of an active compressor was up about 2% in 2011 compared to 2010.

We entered the fourth quarter with a rental fleet utilization rate of 74% on a fleet size of 2120 compressors.

This was a slight increase in utilization from last quarter, and it was on top of a 44 compressor addition to the fleet.

Our horsepower utilization is running at 77%.

With a rental fleet consisting of 2120 compressors at year-end, we unveiled 211 units in 2011 compared to 133 units built in 2010.

Rental capital expense for 2011 was $34 million compared to 2010, when we spent $21 million for the full year.

Turning to the balance sheet, we are debt-free for the first time in almost a decade, and cash in the bank was $16.4 million at the end of the year.

Our cash flow from operations for this year was $34 million compared to $29 million for the same period in 2010, an increase of 17%.

We continue to generate appreciable amounts of cash even in sideways markets.

We've spent $34 million in CapEx this year, $13 million more than last year, and our cash balance is only $3 million lower.

Now, looking at current markets, it is apparent that gas pricing isn't where it should be.

It's been a very quick turn in the gas market.

At the beginning of winter and over the prior year, pricing was stable, storage was balanced, and the world was a happier place.

But throw in a little bit of warm weather -- not to mention a total lack of cold -- and in two to three months, prices have tumbled as fast as storage is built.

The lesson here, again, is that it is folly to try to predict natural gas prices.

I have been under the apparently mistaken impression that if there's one constant in this world, it was that natural gas prices increased with the onset of winter.

Always, always going into winter, prices got better.

Not this year.

Winter just hasn't happened.

We now have the lowest gas prices in 10 years, and some are predicting further deterioration.

Along with that, the natural rig count is also at a two-year low.

However, that is a positive, because it will help reduce the supply issue that has driven the price problem.

Our business doesn't directly depend on the rig count or the price of natural gas, although they both are indications of future activity.

Instead, we are interested in how much gas is moving through the system.

And even at these low prices, we haven't seen any real shut-ins.

That doesn't mean that spring and summer couldn't bring some, but right now, we haven't seen any real impact from low prices.

There isn't anything we can do about the price, but we can choose the markets we compete in.

And we will continue to push into the oilier areas while also maintaining our presence, relationships, and service in the existing dry gas areas.

That's still a good, big business and it will resurface.

We now have 20% of our active fleet in liquids-oriented areas, up from zero in 2009.

Our challenge will be to keep liquids-oriented growth high enough to counter any negative impact on the dry gas side.

Some recent figures show that weather-adjusted storage has shifted from a 3 bcf per day oversupply to a 2 bcf per day undersupply over the past few weeks.

This is a huge, 5 bcf per day swing, and it is being attributed to cold gas switching, some production shut-ins, and the falling rig count, which also has a knock-on effect of not replacing depleting wells.

So, if you're one of the guys predicting too-lower gas for the next decade, I will refer you back to my comment about trying to predict the price of natural gas.

From a macro and longer-term perspective, the consumption of natural gas doesn't have any choice but to grow.

For example, LNG liquefaction plants are being constructed for natural gas imports here in the US.

And not only are they being built, but they are securing long-term export contracts, and favorable financing and investment.

Natural Gas Vehicle, NGV, trucks have been announced this past week by Chevy and Chrysler.

This should kickstart some fueling station buildout.

These are also biofuel vehicles, so the risk of running out of fuel is no greater than a standard gasoline-powered vehicle, and that should mitigate the present lack of infrastructure issues.

The low price of natural gas has caused a minor renaissance in the building and reopening of petrochemical plants.

The Northeast region of the US has 1.5 bcf per day of new gas-fired power plants proposed to come online within the next two years.

And the cross-border pollution rule -- that would have driven the retirement of many coal plants over time -- has been held up by the courts recently; but I expect it will go into effect in the next year or two.

These are all natural gas issues that are structural.

Once you have them in place, they are not easily displaced.

Exxon's recently issued Annual Energy Report noted that in 2040, coal, oil, and natural gas will supply nearly 80% of the world's energy.

Renewable fuels will be the fastest-growing energy sources, but they remain a minor slice of the global energy supply, increasing from 1% today to 4% in 2040.

Natural gas will continue to be the fastest-growing major fuel and demand will increase by about 60% from 2010 to 2040.

After 2030, they see global coal demand declining for the first time in modern history, and coal is the most direct competitor to natural gas.

So, we continue with a short-term gas price issue, but the future looks all the brighter.

Now let's address the all-in energy policy recently announced by the Administration.

This was described as, among other things, a strategy to expand and expedite the production of fossil fuels on federal lands while ensuring their safe and responsible development.

Sounds like a good policy -- who couldn't agree to that?

Not unsurprisingly, this tribute to the development of our own safe, secure domestic resources seems to be again more hype than hope.

Instead of listening to what is said on the campaign trail, let's look at the facts, as inconvenient as they may be.

The Administration says they want to expand US production of fossil fuels on federal land, but in fact, the opposite has happened.

Oil and gas production on federal acreage is 40% lower today than 10 years ago.

Under this Administration, 2010 had the lowest number of onshore leases issued since 1984.

The Administration had only one offshore lease sale, and narrowly avoided making 2011 the first year since 1953 without an offshore lease sale.

The Administration wants to raise federal royalties to, quote, "market rates." This has increased taxation under another name.

They want safe and responsible development; but, as an example, and outside of all the noise, fracking is actually safe and responsible.

There has been no tie to groundwater contamination ever proven, but there are those trying to shut it down, and causing some delays in the development of some of our resources.

Safe and responsible can be a cover for stop and resist, too.

This administration has recently taken the position that all the increase in oil and gas production in this country has been due to their positive actions.

Nice try.

But US oil and gas production has increased only because of increased production from private and state lands, while restrictive federal policies have resulted in declines in oil and gas production from federally-held lands.

Do any of these sound like effective methods as the policy purports to increase production of our oil and gas resources?

No.

In my opinion, this is a guise to retard domestic production of (technical difficulty) higher levies on the oil and gas industry, and redirect them to renewables under the title of an all-in energy policy.

When applied to the oil and gas industry, it's actually an all-out-of-our-pocket plan.

There were a couple of other interesting actions recommended by the policy.

Cafe regulations are set to increase the mileage of cars by 25% to 30% in the next 10 to 15 years, a noble endeavor -- and this is touted as a way to energy independence.

But again, the economics of it are left behind.

The added cost per car of getting there is about $5,000, and that is never mentioned.

I love this one.

Have the government buy more hybrids -- how in the world does that do anything for anybody?

It is fitting, though.

The government can start buying Volts, the GM electric car that they had to stop building because no one was buying them, even when the government gave $7,500 towards the purchase of one.

This week, the Administration announced that the rising price of gasoline has to be the actions of nefarious traders and manipulators, and announced another investigation of price manipulation.

There have been at least 10 to 12 investigations by the government over the last decade, and never was any manipulation found.

Never.

The primary reasons for the higher price of crude and gasoline is our lack of a real domestic oil and gas policy, which begets the instability of our supply chain of crude, and the inflationary effect of a dollar-based barrel of crude due to the tremendous deficits we are running that have weakened the value of our dollar.

This Administration pleads innocence when it comes to high gasoline prices, but there are real actions that can be taken to minimize the impact.

Let's take this a bit further to the Administration's other great passion -- besides the production of oil and gas, of course -- and that is higher taxes on the oil and gas industry.

I call them tax hikes, but the Administration characterizes them as the elimination of subsidies.

These subsidies, however, are available to all manufacturing industries, but they want to eliminate them only for the oil and gas industry.

This is nothing less than discriminatory and selective taxation for an industry that is out of favor with the present administration.

Speaking of subsidies, according to a July 2011 Energy Department study, oil, natural gas and coal received tax preferences that amounted to $0.64 per megawatt hour in 2010, while wind energy received 100 times more, or $56.29 per megawatt hour.

And their subsidies were tax preferences and direct cash infusions.

At least the oil and natural gas and coal industries were net taxpayers to the tune of billions of dollars.

I'm not even going to go into the cancellation of the XL pipeline.

Apparently four years of study wasn't enough.

If it isn't already obvious that this was a political payback, then nothing I say will make any difference.

So, the all-in energy policy is no such thing.

It's the same rhetoric, cloaked in a different cover.

The intent is not to increase domestic oil and gas production, but to increase the taxes on it, and redistribute its income towards the energy industries that have no chance of stand-alone profitability, and by default, a real secure supply for at least 20 years.

That's the end of my prepared remarks, and I'll turn the call back to Erica for questions that anybody might have.

(Operator Instructions) Gary Farber, CL King.

Just a question -- given the environment you describe with your operating, you said the low gas prices weren't really impacting at this point -- can you talk about what the competitive environment is right now?

And are there opportunities on your pricing or anything like that?

Where do you see the opportunities, I guess, in line with what the competitive environment is?

Well, obviously, the main opportunity is in the liquids plays that we've been moving into in fairly good fashion in the last couple of years.

So, that would be the first thing, because there's -- number one, there's a lot of activity there; utilization tends to be relatively higher on that type of equipment.

Pricing pressures tend to be relatively less, because mostly there's very good economics for everybody in those projects.

So that's the first thing.

We have been able to -- as I mentioned, our average price is up 2% over the year.

So we have been able to get some pricing in.

We do it selectively, where we can do it in certain areas or certain -- you know, if we have equipment that's highly utilized, it tends to carry more of a market price than equipment isn't.

So we're pretty cognizant about the opportunities where we can and can't push price, and we do that as quick as we can.

From a competitive standpoint, we -- there seems to have been some mitigation of some of the -- I guess what I might call predatory pricing last year, although I haven't -- we're still sleeping with one eye open, because every once in a while, something pops up that just surprises you.

But hopefully, everybody has kind of come to the conclusion that lower and lower pricing isn't the answer to things.

We're not seeing as much of it, I don't think.

Just also on the liquids side, if we'd go back like a year ago compared to where we are today, I mean, how much different is it playing out?

Is it playing out faster than you would have thought a year ago?

The opportunities are there -- is the market more robust than you might have thought a year ago?

How do you see it?

No, I think it's about what we expected.

I mean, it's going to keep growing.

I think certainly what we're -- as I mentioned, our challenge is to keep it growing faster than any potential downside on the dry gas.

And again, we haven't seen anything, but you know, you always have to look at the margin.

Any price change affects something somewhere.

We've been able to keep up or stay ahead of anything.

So I think the development has been about what we thought.

We think it will continue certainly as long as oil stays $100 or more.

I think that's going to be a pretty standard price going forward.

We may be able -- we're obviously always -- we're moving stuff into this -- some of the oily areas we're already in.

We're always looking at getting into new ones.

So I think as we do that, we may be able to push the growth a little quicker.

But it's about what we're thinking.

The rate of growth is about what we thought.

Right.

Okay.

Thanks.

Thanks, Gary.

(Operator Instructions) Ian Breusch, Private Capital Management.

Hi, Steve.

Got a quick question on utilization.

I know that -- I think the last time we talked, you'd talked about it maybe ticking up by a percent or so over the next couple quarters, and maybe getting closer to 80% by the end of next year.

I assume that maybe those projections have come down a bit, just in light of where natural gas is right now, and maybe looking at a flat utilization rate going forward for the next year or so?

Well, it could be.

Besides just utilization, it was -- and we talked a bit about this probably more so than last year, where we were actually growing the fleet and growing revenues, but utilization was kind of stuck at a certain number because we were adding a lot of new equipment to the fleet.

And although that new equipment was 100% utilized, it wasn't moving -- with over 2,000 units, it just wasn't moving the needle very much.

And we may get into a little of that this year, too.

I think we can keep the fleet growing, but I think -- we want to keep an eye on utilization, because certainly, we look at that very closely; but I think everybody also needs to keep an eye on the other factors that matter, like what our revenue is doing and how many units we're adding to the fleet, and stuff like that.

So there's some other factors now besides just pure utilization as a good indicator of growth.

It has to be looked at also as we're adding equipment in.

As I mentioned, utilization on a unit basis, 74% of utilization on a horsepower basis is higher, about 77%.

And usually we would run with that within a point of each other.

So that's really expanded here over the last year, and that's because the oilier plays are taking higher horsepower equipment and we're putting that stuff out there on a 100% utilization basis.

We don't build anything in that realm without signing contracts.

So that stuff is already committed when we start building.

So we're seeing some -- that's certainly a positive indication, too, because that's driven by the oil plays.

And you get a small incremental -- incrementally better margin on that stuff now.

It's -- you're not going to see it in 10, 20, or 50 units, but over time, as you start building this into 200, 300, 400 unit component of the fleet, it becomes a little more appreciable.

So utilization is a good indicator, we want to watch it, but you add the -- it could flatten a bit.

Though when you see it out, I think, I'd direct everybody to start looking at what are the revenues doing, what are we adding to the fleet, and things like that.

Okay.

Great.

One other quick question -- it's somewhat related.

Roughly $35 million in CapEx for 2011.

Obviously, there's growth related to oil.

Do you kind of foresee that same number for 2012?

Or does that ratchet back just with what's going on?

Has that increased at all?

Where are you at on CapEx budget maybe going out another year or so?

Yes, that's -- that's pretty much of a moving target, especially with the dichotomy we've got between the oil plays and the gas plays.

I'm certainly not -- I think last call, I probably mentioned we were thinking the $25 million to $30 million range, just from the point of pricing taking such a dive -- gas pricing.

I'm not uncomfortable with that number.

Now, I don't want everybody saying, oh my gosh.

Capital is down 25%, things are going south.

That's not the point.

What we're trying -- what we've got to try to balance is certainly we think there's going to be increases in capital required to build equipment for the oil plays, but just trying to figure out what the gas plays might do is a wildcard.

If we get any deterioration there, actually, some of that equipment might be moved into the oil plays.

So we can still grow on the oil side, but we wouldn't need to build as much equipment as we had in the past.

So that's why the big variation in what we think the capital might be going forward.

It's just going to have to play out.

Okay.

All right, great.

Thanks.

Joseph Gibney, Capital One.

Morning, Steve.

Just a couple of questions on the sales side.

You referenced some delays have carried over from 3Q out of your $1.8 million in res and you're sitting on $7.5 million in backlog.

I'm just curious what kind of visibility you have on pull-through of revenues there out of your backlog, say, in the first quarter?

Well, you know, the majority of that backlog is going to be a Q1, Q2 thing and kind of -- as backlogs do kind of decline over that period.

Visibility, like they say and have been saying for two years, absolutely none.

Because I think this is probably the third quarter in a row that projects have been pushed back or delayed, only because customers have added equipment or changes or stuff like that.

We always want to try to book those things as quick as we can, but -- you know, so there's always some of that.

And we just don't have that visibility any more on some of these things.

Some of it's been we've moved into doing some larger horsepower builds on the sales side, and that stuff always takes -- it's got a little longer build time start with.

So you're tending to span quarters to begin with, and if you get any changes in that, it kind of moves it around.

And then we've had some relatively good international work here lately, and that tends to stretch out too.

So there's -- again, factors in that that's just hard to identify right now.

Okay.

Fair enough.

Just on the non-compressor sales portion continues to be pretty strong -- you referenced flare sales.

I mean, on average, you do over $10 million in revenues on the players, parts, and rebuild side of your business on the sales front, and '11 is a strong year.

I mean, do you think you can maintain the current levels?

Just curious your outlook on the flare business, has been strong.

Yes.

I think so.

The inquiry level is still running well, and that business still didn't look like it had any fall-off at all.

A lot of that stuff has been going up to the Bakken.

I think that's going to continue for a little bit, but we've also seen just as much in some of the other plays, too.

I mean, there's quite a bit going on here in the Permian.

So there's flaring in some other places, it's just they can't get the gas connection.

So that seems like it will hold in for this year.

And that's what's driven -- you know, we had a pretty good jump in that gross margin on the sales side.

And although the revenues were flat across, we had that mix shift in there being more flare sales and compressor sales, and flare sales being a higher margin.

Sure.

Understood.

All right, last one from me and I'll turn it back.

Just on your 20% liquids-driven of your rental fleet, just I know predominantly, you've been more Barnett combo focused.

So I was just curious amongst different plays how that 20% is dispersed, sort of roughly?

Yes.

Well, it's starting to get distributed out.

Certainly, the Barnett was the first one we got into.

The granite wash is now providing pretty good growth.

We're starting to see -- I think we mentioned in the past the Utica Shale starting to pick up some stuff.

The ones we haven't seen a whole lot in yet are Marcellus and Eagle Ford.

Those are probably running a little slower than what we anticipated.

There's bigger equipment going on in those plays, but down at the wellhead yet, we haven't seen a whole lot.

We anticipate that, and that's where I think if we get -- we think we can continue to grow in the places I mentioned that we're going into now.

But we think these others are still out there.

Hopefully, this year or probably certainly next, that we'll start seeing some growth there too.

Sounds good, Steve.

I appreciate it.

I'll turn it back.

Okay.

Thanks, Joe.

Craig Hoagland, Anderson Hoagland and Company.

I'm all good.

My questions have been asked and answered.

Thanks.

All right.

Thank you very much, sir.

Then our next question comes from Dick Kindig from Keeley Asset Management.

Please state your question.

You mentioned a little earlier about a rate of growth expected.

But you didn't mention that rate of growth.

Now, in the oil plays?

Well, I thought you were just talking about your general, overall growth rate.

But --

Okay, from a top-line perspective?

Right, yes.

Yes.

You know, we don't normally venture too much into that.

I might have been -- I don't know what I was referring to, actually, but --

Maybe you were talking about the oily plays.

I don't --

Yes, probably more the oily plays.

(multiple speakers)

Then what rate did I miss?

(laughter)

Yes.

Well, you know, if you look at our growth the last -- '09, '10 and '11, of course oil has been the main driver.

Dry gas has shown a little of an uptick, but essentially it's been 0 to a 5% growing, essentially flat in the whole scheme of things.

I imagine dry gas will stay about the same.

It's not going to move a whole lot until we get a little better -- a little firmer pricing.

But we've -- 20% of the active fleet in oil plays now, so that's going to calculate out to, I'm thinking, around 300 or 400 units.

That's taking place over the next couple of years.

So I think if you just take that, maybe, the rate of growth isn't going to be as high, but I think if you add in maybe another 100, 150 this year, maybe the same next year, you get roughly the same amount of units in there somewhat.

So I think you can -- from the oil side, you can probably see a doubling of that in two to three years.

Now, that's -- I hate to go out on a limb like that and say that stuff, because, you know, oil will go to $50 tomorrow.

It's like washing your car and it rains.

But you know, just roughly looking at what it's been, that's not unreasonable.

Haithum Nokta, Global Hunter Securities.

You highlighted the -- yes, you said just 20% of your fleet is currently working in, like, liquids plays.

Right.

I was wondering kind of where do you expect or what do you think, like, the potential is for that number to be by the end of 2012?

Well, you know, it could be in the 25% to 30% range.

And I would say maybe conservatively -- again, we've come from zero in '09.

So a couple of years, we've gone to 20%.

That's an average of 10% per year.

I'm not going to say that will -- when you first get into a play, you kind of get some flush activity.

But I think -- we could see a 25%, 30% -- so 25% to 50% more units in the oily plays as we go.

Okay.

What do you think would be, like, the biggest issues in, like, moving into those plays?

Of what -- moving into them or --?

Yes.

Not really any big issues to us.

I mean, we're actually looking at some others.

We've -- obviously, we've moved into the Utica brand-new last year, moved into the Barnett brand-new two years ago -- I mean, the Barnett combo; we were already in the Barnett.

Moved into the Granite Wash last year.

So we're pretty adept at moving in to places where we see the market and taking advantage of it, and getting a fairly good footprint.

So I don't see any issues to it.

Probably the biggest thing you always have any time you're doing that, if it takes new equipment, is just getting the equipment in a timely fashion and building it and stuff like that.

But I don't think that's going to be a bottleneck, necessarily.

I think it's just something we had to plan for.

Great.

Thank you.

I'll turn it back.

(Operator Instructions).

Dustyn Owen, Sidoti & Company.

Hey, Steve.

Good job on the environment that we're in.

I know you talked a little bit about the utilization and the revenues in the rental, but can you go over the numbers quickly again on total numbers -- total units there?

Well, on the 74% number?

Yes.

Yes.

Well, we've got 2120 units at the end of the year.

So 74% of those are -- so, 1500 to 1600 are operating; the balance are not.

And then of those is a 20% that are in the liquids plays right now.

So that would equate to around 250, 300 or so in there.

And then again, the horsepower being about 300 basis points higher, so we've got just a little more -- we have -- and that reflects the higher utilization of that higher horsepower range that we've been putting out as oil plays.

Perfect.

And the -- a quick just maybe number on what the total growth for '12 might be?

Well, as I mentioned to Dick, we don't put out guidance per se in that respect.

Again, we don't -- the sales visibility is pretty tough.

And as I mentioned in the past, that's going to be a up-and-down quarter-by-quarter number.

If we tend to have a higher than expected revenue or a lower than expected revenue in any certain quarter, undoubtedly, it's going to be on the sales side.

From the rental piece, as I mentioned, if we get into a $25 million to $30 million capital build, you can ratio that with what we spent last year in the number of units -- $35 million and 2020-something units.

So that kind of maybe give you a rough idea of what we think the rental side will be.

Yes, that's perfect.

Thanks.

Okay.

Thanks, Dustyn.

At this time, we have no further questions.

Okay, Erika.

Thanks for your help.

I appreciate everybody joining in, and we will talk to you next quarter.

Thanks.

This concludes today's conference call.

Thank you for attending.