RPC Inc (RES) 2010 Q1 法說會逐字稿

Good morning, and thank you for joining us for RPC, Incorporated's First Quarter 2010 Earnings Conference Call. Today's call will be hosted by Rick Hubbell, President and CEO, and Ben Palmer, Chief Financial Officer. Also present is Jim Landers, Vice President of Corporate Finance. (Operator Instructions.) Jim will get us started by reading the forward-looking disclaimer.

Thank you, Jenny, and good morning. Before we begin our call today, I want to remind you that in order to talk about our Company we are going to mention a few things that are not historical facts. Some of the statements that we'll make on this call could be forward-looking in nature and reflect a number of known and unknown risks. I'd like to refer you to our press release issued today along with our 2009 10-K and other public filings that outline those risks, all of which can be found on RPC's website at www.RPC.net.

I also need to inform you in today's earnings release and conference call we'll be referring to EBITDA, which is a non-GAAP measure of operating performance. RPC uses EBITDA as a measure of our operating performance because it allows us to compare performance consistently over various periods without regard to changes in our capital structure. We are also required to use EBITDA to report compliance with financial covenants under our revolving credit facility. Our press release today and our website provide a reconciliation of EBITDA to net income, which is the nearest GAAP financial measure to EBITDA. I invite you to review that disclosure if you're interested in seeing how it's calculated.

If you have not received our press release, please call us at 404-321-2140, and we'll provide one to you immediately.

I am now going to turn the call over to our President and CEO, Rick Hubbell.

Thanks, Jim. This morning we issued our earnings press release for the quarter ended March 31, 2010. In a few minutes, Ben Palmer will discuss our financial results in more detail. At this time I would like to provide you with a few operational highlights. During the first quarter of 2010, RPC experienced its first profitable quarter in over a year. It is a welcome change to discuss with you today the positives occurring in our business. RPC's success during the first quarter of 2010 was due not only to improving industry conditions, but also to actions by our managers during the previous 12 months. Their initiatives to right size our business and enhance strategic relationships with key customers put RPC in a position to take advantage of the rapid absorption of industry capacity. While pricing still remains competitive, increasing demand has provided some relief from the high discounts experienced in 2009. In response to customer add-on opportunities, we have committed to increase our pressure pumping fleet 90,000 horsepower, or approximately 30%, over the next year.

With that overview, Ben Palmer, our CFO, will provide some financial details.

Thanks a lot, Rick. For the quarter ended March 31, revenues increased to 213.1 million, a 20.9% increase compared to the prior year. EBITDA for the first quarter was 55.2 million, a 36.2% increase compared to the same period in '09. RPC reported an operating profit for the quarter of 22.6 million, compared to 8.4 million in the prior year. Our net income was 13.4 million, or $0.14 diluted earnings per share.

Cost of revenues increased in the first quarter from 110 million in the prior year to 129.6 million in the current year. The increase in costs were due to a variety of factors resulting from higher business activity levels, including materials and supplies expenses, fuel costs, and maintenance and repairs expenses. Costs of revenues for the first quarter was 60.8% of revenues, compared to 62.4% in the prior year. This decrease as a percentage of revenues was due primarily to the higher revenues associated with increased utilization in unconventional basins, lower direct headcount compared to the prior year, and operational leverage.

Selling, general, and administrative expenses during the quarter were 27.8 million, which was approximately the same as the first quarter last year. Because of our ability to leverage these fixed costs over higher revenues, SG&A cost as a percentage of revenues decreased from 15.7% last year to 13.1% due to these significantly higher revenues. Depreciation and amortization was 32.3 million and was approximately the same as last year.

Our technical services segment revenues increased 26.7% due to improved utilization of the entire fleet and a favorable job mix. Operating profit more than quadrupled from 6.1 million to 25 million this year. This increase was due to higher revenue from both improved utilization and pricing and operational leverage. These improvements were partially offset by increased materials and supplies and fuel requirements due to [job mix].

Revenues in our support services segment, which is comprised mainly of our rental tool service line, decreased 13.7%. This segment generated operating profit of 1.9 million, compared to 3.7 million last year, due to lower pricing for our services, partially offset by higher utilization. RPC's first quarter 2010 results continued the sequential improvement that began two quarters ago. Our consolidated revenues during the first quarter increased again to 213.1 million from 152.4 million in the fourth quarter, a 39.8% increase, which is significantly higher than the average sequential rig count increase. Revenues increased due to significantly higher activity levels and improved pricing, especially in selected unconventional plays.

The first quarter cost of revenues as a percentage of revenues decreased from 67.1% in the fourth quarter to 60.8% in the first quarter as a result of leveraging personnel and fleet expenses over higher revenues. SG&A expenses increased 4 million or 16.7% from the prior quarter due primarily to higher incentive compensation. However, SG&A as a percentage of revenues decreased from 15.6% to 13.1% due to leverage from these higher revenues. Our sequential EBITDA more than doubled from 26.1 million in the fourth quarter, compared to 55.2 million in this quarter. Our technical services segment revenues increased 40.8% to 191.4 million and generated an operating profit of 25 million, compared to a loss of 1.7 million in the prior quarter. Almost all of our service lines within this segment experienced pricing and utilization improvements with our pressure pumping, coil tubing, and down hole tools businesses leading the way.

Our support services segment experienced a 31.6% sequential revenue increase and generated an operating profit of 1.9 million during the first quarter, compared to an operating loss of 2 million in the fourth quarter. Our rental tools business experienced higher activity levels, but pricing pressures remained strong.

First quarter 2010 capital expenditures were 10.4 million and were primarily of a maintenance nature. However, as Rick mentioned previously, we have taken steps to increase the size of our fleet by adding new equipment. Capital expenditures for the year are now projected to be approximately $130 million. Almost 75% of our 2010 capital expenditures relate to pressure pumping, with the remainder being invested to support our coil tubing and other service lines. At this point, we expect substantially all of this equipment to be in service and generating revenues by the first quarter of 2011.

RPC's outstanding debt at the end of the first quarter was 114.3 million under our credit facility, which matures in September of 2011. Our ratio of long term debt to total capitalization was 21.4% at the end of the first quarter, compared to 22.9% as of March 31, 2009. And in regard to our credit facility, we have taken the initial steps to refinance this debt before the end of the third quarter.

With that, I'll turn it back over to Rick for a few closing remarks.

Thank you, Ben. Riding the wave of unconventional drilling activity and its service intensive nature, RPC has positioned itself to take advantage of the rapid transition to these markets. While I am pleased to report improved industry conditions and RPC's markedly better results, the lower price of natural gas creates an overriding uncertainty regarding the sustainability of recent trends. While we are confident about the future growth of RPC as demonstrated by our increased capital investments, we are always attentive to industry changes and will adjust accordingly.

I'd like to thank you for joining us this morning. And at this time we will open up the lines to answer any questions you may have.

Thank you, sir. (Operator Instructions.) And we'll take our first question from Rob MacKenzie with FBR Capital Markets.

Good morning, guys.

Good morning.

Hey, Rob.

I don't normally say this, but great quarter.

Thank you.

Thank you. We appreciate it.

No, I mean, in most cases I think that can be obsequious. But regardless, it was here. And what I'd like to explore with you guys in some depth here, if you will, is how should we think about cost absorption and/or cost inflation going forward. Clearly, I think you probably benefited from a lot of just absorption of costs you were bearing in prior quarters from excess personnel or equipment. When do we start seeing those incremental margins decline as you start having to add costs to meet the growth in demand?

Rob, this is Ben. That's a fair question. Obviously, coming off this great quarter with a large sequential increase, we'll have to see where things shake out. But to your point, I think we will have to add some personnel. I mean, we expect things to stay at this level, so we'll have to add personnel to be able to handle that effectively--continue to handle that effectively. And beyond that, I expect if industry conditions continue to stay strong there'll be just some general upward pressure on personnel cost and compensation. But beyond that, we do expect--we do have some ability to continue to get some leverage on some of our other service lines, like rental tools, that hasn't--didn't turn quite as quickly as some of the other service lines. So again, fair question, but there's a lot--there'll be a lot of moving parts kind of--most of it good, I think, but a lot of moving parts over the next couple of quarters.

Okay.

Rob, this is Rick. Of course, as we add this new equipment, we're also going to have to add people to staff it.

That's correct. And we'll--that will have to be done ahead of time and they'll have to be trained and that sort of thing. And all things being equal, that will be some added cost. That's a good point.

Okay. Can you give me a feel for what the timing is on delivery of the 90,000 horsepower?

As we said, we think most of it will be here, clearly in and operational by the first quarter and expect it could be sooner than that. We may see some benefit even starting in the third quarter. But it could be fourth or first quarter next year. But it will begin to be delivered during the third quarter and certainly we'll take advantage of it as much as we can.

Okay. And you expect to have no problem delivering all aspects of the operation from blenders to pumps and everything else?

Correct. As you can imagine, I mean, yes, we've got a very detailed plan that our guys put together that we've gone through. And we feel good that it's very complete and the ordering and all of that is in place and the planning for it to come onboard and get it assimilated and all of that. So we feel good about it and we think we're in a good position, maybe a little bit earlier than some of the other folks. And we feel good about that.

And Rob, this is Jim. I know you've known us for a long time. We learned some things from our expansion of a couple of years ago. So happy to have learned some things and we're coordinating things we hope better and more realistically than perhaps in the past, for what that's worth, too.

Great. And I guess my next follow-up would be for Rick. I mean, strategically, Rick, how do you think about the impact on the market of adding additional capacity here when arguably pricing has just recently in the past several months started to show meaningful improvement? Are you worried that if you guys do it and if other folks do it that you guys could present an overhang in terms of meaningful pricing recovery going forward?

Well, Rob, that's always a concern and it certainly is a risk. The particular equipment that we're adding is in direct response to customer requests. So we feel I believe more confident about this equipment than we did two years ago when we kind of added blindly. But as you said, it's always a risk.

So is this work or are these--how many complete units or--.

--Fleets--?

--Fleets are you adding with the 90,000 horsepower?

Obviously, you could break it up into several different pieces. But that would probably represent a couple of fleets at this point. The improvement we saw from the first--from the fourth quarter to the first quarter was in some respects sort of a perfect storm. We had, as we indicated, some customer conversions, successes, whatever, due in part--I mean happening at one time I think because of the rapid absorption of capacity at this point in time. But a lot of the ground work had been laid over the last several months. And it just happened to--a lot of those successes happened to not impact the fourth quarter, and--but they all began in the first quarter. So the--it's a little bit different in some of these unconventional plays the way the jobs are having to be delivered, and it requires a little bit more of an equipment between the pressure pumping service providers and the customers.

And we feel like we maybe understand that better than some of our other competitors and I think we're being able to take advantage of that. And to your point about creating too much capacity, as Rick said, that's always a concern. But we believe this trend will continue that the--that our customers as they learn more and more about operating in these unconventional plays will realize that it's different than a conventional play. Again, I think we have an approach that's worked well for some of our customers and they are looking forward to us having additional capacity to be able to deliver in the same manner and some of the same and some additional basins. So we feel very good about that.

And Rob, this is Jim. I just wanted to--or just emphasize an answer to your question when you asked how many fleets or how many spreads. Understand that a pressure pumping spread today or pressure pumping fleet, whatever you want to call it, is a whole lot bigger than it was a couple of years ago.

That's why I was asking, to just try to identify kind of almost exactly where it's going. It was a backdoor question.

Sorry.

And then, since you said--since you mentioned in response to customer requests, I think it was Ben or Rick, does that mean that you have contracted this equipment in terms of service already with a certain customer or customers?

It's not all contracted yet, but certainly we're a long way down that road.

Okay. And how would you characterize, if you will, the pricing on this versus kind of your--the average of your existing fleet today?

Well, again, reasonable question. Again, things are really moving and changing and I think the dynamics in these unconventional plays, it's a little bit different ballgame with the way the jobs are performed. The pricing is different than it is with conventional sort of setup, do the job, breakdown, go back home, get ready to go to the next job. These are long-term jobs, so there's a lot more volume taking place. That's why the fleets are much bigger and it's kind of a different dynamic. But I think that with the customer discussions we've had, clearly we've not signed off on the pricing yet. That's part of the discussion we'll be going through and that, as always, will be dependent upon where the market's moving and both sides' perception of what the right place to be is. We expect that the pricing on the new equipment will be at least as good as it is on what we've converted here in the first quarter.

Rob, this is Rick. We are fortunate to have an outstanding group of managers and employees and we certainly could not have--could not do this without them.

Rob MacKenzie. Really. Thank you, guys. I'll turn it back.

Thanks, Rob.

Thank you.

And we'll take our next question from Jeff Tillery with Tudor, Pickering, and Holt.

Hi. Good morning.

Good morning, Jeff.

Hey, Jeff.

I wanted to follow up on some of the questions on the capacity expansion. So should we take this that when--maybe not all contracts are signed, but would you consider this a contractually backed capacity expansion or do you consider this more speculative? I'm just trying to understand. Because I would--returns today for the industry aren't great. If you can lock in some utilization maybe you can get returns to where they're economic. I'm just trying to understand the dynamics around the capacity expansion.

Yes. A reasonable question, I guess. The agreements we have with various customers, each one are different and unique. Obviously, there are some things about them that are similar, but they each are different in terms of their commitment and language and so forth. I would say relative to what we're adding, there is no firm commitments yet. But again, a lot of discussions, a lot of groundwork that's been laid over several months. And again, as I said, just like what we converted in the first quarter, the groundwork has been laid. So we feel good about it. We think the demand is strong enough that we're confident that we'll be able to convert it into additional firm relationships with current and new customers. And--but we can't say right now that it's committed. So I think it's somewhere between (inaudible) and already contracted.

Is some portion of it committed or basically you're saying these are covered, you've placed the order, and you think that there's going to be some equipment in place by the time the equipment is delivered. Just trying to understand kind of the timing.

The latter.

Okay, that makes sense. The total cost for this equipment add, is that somewhere around $80 or $90 million?

Yes, I think it's about 75% of the 130. Yes.

Anything--you mentioned some--a lot of things going well in the first quarter in terms of things had been--in the customer conversions the groundwork had been laid. Anything that you consider in the Q1 results unusual or worth highlighting that may not repeat in the second quarter, if we assume activity holds up and kind of the business in aggregate for the industry is okay. So anything unusual that we shouldn't think about as repeating in the second quarter?

There really was not anything unusual. These new opportunities I would say obviously possibly impacted much of the quarter, not the entire quarter.

Yes.

So that provides some cushion there going forward and we think there's opportunities for some of the other service lines. Some groundwork's been laid there for them to improve also over the next quarter or two. So--.

--The--I guess in your pressure pumping and coil businesses today, is there room for utilization improvement, or the revenue gains from here, are they more a function of pricing?

Pressure pumping in the first quarter, it depends on whether--we were pretty busy, pretty close to being [so]. We could do better than that, but to expect to do better than that quarter after quarter would be a bit much. But we were--pricing would be more of it for pressure pumping. Again, some of these customer relationships we have locked in for a longer period of time, so there's not as much ready pricing improvements on that portion of our fleet. But on other portions of the fleet, there is some ability to increase prices. And I would say, again, on the other service lines other than pressure pumping, that there is the ability to increase prices and we expect that to occur.

Okay.

Jeff, this is Jim. Just emphasizing something Ben said. Rental tools, we're looking for some traction on pricing increases there.

That's right.

The margin ramp in technical services obviously was pretty sizable quarter on quarter. I just wanted to get a feel for as we move forward--I mean, if--I guess exit rate for the quarter would the operating margins have been high teens? Just trying to get a feel for where things are today.

Not high teens. Exit rate was higher than the average, but not high teens.

Okay. I guess just from an outlook standpoint, both the Fayetteville and the Haynesville have been important markets for you guys in the frac businesses. Those are also markets where we've seen CapEx reallocated elsewhere. I know you guys--I mean, the fleet is mobile. Can you just give us an update on what you've done from kind of a moving the fleet around standpoint. I know the Marcellus has been a growth area. Have you moved more equipment to the Marcellus, just to get an update on that?

We've moved some equipment to the Marcellus and it's probably the same as the update that we would have last given you. We have some pressure pumping equipment in the Marcellus. We have a meaningful percentage of the coil tubing fleet in the Marcellus, some rental tools. It's not any different than it was a few months ago.

Okay. Thank you guys very much.

Thanks, Jeff.

Thank you.

And we'll take our next question from John Tasdemir with Canaccord.

Thanks. Hey, guys. I really just wanted to follow up with a couple of questions I guess really Jeff kind of left with. But obviously, we're hearing a lot about the big moves into some of these oily liquid plays like Bakken or Eagleford or Granite Wash. Is that stuff playing into your business thinking at all?

Sure. I mean, we are working there in those places and looking for various opportunities. Again, the thing about the fleet that we're adding and the equipment that we're adding can work in any of these particular basins. So we're going to be going to the customers that are--that again where we had existing relationships and/or new relationships and saying, we know how to do it and we've got new fleet and we'd like to establish a relationship. So we've done it, we've done it other places, we've been successful. And we--again, we'd like to come up with some additional mutually beneficial relationships where we can--they have availability of capacity and know-how and personnel, and we have the benefit of a little bit firmer. Nothing's forever. These contracts are not ironclad. But they are solid relation--customer understandings and relationships. We commit to them and they commit to us and there should be a lot of mutual benefit. So this equipment can work in the gassy plays or the oily plays. So we'll just have to see where they land.

Got you. But is the--I mean, I know you guys are just [all] out, but have you seen your equipment start to migrate to some of the oily plays, or is it just an all out story of things going--?

I would say more that there's--they're more just initial exploration in some of those oily plays. Equipment does have wheels, but it does take some time to make those decisions and actually physically move them. So I'd say there's been more focus on what's been active in the last six months than what's been hot in the last six or nine months than what's been hot in the last two or three months.

That makes sense. And I also wanted to push a little bit further on some of the last questions. And that's trying to triangulate--I mean, you had such impressive kind of revenue and margin growth in the first quarter. We're all kind of scratching our heads to figure out the progression of that as we look even just into the second quarter. You said you're kind of--your utilization got pretty good, that you'll see some pricing improvement. I mean, is a 5% to 10% type of top line growth into the second quarter sequentially in the ballpark, or can you help us at all?

Reasonable question. Again, it's tough that there's a lot of moving parts. Again, a substantial move obviously in the first quarter. So to be honest, we're not sure exactly where it's going to land either. We think it's going to be good, but we're not sure exactly where it will land. There could be some of the large amounts of activity. It's dependent upon how many stages are completed and that's customer driven and it spans a variety of things. It's reasonably predictable, but it can vary a lot month to month. The first quarter was a good month for that type of activity--or a good quarter for that type of activity and it likely could be better. It could be a little bit lower, it could be higher.

But with the other parts of our business, we are seeing some improvement and we would expect that that would provide some cushion underneath any maybe slight reduction in revenue within some of the unconventional basins. So again, reasonable question, but we, too, are kind of waiting to see exactly where it will fall out. But as I said earlier, it's obviously good. There is nothing that's unusual about the first quarter, but we'll just have to see where the second quarter falls out.

Okay. Well, how about let's say--I don't know if you've got April yet, but maybe March or April trend versus January trends? I mean, better?

March was a good month. It's interesting. We had our board meetings yesterday and we have a lot of members of our board that are involved in a lot of different businesses. And I was telling our guys that I heard on the radio or on TV this morning, it sounds like a lot of people had a tremendous March. We had a good March as well. And--but I'm not counting on that continuing month after month, but it could.

Okay. And then, just on the margin side a little bit, I imagine--I'm guessing that your margins are just as--from a pricing perspective are just kind of--use the word again, migrating a little bit higher on average from first quarter to the second quarter, just based on my guess. Is that accurate, you think?

I think that's right. I mean, there's--again, we've got pricing improvements that should roll through that will benefit us. But we do have--we're going to need to add some more personnel to be able to handle this level of volume. We'll have new personnel we're going to hire and it's talking about out the rest of the year we'll have to add some new personnel ahead of the equipment coming in--the new equipment. So there's positives and negatives there.

That makes sense. Okay. And one final question and I'll let you guys go. But the new equipment that you're building, is there--for you guys was there a buy versus build decision? Is there anything out there from a consolidation perspective or what--any thought process there?

John, this is Jim. Traditionally, our returns on invested capital have been higher from building rather than buying, if you're talking about buying companies or buying fixed assets from others. And that's probably still the case because if any auctions come up, we typically do not win auctions. There's sort of a winner's curse that we find. So for the present time we're still building, buying equipment rather than looking at acquisitions, just because of the premium that you have to pay.

I'd say the other thing, too, is with these--with unconventional plays and the stress that it's putting on the equipment, we think we've--we tend to--we think we've got some techniques that help us in that regard. But it is tough on the equipment and it's a lot safer to buy new equipment that you know what the history that hasn't been overworked or not adequately maintained. So that's risk, buying another company and buying equipment that may not stand up to the stress of the type of work that's taking place.

Makes sense. Okay. Well, thank you very much, guys.

Thank you, John.

Thanks. Appreciate it.

And moving on, we have a question from Andrea Sharkey with Gabelli and Company.

Hi. Good morning.

Hey, Andrea.

Good morning.

I wanted to ask a [follow] on sort of the oil shale. Is--do you anticipate that there would be any difference in say the intensity or the pricing in the margin on work that you might do there versus unconventional gas shale plays that you're working on now?

Good question. I think it just depends. It probably depends on where the customer--if you're talking about these new fleets, it just depends upon whether they see availability otherwise and what their pressures are. It could very well be initially as they're moving into a new area, as it's developing out that they need to get that first one in there and getting it working, that maybe you'd have the ability maybe to negotiate something a little bit better. But market forces will be at play. I don't expect that there'll be a meaningful difference because of the volatility in obviously oil and natural gas. Who knows six or nine months from now what the relative valuations are going to be. That gap could close. So hard to say. I'll just say I don't think it would be meaningfully different.

That makes sense. And then, yesterday I heard on the National Oilwell Varco conference call they were talking about getting some orders for coil tubing equipment, that people need larger diameter on some of these unconventional plays. And I was curious if you guys were seeing that in your equipment and how your equipment stacks up for that.

Andrea, this is Jim. That's definitely a trend. Larger diameter coil tubing is of more use in these unconventional or horizontal plays. They are more useful in longer laterals. You can just do more with them, so that's definitely a trend. We were an early pioneer in coil tubing. We've tried to stay out front. And those larger diameter coil tubing units are definitely something that we have and continue to need. So--.

--And as we talked about, coil tubing is part of this expansion and those will be the larger diameter.

Okay. So that added CapEx that you're spending also includes maybe adding some more large coil tubing units?

Certainly.

Yes, very potentially. Yes.

Okay, great. Thanks. That's all I had.

Thank you.

(Operator Instructions.) And we have a question from Brad Handler with Credit Suisse.

Thanks. Good morning, guys.

Hey, Brad.

Hey, Brad.

Actually let me pick you up this way. Could you--maybe I could ask a couple questions about pressure pumping, also. Could you describe what you guys see in terms of trends and maybe look out a year in terms of the size of jobs, the duration on site, equipment needs, and how that--you think that evolves going forward?

Brad, this is Jim. Without giving away too much, I think everybody in the industry has been--has taken notice of the fact that the things that are happening in the market right now are just very horsepower intensive and they take a long time to do. And if natural gas falls a whole lot, then that won't be that big a deal. But there's--that trend ought to continue. I mean, with everything that we are hearing and our customers are talking about, it's not going to get any easier to get natural gas out of these rocks in the next few months than it was in the past few. So that really speaks to the service intensive nature of this kind of--these kind of production activities or completion activities, and that's what we're involved in. So that's kind of the best answer we can give at this point.

And I think the--this is Rick. I think the acquisition of Exxon--or by Exxon of XTO, I think that's an indication that the whole industry is moving in that direction.

Sure. Yes. Clearly, I just--I don't know if it's a simple thing. Do you think there'll be--the average number of completion stages will be higher? I mean, based on the conversations you're having, are you moving--does it continue to move in that direction or are things stabilizing?

I think there has been an increase in the number of stages in general. And with the increase in the percentage of completions being unconventional, overall, yes, I think there'll be more and more stages and more and more activity a year from now.

Okay. Do you think that--in terms of how much your--like in the Haynesville play we've obviously heard a lot about running equipment very hard and there's a certain wear and tear on the maintenance side of it, and there's a certain redundancy that you guys bring that everyone needs to bring I think to handle that. Right?

Right.

In terms of your experience over the last six months in that, how are you guys thinking about what needs to happen? Are you--do you need to bring even more equipment out in terms of sort of handling that redundancy need because of maintenance stress, or is it something that as your expertise grows in the regions you might be able to bring less out and thereby kind of work the capacity a little bit, if you will, more efficiently?

Brad, I--this is Jim. I think the answer is the middle of the road. I don't think we--you're right about how much horsepower you have to take. I don't think we're going to need to take more horsepower, but I don't think we'll need to take less either. I think as time goes on, you have some acquired knowledge and some embedded expertise that allows you to work it maybe not easier, but differently, and tweak a few things, as Ben just said. And I think that--I think that's the solution. But it's not a less horsepower answer.

Okay.

I think the overdriving concern is to do a good job for the customer. And if that means taking more rather than less to the job, we would always take more.

Reliability is key.

Sure.

Being able to do--.

Makes sense. As you guys thing--shift a little bit differently. As you guys think about--and your broader products can apply here. It doesn't have to be just a pressure pumping question. As you think about how the next year evolves for you, trying to gauge, do you think you'll wind up having a concentration of customers? As you've aggregated your moves--your equipment into larger plays and you're talking with some specific customers about meeting their demands, do you think you'll wind up concentrating your customers and having sort of more of your--deepening those relationships and having more of your revenues come from a smaller customer base over the course of the next year or two or more. Is there no change in your philosophy there or how the business evolves?

I think as a percentage we will have more concentration with these types of relationships. It won't be across all of our service lines, but certainly the ones that are very active in these unconventional plays. The commitment, both from the customer and from us is tremendous and--so it will result on us--the impact on us will be larger concentrations of customers. Yes.

Interesting. Okay. And so, as you're having these conversations for new equipment and old equipment, existing equipment, do you--I gather they are longer--somewhat longer term in nature, in some respect, right? You're talking six months, you're talking one year kind of commitments, right?

Right.

That's correct.

Okay. Just wanted to clarify that. Okay, that's it. Thank you. It's been very helpful.

Thank you.

Thank you, Brad.

And we have a follow up question from Rob MacKenzie with FBR Capital Markets.

My follow up has been answered. Thank you.

Oh, thanks, Rob.

And it appears there are no further questions at this time. Now I'd like to turn the call back over to Jim Landers for any additional or closing remarks.

Okay, thank you, Jenny. I want to thank everybody for calling in this morning and for all the interest and all the questions and good discussion. We appreciate it and hope everybody has a good day. Thanks. Talk to you soon.

That does conclude today's conference and we do appreciate your attending today. Thank you.