Solaris Energy Infrastructure Inc (SEI) 2021 Q3 法說會逐字稿

Good day, and welcome to the Solaris Third Quarter 2021 Earnings Conference Call. (Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President, Finance and Investor Relations. Please go ahead.

Good morning, and welcome to the Solaris Third Quarter 2021 Earnings Conference Call. I am joined today by our Chairman and CEO, Bill Zartler; and our President and CFO, Kyle Ramachandran.

Before we begin, I would like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. Please refer to our press release, issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.

I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe, can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release, which is posted on our website, at solarisoilfield.com, under the News section.

I'll now turn the call over to our Chairman and CEO, Bill Zartler.

Thank you, Yvonne, and thank you, everyone, for joining us today. I'm pleased to share another quarter of strong Solaris results. We generated a 40% sequential quarterly increase in revenue to over $49 million, adjusted EBITDA increased 18% sequentially to $7.7 million, and we paid our 12th consecutive quarterly dividend. We ended the quarter with $43 million of cash and no debt on the balance sheet. Industry fundamentals continue to shape up strongly during the third quarter. Oil prices increased to the $80 range and gas prices climbed over $5, as global supply and demand dynamics continue to tighten.

During the third quarter, U.S. horizontal rig count grew 10% from the second quarter average, while completions activity grew at a slower rate as operators increased drilling activity and inventories of drilled and uncompleted wells reached multiyear lows. Since the end of the third quarter, the horizontal rig count is up another 7%. Many operators have taken advantage of higher commodity prices and attractive wellhead economics, albeit not at the same rate as the increase in commodity prices. We expect operators to continue to increase drilling activity, including many private operators that haven't been active in many years.

Meanwhile, we continue to see public operators stick to capital discipline. Many are indicating modest increases in drilling and completions activity and spending next year as they plan to maintain or slightly grow production. We believe this combination of robust commodity prices, capital discipline from public operators in 2021 and growing backlog from both public and private operators, all set the stage for another year of activity improvement in the U.S. completions and for Solaris in 2022.

Beyond increases in overall activity levels, we also believe recent supply chain tightness in the market will play well into Solaris' strength in the coming year. The industry is currently facing constraints in many critical areas such as labor and trucking. And both new and existing Solaris offerings help reduce the impact of these bottlenecks by providing highly efficient, large storage buffers with multiple unloading spots and built-in automation.

We're continually improving our system automation that is core to Solaris. We believe continued automation can help further reduce labor requirements, improve performance and reduce costs. We demonstrated this with our AutoHopper technology, we introduced a couple of years ago, which resulted in increased operational efficiencies, reduced labor, increased reliability and reduced spillage and dust, when traditional frac blenders are in use. Our new AutoBlend technology advances those automation gains by completely replacing traditional blender technology with a streamlined, integrated, all-electric blender.

During the third and fourth quarters, we continue to run customer trials with AutoBlend. Several of our customers have now seen, firsthand, the significant improvement in reliability and performance of the AutoBlend versus traditional blenders. We continue to demonstrate that our AutoBlend solution can further reduce headcount requirements while also improving uptime performance and sand throughput. Additionally, because AutoBlend is all electric, it can be integrated with the same cleaner power sources that are used by a growing number of electric frac fleets. We believe that the continued industry focus on capital efficiency and discipline will drive demand for technologies that can, both improve operational efficiencies and meet sustainability initiatives.

Solaris is the only integrated provider, all-electric solutions for the low-pressure side of well completions operations. And we believe, this strongly positions us to address many of the challenges of today's market as well as support our customers' key ESG targets. We expect our next 2 AutoBlend units entering service no later than the first quarter of 2022, and we are looking forward to full commercialization of the system. We continue to have discussions with several customers about longer term contracts, in order to secure spots in the supply chain queue.

The performance of our system and the commercial structure under discussions appear compelling for our customers that have trialed our system. Supply chain lead times on some of the components of the AutoBlend have continued to tighten, and we have ordered long lead items for a few additional blenders as we finalize commercial negotiations.

Trucking is another area of tightness in the industry that is receiving a lot of attention right now. When we manage the last model for our customers, it means we manage the trucking logistics in conjunction with our silo-based sand storage services on well sites. Much of Solaris' ability to achieve record-managed, last-mile activity in the third quarter is a direct testament to our equipment and the associated supply chain and operational technology. The team we built to management and our balance sheet.

Our last mile logistics team has grown in both size and sophistication and has worked hard to strengthen our deep relationships with trucking providers. Our strong balance sheet has also helped us secure trucking access as our debt-free balance sheet and liquidity allows trucking carriers both certainty and speed of payment. We are also expanding our next-generation belly-dump unloading offerings with that work in conjunction with our silos.

Today, we have 2 new top fill-based systems of different designs, currently running in full-scale trials and are very pleased with the results of both, so far. Both solutions allow for flexible placement on well sites, up to 400 tonnes per hour offload rates and preserve the option to unload from pneumatic trucks to maximize truck procurement flexibility. This flexibility should allow operators to optimize their payloads for trucking availability, lead to lower overall costs and increase surety of meeting production time schedules, at a time when trucking resources are tight. While the Solaris silo system already offers many efficiency benefits today, we believe this enhanced belly-dump loading technology could ultimately result in new customers for Solaris.

Our customers will continue pushing for solutions that ensure wells can be completed as fast and efficiently as possible and at current commodity price levels the timeline to reach production is crucial to driving value. We believe our people, relationships and technologies are well positioned to ensure our customers can meet these timelines while also offering all-electric, automated and safe solutions that enhance sustainability benefits for the entire oil and gas industries.

With that, I will now turn it over to Kyle for a more detailed financial review.

Thanks, Bill, and good morning, everyone. I'll begin by recapping some of the numbers. During the third quarter, we generated $49 million of revenue and adjusted EBITDA of $7.7 million. We averaged 59 fully-utilized systems, which represents an 11% sequential increase from the second quarter. Total revenue increased 40% sequentially, driven both by an increase in system utilization as well as an increase in the amount of sand delivered in our last mile business.

Over the course of the quarter, we deployed a total of 88 proppant systems, which worked with varying degrees of utilization. This was an increase of 1 deployed system from second quarter levels. Our calculation of 59 fully-utilized systems reflects the number of equivalent systems that generated revenue every day in the quarter. The tightening in the gap between our fully-utilized and deployed systems during the quarter reflects a modest compression in white space on the calendar. The 11% increase in our fully-utilized system count was achieved against a backdrop of relatively flat industry completion activity and was positively impacted by a Solaris record of both tons delivered and managed last mile systems, operated in the quarter. We also benefited modestly from an increase in activity with the customer that we signed a 3-year agreement with, during the second quarter.

Operating cash flow was approximately $7.7 million and included a release and accounts receivable as we caught up with a late collection from a customer, which was previously disclosed in our second quarter earnings call. Consistent with prior quarters, we have continued paying for trucking services at an accelerated pace to ensure availability for higher activity levels in our last mile service offering. We also realized a $1 million cash benefit from the employee retention credit as part of the CARES Act of 2021.

We have filed for additional $2 million of benefit related to the first two quarters of 2021 and expect to realize that remaining cash benefit in 2022. After total capital expenditures of approximately $6 million in the quarter, we were free cash flow positive at $1.7 million. We returned a total of approximately $5 million to shareholders in the third quarter in dividends, which was flat with the prior quarter. Since initiating our dividend in 2018, we have returned approximately $87 million in cash to shareholders in the form of dividends and share repurchases.

We ended the third quarter with approximately $43 million in cash and $50 million available under our undrawn credit facility for a total of $93 million in liquidity. We're currently in the process of negotiating an extension of our credit agreement with our lenders and expect to complete those negotiations well before the expiration of our current agreement in the second quarter of 2022.

Turning to our fourth quarter outlook. During October, our fully-utilized system count was flat with the Q3 average. There are a number of puts and takes that will likely play out for the remainder of the fourth quarter, including some level of holiday shutdown and budget exhaustion. These could be balanced or offset by certain operators, getting their 2022 programs started in late December. We expect that our managed last mile service-related activity will come off of the record level, we experienced during the third quarter, as this is a throughput-based business, which will be subject to lower volumes during holiday shutdowns and will likely be challenged with additional tightness in trucking during the holiday season. This should result in overall activity levels for Solaris that are flat to potentially down slightly in the fourth quarter but points to a positive outlook for 2022, where activity should be up from 2021 levels.

SG&A expenses for the third quarter were approximately $5 million, inclusive of noncash, stock-based compensation. For the fourth quarter of 2021, we expect total SG&A to be roughly in line with third quarter levels, inclusive of the normal quarterly expensing of noncash, stock compensation. Our previous expectation was for full year 2021 CapEx spending to be in the range of $15 million to $20 million. Given the strong interest from our customers and in anticipation for full commercialization of our new technologies, we've begun to order initial long-lead items for additional AutoBlend units, beyond the 2 we expect to receive by the end of the year. As a result, we anticipate our CapEx spending for the year to be approximately $20 million. We expect maintenance CapEx for 2022 to be flat with 2021, in the $10 million range, and growth CapEx related to commercializing our AutoBlend and our belly-dump solutions as the primary driver of capital expenditures in 2022.

In summary, we are excited about how industry fundamentals are taking shape for the coming year, and we are excited to see the progress in the new technology, we've been working on for the past couple of years. We also believe our technology, service differentiation and focus on core competencies can help drive value for our customers and help to alleviate many of the supply constraints, currently facing the industry. The timing of our new technology introductions with an industry upcycle offers exciting prospects for Solaris. We remain committed to capital discipline by focusing on new technology that can drive incremental returns for shareholders, maintaining our dividend and maintaining our debt-free balance sheet and strong liquidity position.

With that, we'd now be happy to take your questions.

(Operator Instructions) Our first question today comes from Stephen Gengaro with Stifel.

Two things for me. The first, just thinking about some of the technologies and the capital spend that you talked about. When we think about 2022, how should we calibrate your growth potential versus an underlying expectation of growth? Let's say, I mean, people seem to be settling around 20% plus upstream spending growth but -- I mean, if you make an assumption that completion activities up 20%, give or take, how should we think about your growth in that kind of environment?

Yes. I think as we evaluate the new technologies, we see those as ways to grow market share. So it does require incremental capital, but we do think it potentially provides an opportunity to grow beyond what say, market growth is, in terms of our activity. I think both the blender technology as well as the top fill technology address specific pinch points in the industry that potentially allow us to perform at a higher level than market.

Yes, and I'd add that the blender really does pull through potentially new customers, with the silos that might not be there before, so the complimentary nature of the products allow additional pull through business that may not be there today.

And is there a pricing component, we should be thinking about next year or is that too soon to tell?

No, we're in those discussions today. I think you've heard from a lot of other public companies around pricing for next year. And certainly, there are inflation considerations, investment considerations in the new technologies that we've continued to talk about in enhancing our systems that allows to have those conversations with customers in very constructive manner. Too early to, kind of, come up with any firm numbers, but those are certainly discussions we're having.

And then the other topic, I wanted to ask you about, was -- I am realizing, it's containerized solution versus your systems but obviously the PropX deal was interesting, with Liberty. Just curious, a, how you think that impacts the landscape, and b, sort of, what you think of those type of marriages with -- directly, with pressure pumpers, as an industry direction?

We think, the last mile business and the well site storage business is really a bit independent from pressure pumping. Liberty was a large customer of PropX. They helped start that business up. So there is a very strong relationship between the two parties that made sense for them, maybe, they are consolidated. From our perspective though it's an independent business, we treat it differently. We manage our equipment differently. It's just a very-focused organization around managing, what we call the low-pressure side of the business or the logistics and supply chain, from chemicals to the sand side to the ultimately -- when it all gets blended upside of the pumps. And so our focus is there, and we think that we have and continue to do business with probably, every single pressure pumper in some form or fashion, and we think there's value in that diversity.

Our next question comes from Jon Hunter with Cowen.

So my first question is just on activity in the third quarter, where you outperformed your original guidance quite a bit. I'm curious, are these new customer wins, are they expanded agreements with existing customers? And is it fair to say that the 3Q exit rate was, kind of, the high point for the quarter?

Yes, I think it's always a mix of additional growth with current customers, new customers. We mentioned, we signed a 3-year contract with the customer in the second quarter and that drove additional growth as well that maybe wasn't in our prior guidance. So it's always, kind of, a mix there. As far as the second point around -- sorry, Jon, can you just restate the second question?

Yes. So we touched on, I guess, new customer wins and the expanded agreement.

Yes. We tried not to get too much in month-over-month variance. We did mention in the prepared remarks that October is coming in pretty close to the average of the third quarter, still finalizing some of those numbers. But as we look into the fourth quarter, we talked about some puts and takes. Certainly there are potentially operator shedding down for budget completion. But where commodity prices are today, there's also potential for operators to say, "Well, I'm going to ignore that exhaustion. I'm going to keep going that allow loses the crews that are working really well and rest starting up in January."

So our guidance is flattish, based on those sort of puts and takes. And obviously, there's seasonality as well and when I -- for that, I'm speaking to holiday shutdown, specifically. Our last mile business is a throughput business, where we get paid, every time a ton is delivered to location. And over Thanksgiving and over Christmas, there will, no doubt, be days, where tons aren't delivered. And so that will have an impact on the fourth quarter. But all of that is shaping up, in our opinion, very well for 2022, where we see spending up and activities continuing to fill in the white space that we did see an improvement in white space, sort of, utilization in the third quarter.

One other thing to add -- yes, One other thing to add to that, Jon, is I think if you play back time, we weren't at 80 -- we weren't north of $5 on gas and north of $80 on oil, when we looked at the third quarter. So that does play. It frankly has muted relative to what one would expect at these price levels, but there has been increases.

Thanks, Bill. And I guess, along that same line of questioning, your utilization improved sequentially. That was nice to see. Can you talk about the sustainability of maybe that higher utilization on your deployed systems?

Is this a function of your customer mix and partnering with mainly large E&Ps that are more predictable? And how do you weigh that against maybe being opportunistic with some of the smaller players that are reacting to the improvement in commodity prices?

Yes. Well, I mean, clearly, I don't think, being reliable and steady is necessarily a big versus small phenomenon. I think there are smaller operators that are very reliable, that keep a program going, and maybe adding to that program. I think it's really a dynamic that as things were ramping back up through this year, you've just seen random ramping of various customers. And now all that white space begins to fill up, we'll see more and more -- higher and higher ratio of actually fully-utilized systems that were actually deployed. So that gap should continue to close as folks fully develop their capital budgets and their programs and may add a rig and fill in the completions programs to match the -- either the DUC drawdown or the additional wells that have been drilled.

Yes. And you're certainly seeing on the pressure pumping side, where operators, that don't miss a consistent program, are having to really schedule ahead because more and more folks that haven't been around for a while are popping up and completing wells. So not only are we seeing higher utilization, but I think on the pumping fleet, we're also see higher utilization. Part of that is driven by equipment but also by people. So it's obviously, more efficient for the industry to be running fewer crews and higher utilization than lots of crews and lots of people that aren't necessarily working all the time.

Yes. That makes sense. And then -- I guess, just last one for me is, if your activity is, call it, flat in the fourth quarter. I know you said it's flat to maybe down, but let's just assume it's flat. Would you assume that your margin would be flat with where it was in the third quarter? Or is there anything in 3Q that kind of weighed on results that goes away in the fourth quarter?

I think it's probably consistent. The last mile business tends to have a bit of a mix impact. If there are certain jobs where they're really firing all cylinders and we're pumping a lot of tons every day and then there are jobs that have wire line issues and, we're down for a couple of days. And so that's, sort of, some of the volatility we're seeing, from a quarter-over-quarter profitability mix, as the last mile portion of our business continues to grow. And yes, that may be a negative in one quarter or may be a positive in other quarter.

(Operator Instructions) Our next question comes from Ian MacPherson with Piper Sandler.

Which way, do you think, we're headed, next year, with overall completions efficiencies? Not just speaking to your purview, but it's been a secular trend of getting better, faster, cheaper, but we're hitting -- obviously, hitting a lot of sip just short-term supply chain snacks, but also just running out of the best cruise equipment and et cetera. And as an enabler of efficiency gains, do you think that companies like Solaris can help the industry stay on that track? Or do you think that 2022 is teed up to be a year of reversal for efficiency gains for E&P?

Well, certainly, the rate of change does appear to be slowing a bit, but the actual changes are incredible, if you just look at it, from, sort of, a pounds pumped per day or hours pumped per day, basin by basin, all the measures are going up. There's certainly -- certain basins that are trailing, from an efficiency standpoint, that have room to catch up. One of the -- you make a great point, when we find some high efficiency on, say, zip, multi-well silo fracs, well creates a challenge elsewhere. And so we're seeing the challenges in peer trucking logistics, getting enough capacity to deliver the amount of sand, that the industry needs, on location. So there's always a bottleneck that gets created somewhere, either upstream or downstream of some of these efficiencies.

And from our purview, the blender continues to be an incredibly high point of contention on traditional well sites, with lots of NPT. We've heard lots of anecdotes that we are happy to talk about. But the point is, there continues to be problems around blenders. And that is a point, where we're really focused on helping the industry get more efficient there. And again, the trials are driving a lot of interest on that product.

Yes. The completions activity really today -- because we're trying to manufacture as a constraint-management goal. And so as you look to goal seek around optimizing the efficient frac, you hit one bottleneck at a time. So it was sand logistics and sand storage and then it becomes water, then it becomes chemicals. It's removal of the blenders and beginning to automate things because labor becomes a challenge and people making just simple mistakes. And so our blender, in addition to the silos and other things believes what we think is, one of the most unreliable pieces of the actual low-pressure side of completions, which is what we're focused on. So our goal is to continue to make it efficient. The step changes are always big and they slow down, but our goal is to continue to keep a bit of a ramp on that. I don't think any of this reverses. So I think the trend may moderate, but does continue somewhat in terms of the industry's ability to complete a well in a certain amount of time.

That's really helpful. Thank you, both. Bill, in response to Stephen's earlier question on the PropX, it sounds like you view that as -- and, sort of, neutral to your market wallet opportunity. So you're not necessarily reading any specific positive or negative takeaways from share nibbling up or down on market share around the edges as a result of that transaction. Is that correct?

I think it will be around the edges. I mean, we do some business with Liberty, and PropX have a great place in that role in a well site, and the silos has a great place and we're on the well side. And I think a lot of that groundwork is established. And as we look at completions, efficiency and the amount of storage needed in a well site, we are a much more capital-efficient solution over time than having to load more boxes and swing small boxes around on a well site. Now -- and they've done a good job with it, and I think they'll continue to do a good job with it, and there's plenty of room for both of us.

Our next question comes from Samantha Hoh with Evercore ISI.

I was wondering, if you could update us on your chem and water initiatives. I believe there were some trials with the blender, using a combination of both the blenders and the water chem systems? And I was just wondering, if you could help us think about whether or not those initiatives can contribute to 2022 results?

Yes, all of the blenders will have water systems connected to them. So that's part of that kit. We've got, I don't know, maybe, roughly half a dozen to maybe 8 water systems running at any time with customers, even on an independent basis. And then on the chem system, I think we've had a couple running at various points as well. So not a ton of growth on the chem systems, at this point, but we do think it does tie in well into the blenders and same on the water side.

Okay. Great. And then, I was just wondering, as you think about the white space that you have for your rental system. Are you seeing a point, where you might need to deploy extra systems in the first half of next year? I'm just kind of wondering like how much, like space do you want to maintain, just in case there is like last-minute demand from customers? Anyone that's like really buying to add incremental works into your calendar.

Yes. I mean, if we look at -- let's just call it, 90 systems having run in the third quarter, to use round figures and if we think about our unutilized capacity is still quite significant, so we've got plenty of room to capture whatever share is out there. So from an optimizing white space say, you always want to have some reserve to make sure you're capturing all the revenue opportunities. But at this point, we've got plenty of capacity on the sand side of things to capture market share that may be available.

And then there's some level of that white space that is intentional because it's logistics driven, right? We may have a system down, maybe going to the same customer, but then maybe moving locations or further away, we want to take that system down for a week and put another one in service. So there's some mob/demob reasons to actually keep some of that white space. It's higher than usual because of the dynamic as the industry is ramping back up, right? We do have plenty of extra capacity to take advantage of additional spot work, which does, sort of, in itself create a little more white space.

You guys used to give us like a breakout of where all your systems were spread out geographically. Can you give maybe just like a loose update of where you're most concentrated these days?

The Permian continues to be our biggest set of focus. I mean, quite frankly, it's pretty closely aligned to the rig count and just overall completion activity. I wouldn't say it's all that different. We're probably a little bit higher in South Texas relative to rig count and maybe a little bit higher in the Permian relative to rig count.

Okay. And can you, kind of, characterize, maybe any, sort of, like operating preference between like the large E&Ps and privates. I mean, kind of curious, if you could say like -- I mean everyone expects the large E&Ps to be more efficient operators than to, kind of, run these systems longer. But are you seeing any sort of like notable trends in terms of how one operator might work in like certain basins versus another?

No. They all have their unique characteristics. Both small guys -- there are some small guys that are extremely efficient in what they do, and there are some big guys that are extremely inefficient with what they do. So I think it's a mixed bag, and we love them all the same.

Even on the new technology, we've got privates that love the new technology, they're very focused on driving efficiencies. We have privates that are less focused on that and vice versa on the publics.

Can you share a mix of your -- what -- how much the privates were in terms of your system usage this past quarter? Are they like 40%, 50% or more?

Well, I think, from a rig count standpoint, the privates have moved up to close to 60-plus-percent of overall rig count. And I don't know if it's quite there on completions, but it will get there, if it's not. So again, given our size, as far as overall market share, we tend to look like the market. So a lot of the pressure-pumping work we do directly ends up being for private operators.

Our next question comes from Sean Mitchell with Daniel Energy Partners.

So one thing that caught my attention, obviously, a 3-year agreement in oilfield services today, is a big win. Do you expect -- is that an anomaly do you think? Or do you expect that you'll see more of that to continue in the current environment?

We think it is unusual, but I think it's very strategic for the counterparty and for us. I think the blender and the notion of adding that kit into somebody's pressure pumping is vital as it is. I do think that, that tends to lead toward longer term contracts than generally spot work. So I do think that as a general trend because of the new equipment and new technologies and how integrated it becomes, we will start seeing longer term contracts, that are both -- good for both of us and our customers.

Got it. And then, just as you think about the trends, I do think that you're seeing a lot more folks do the simul-frac wells, both on the public and private side. We've talked to a lot of operators. The biggest issue it seems like when we sit down and talk to operators on the simul-fracs is water and sand. And can you just maybe talk about how much of the -- are you seeing -- I guess, where your business is today or do you think that's a benefit to you as the industry moves to more simul-fracs?

We do. We think that we can buffer sand, we can add a 9-pack, we can add another 6-pack, we can put a lot of storage, depending on the logistics nature of that particular location. Some are clearly closer to mines and places to pick sand up than others. And so that drives the challenge for how much you want to store at the well. Once we're at the well site, our connectivity to the high-pressure pumps is as good as anything, and it's very reliable, from that point on. We're not relying on other kind of equipment from there.

So I do think that, as I mentioned earlier, it's all about constraint management. I think that sand has impacted some places, more driven by trucking. And I do think there's been some tightness in the sand industry as mines shut down last year and are coming back on or needing to have some sort of contract or some sort of term deal to begin to want to put the capital and hire the people back, you need to get the mines back restarted. So there's bottlenecks through the system. And I think they're being hit one at a time and very location-specific.

We've heard anecdotally, jobs shutting down to 12-hour operations due to trucking constraints on the sand side. One of our last-mile jobs, we had planned for X number of stages per day, agreed to with the customer. Turns out, they're doing 1.5x on the stage count, but the problem is there's not enough trucking capacity to meet that demand. So there's no doubt about it. When we put, say, a 12-pack on location, doubling the inventory, you may be providing, say, 12 bonus hours of inventory and at $3,500 an hour in NPT charges, the return on that incremental insurance, if you will, of an additional 6-pack is quite compelling. So we haven't really seen it yet in the numbers materially. But we do think there's an opportunity to capture more calories, if you will, per spread by providing that added level of insurance.

And then, maybe one more. Just as you -- I think, in the prepared comments, you talked about, potentially 2 more blenders going out in '22. Just a higher level question on the blender. Is the adoption rate greater or in line or worse than maybe you expected in terms of how people are adopting that technology?

The interest level is about as high as we expected. We have quite a bit of interest in it, and we're in the process of negotiating. We've been, maybe a little careful with putting the capital to work and waiting on some contracts, which we're working through right now, and we'll be prepared, as we mentioned, we are spending a little bit on some long-lead items in anticipation of that. But haven't fully said go yet on a bunch, but it does feel like it solves numerous problems and bottlenecks in the industry, and we're fairly hopeful about it.

Yes. The evolution of the interest is interesting to watch is 2 years ago, when we initially talked to people about it, it was -- I don't have any issues with blenders. They're all brand new and they work really well. And over time, those blenders, if more not -- and they've been faced with lots of challenges. And so time is, sort of, our ally here, and particularly, as people get more and more focused on efficiencies, this particular piece of equipment on traditional locations continues to be a bulls eye for those trend to drive efficiencies.

Right. And it's all electric, and it integrates right in with the power sources for the electric frac fleets, be it a turbine or a gas generation or line power.

This concludes our question-and-answer session. I'd like to turn the call back over to Mr. Bill Zartler for some closing remarks.

Thanks, Ali, and thank you all for participating on our call. We want to thank all our employees, customers and stakeholders for another strong quarter. We're very proud of all the efforts that have gone into the continued enhancement of our core offerings and the new product development activities. We look forward to providing further positive updates in the beginning of 2022. Thank you all. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.