Trican Well Service Ltd

TSX:TCW

Earnings Call Transcript 2021-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome to the Trican Well Service First Quarter 2021 Earnings Results Conference Call and Webcast. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mr. Brad Fedora, President and Chief Executive Officer of Trican Well Service. Please go ahead, sir.

[Bradley P. D. Fedora, President, CEO & Non]

Thank you very much. Good morning, ladies and gentlemen. I'd like to thank you for attending the Trican conference call today. Just a brief outline on how we intend to conduct the call. First, Klaas Deemter, our interim CFO, will give an overview of the quarterly results. I will then address issues pertaining to current market conditions and near-term outlook, and then we'll open up the call for questions. We have several members of our executive team here as well. So we should be able to answer any questions. I'll now turn the call over to Klaas.

[Klaas Deemter, Interim Chief Financial Officer]

Thanks, Brad. Before we begin, I'd like to point out that this conference call may contain forward-looking statements and other information based on current expectations or results of the company. Certain material factors or assumptions were applied in drawing a conclusion or making a projection as reflected in the forward-looking information section of our Q1 2021 MD&A. A number of business risks and uncertainties could cause the actual results to differ materially from these forward-looking statements and financial outlook. Some of these risks and uncertainties are further amplified due to the current global health crisis caused by the COVID-19 pandemic. Please refer to our 2020 annual information form and the business risks sections of our MD&A for the quarter ended March 31 for a more complete description of business risks and uncertainties facing Trican. This conference call refers to several common industry terms and certain non-GAAP measures, which are more fully described in our quarterly MD&A. Our quarterly results were released after close on market on May 12 and are available on SEDAR. Revenue in the first quarter of 2021 was $148 million, an increase of $45 million from fourth quarter 2020 levels. A recovery in commodity prices improved cash flows for our customers, and as a result, led to higher activity levels for Trican. The benchmark West Texas Intermediate oil price, also known as WTI, averaged USD 58 per barrel, 36% higher on a sequential basis. AECO, the benchmark Canadian natural gas price was up 17% sequentially, increasing to an average of $2.94 per MCF in Q1 2021. The average western Canadian rig count was 146 in Q1 2021, a significant increase over the average of 89 in Q4 2020. The rig count escalated quickly at the start of the quarter and stayed relatively consistent from mid-January to mid-March before declining with the onset of spring breakup. The sequential increases welcome the service companies, but the rig count is still at the lower end of the 5-year range and is reflective of the capital discipline being exercised by customers as they focus on returning value to their shareholders and their balance sheets rather than through the drill. We're proud of our operational execution beginning the coldest days of the quarter, strong operational efficiency and [indiscernible] activity, combined with structural fixed cost improvements made in the last year have led to sequential improvements in key financial categories. Our adjusted EBITDA came in at $27 million, a significant improvement over the prior year period despite a year-over-year rig count decline of 20% and our corresponding year-over-year revenue decline of 23%. Adjusted EBITDA was negatively affected by cash stock compensation expense of $1.8 million, which fluctuates with the movement in the company's share price and by fluid end expenditures of $2.3 million. Trican expenses fluid ends as their useful life is typically less than 12 months due to the type of work found in the higher intensity areas in WCSB. You're aware that this is not a uniform practice across the pressure pumping industry. So we remind readers of our statements to bear in mind when comparing our -- bear that in mind when comparing our results against other market participants. Trican also recognized $5.5 million from the Canadian Emergency Wage and Rent subsidies during the quarter. Fracturing operations were supported by large pad work, driving high utilization and a 46% increase in proppant pump compared to Q4 and 2020 levels. In response to strong customer demand, the company activated an additional fracturing crew in early January at minimal cost. This resulted in 6 fracturing crews operating through the quarter compared to 5 crews in Q4. Improved fracturing margins were a significant factor in the overall sequential improvement in margins for the company. The company was also pleased to introduce the -- Tier 4 dynamic gas blending fracturing pumper in Q1 which is trialed on multiple customer locations. This new generation dual fuel engine can displace up to 85% of diesel with cleaner burning natural gas, reducing costs to our customers and emissions on location. Positive feedback from customers and our own desire to reduce the company's environmental impact as part of our ESG commitment, or factors leading to our decision to upgrade 30,000 horsepower of existing conventionally-powered diesel pumpers to the Tier 4 engines. Cementing activity, which largely tracks to rig count, saw a sharp ramp-up in January and had steady utilization through the quarter until spring breakup conditions start to be more -- started to be felt in mid-March. The average job size increased over Q4 as the company had more jobs in the deep, technically-challenging wells that are found in the Montney and Deep Basin areas. Coiled tubing activity was up on a sequential basis with steady utilization and cost control driving an improvement in margins. The utilization was supported by 122 well coalbed ethane program that ran from Q4 2020 through to the end of Q1 2021. Depreciation and amortization was $24 million, lower than the $25 million recorded in Q4. This reduction is attributable to the age of the company's fleet and due to the impairment taken on nonfinancial assets in 2020. First quarter profit before income tax from continuing operations was $1.7 million, a significant improvement over the loss of $21.9 million in Q4 2020 and the loss of $155 million in Q1 2020. Both comparative quarters recognized significant impairments related to the impact of the COVID-19 pandemic. The company was also pleased to report the sale of a software business for cash proceeds of $6.5 million. This drove a gain of $4.2 million, which was reflected in the profit from discontinued operations. Trican's combined net profit for the period was $5.9 million or approximately $0.02 per share. The company's cash balances remain steady on a sequential basis, even with the working capital build through the quarter, operating cash flow and proceeds from the disposition of noncore assets were sufficient to fund the company's capital expenditures of $6.9 million, along with the company's ongoing investment into our NCIB program. The company expects its full year 2021 capital budget to be approximately $40 million, following the announcement of the Tier 4 fleet upgrade made in April. This investment will upgrade existing conventionally diesel-powered pumpers with the CAT Tier 4 engine that was trialed in Q1. As noted earlier, these engines can displace up to 85% of diesel used in a conventional pumper with clean burning natural gas, reducing carbon dioxide and particulate matter emissions. This low-emission fleet is a key part of Trican's ESG methods. Furthermore, refurbishing and upgrading existing equipment has a lower environmental footprint relative to building new since not all components are required to be replaced. The capital budget is expected to be funded from available cash on hand as well as from free cash flow that will be generated from the business through the balance of the year. Trican exited the quarter with $23 million in cash and no drawn bank debt. Additionally, the company has a positive noncash working capital position of approximately $70 million. Our strong cash position and available credit lines provide the company with sufficient liquidity to invest into our equipment and give us the flexibility to make investments such as the recently announced Tier 4 program as well as consider other opportunities as they arise. The company will continue to dispose of surplus and noncore assets, although it's difficult to predict the quantum of these disposals. Disposals of these assets allow us to monetize stranded capital and redeploy it back into the business, but our capital program is funded independently from these activities. During the quarter, we also invested $1.7 million into our NCIB program. The company continues to review share repurchase as a good long-term investment opportunity for the use of any excess capital, although we'll always evaluate various opportunities that will offer the best long-term investment for the company. I also want to note that we recast the comparative periods for our 2020 quarterly results to reflect the change in the recognition of the Canadian Emergency Wage Subsidy program. We reviewed our 2020 submissions following a CRA audit and determined that our initial applications understated what we were eligible for. We have corrected our submissions, and you'll see in the notes of the financial statements that we recast those amounts into 2020, as they are associated with activities of that year. As a result of this positive adjustment, our recast 2020 results reflect an increase of $5.7 million to our earnings and adjusted EBITDA. Please see Note 13 in our March 31, 2021 statements for complete details. I'll now turn the call over to Brad to provide some comments on the operating conditions and strategic outlook.

[Bradley P. D. Fedora, President, CEO & Non]

Thanks, Klaas. I'll make some general comments, both on Q1 and on what we are seeing for Q2 in the second half of 2021. So just in Q1, activity increased significantly when you compare it to Q4. We were active with all our core customers. We were fortunate enough to have had a very short Christmas break and had most of our crews back working actually before year-end or very early January. And even during the extreme cold in February, we had very minimal delays. Our crews worked really well through that whole week. The quarter began with about 150 rigs running in the basin. We peaked at about 182 and then exited the quarter, I think, with 79 active rigs. The pricing was stable compared to exit 2021 levels. Even though it was stable, the pricing is always competitive, with companies jockeying for market share, particularly Liberty was one of our -- one of the bigger price offenders in the market in Q1 and continue to be in Q2. And so that has provided some unneeded pressure into the pricing market. Our strategy has not changed. We plan on moving pricing up in the second half of the year. We simply cannot operate at these pricing levels and maintain a sustainable business. And I think most of our customers understand this. And any, as I've discussed in prior calls, any positive pricing movement goes straight to cash flows and our -- and the bottom line. So the operating leverage works well, both on the way up, just as it does on the way down. Much of the fleet in Canada is nearing its end of life for the main components on the pumps, especially. And so the sector as a whole will need capital reinvestment going forward. And so when you look at today's pricing conditions, you simply cannot afford to reinvest into our equipment. And I think generally, the reactivation cost of bringing fleets back into the market has generally been underestimated. And so I think you'll see continued pressure to get pricing up to more reasonable and sustainable levels throughout the rest of this year. As Klaas was saying, we ran 6 frac crews in Q1, we averaged about 186,000 working horsepower throughout the quarter, 17 cement crews and 6 coil crews. We don't expect that this will change any significantly going forward. The cementing crews tend -- obviously go up and down with the number of drilling rigs that are running, but the 6 frac crews and the 6 coil crews, we think, will be stable until this fall. We continue to focus on the Montney and the Deep Basin, with the improved commodity prices, particularly natural gas over the last sort of 9 months, activity has been stable and growing in that area. In Q1, about 85% of our work was natural gas or liquids-rich gas at about 15% oil. We don't expect that will change much. Now that we've got oil in the mid-60s, we may see some -- our oil share grow a little bit. But certainly, the core -- our core business is focused on gas and liquids-rich gas areas. The number of -- the amount of proppant pumped in Q1 increased by about 45% and we pumped about 335,000 tonnes in the quarter. Most of that was internally sourced. About 65% of the proppant we pump comes from Northeastern U.S. or is the Ottawa white sand versus the domestic sand. And more of our customers are pumping their own sand, but that's okay. We will charge corkage on customer sand going forward. And so we don't see that as being a significant impact on our business. We achieved really good cost reductions in the quarter, especially in our fixed cost infrastructure. And of course, this leads to higher margins, improved cash flow and earning margins. And as a result, we generated about $19 million of free cash flow in Q1. We've been significantly invested into our infrastructure, in our business in the past. And so we're able to add revenue to our business in the future without any significant increases to our fixed costs or our D&A, and that's the operating leverage that I often refer to. So just on the second half, we've had a really good start to Q2. I think customers are taking advantage of good commodity prices and actually very stable weather, which has been a treat this year. If we don't get any prolonged weather interruptions, this will be our best Q2 that the company's had in years. We expect to actually to be EBITDA positive for the quarter, which will be a nice change, and will have a significant impact on our annual EBITDA and cash flows. I think our customers are doing a better job of level loading their programs this year. And we hope that continues into the future in the following years. The Q2 rig count has generally been better than what we expected. We're currently at about 64 rigs. This is a really good sign for the second half of this year. When you think back to this time last year, there was almost no rigs running. The basin, as always, remains very gas focused. Improved oil prices, you'll see more liquids-rich and oil plays being pursued. But in general, Canada in the gas basin, and gas prices have really firmed up nicely in the last 9 months. And certainly, the forward curve looks encouraging. So we're expecting activity to slowly increase in Canada. And just backdrop to that increase in activity that we're expecting, we are not going to be running any more frac crews. Like I said, we're going to run 6 frac crews until the fall, six coil crews, cementing crews will fluctuate with the drilling rigs, but we're not expecting to add any crews into this basin. We don't have great visibility past the summer as we never do at this time of the year. Generally, our summer looks very busy. We have -- our Board is full, per se. And so we're expecting a busy summer and just as budgets get firmed up over the next sort of 6 to 8 weeks, we expect to have a better sense of Q4, but we expect to stay busy for the second half of the year. We're -- the strong commodity prices that we're seeing today, I don't think are being reflected in budgets. And so when you think about budgets coming out over the next 6 to 8 weeks, I think, generally, they will trade -- they will trend up. But certainly, we're aware that our customers are under pressure to reduce debt payments, increase dividends, not grow production for the sake of growing, but to focus on returns. And we're doing the same. And we're working with them to make sure that the programs that they are conducting, they're as efficient as possible, and we certainly want to add to their profitability. And we hope that they will see us a partner -- as a partner in their growing profitability and efficiency going forward. That being said, fuel margins are still skinny. We're starting to see some cost creep into the system from our suppliers, which is expected. Both us and our suppliers have reduced prices to unsustainable levels, and they were held there for the most of 2020, and they just can't stay there forever. So we understand that our suppliers need to give us price increases and just like we need to give our customers a price increase. Going forward, if the basin does continue to grow its activity, people will remain the bottleneck for future crew activations. The labor force, although it's not an issue today, we do expect that if -- if we start growing activity 10% a year, that will become an issue, and it will become an issue for all service companies, not just the pressure pumpers. And that -- it will increase the reactivation times. And that, combined with higher reactivation costs, and I think what has been previously anticipated should maintain the market in a fairly tight supply demand balance. On the supply chain and cost efficiency side, we did a great job. The company's done a great job of getting its SG&A down in the last few years. Our SG&A levels today are sort of less than half of what they were a couple of years ago. And the same would apply to our fixed operating costs. We're operating on a monthly basis now. That's less than half of what it would have been 2 years ago. So that is a great -- that's great augmentation to profitability. And we don't expect that, that's going to change going forward. We expect that if we do add crews, whether it's on the coil, fracking or cementing side, that our fixed costs will remain very stable. On the supplier side, the biggest pressures we've had is diesel and third-party trucking, and those, of course, are intimately connected to each other. Hotel costs have gone up. The amount of density in the rooms that we're able to implement due to COVID has obviously declined. We used to put 2 people in the room. Now we can only put 1 and those costs are definitely showing up in our cost structure. We have been able to pass some of that on to our customers. But you've had a huge increase in diesel in the past 6 months. And I don't think that's been truly appreciated in the marketplace. This will put pressure on all third party costs. And so we expect that as our costs increase, we will pass on those cost increases to our customers. Given the events of line 5, I think we get questions, how that impact your operations and even though it's not a direct impact to us, if we do end up with more crude by rail over the next year, depending on what happens, that could cause some logistics bottlenecks, particularly with respect to sand coming out of the U.S., but we'll just continue to monitor that and hedge our bets accordingly. We're always looking to invest in technology advances within our industry. We have the balance sheet to look at anything and everything. And we showed that, I guess, a few weeks back when we announced a 3-year deal with 1 of our customers on a Tier 4 low emissions fracturing spread. That fracturing spread becomes active in Q4 of this year. And we'll look for more of those. And I think what's important to note is that the price volume -- or volume negotiations that resulted were at levels that we felt we were getting good returns on that investment. We would never make investments, whether it's technology or equipment, unless we thought we were going to get returns above our cost of capital. And certainly, we would have no issues with parking spreads. If prices go down, we're -- I want to just stress that we're very returns focused, and we will make moves accordingly. We've made other implementation into technology and things like idle free in the field with our large pumps. We expect that, that's going to expand through our fleet. And just what that does is just shut the engines down when it's not being used, saves on diesel, saves on emissions, saves on repairs and maintenance. So it's a good technology to implement. It's just making sure that the pricing environment can support that ongoing investment. The capital program for 2021. We've announced previously that we expect our capital to be about $40 million for the year. That's going to be split evenly between our Tier 4 spread upgrade and maintenance capital. We'll continue to monitor opportunities for investment and the need for continued maintenance capital. But for now, our program is set at around $40 million for the remainder of the year. When we look at sort of growth opportunities and acquisitions, we often get asked about this and consolidation opportunities. Our primary focus still remains on getting our existing equipment fleet to work. We have a lot of equipment parked. We have a company built for much higher levels of revenue. And so certainly, from a returns on investment perspective, that is the best way to increase cash flows and earnings, is to get our existing equipment into the field and working. So we're going to be looking at ways to make our existing fleet and our potential adds more efficient. And that's basically where our efforts are going to be for the next few quarters. I mean we're always open to the right deal, and we're always evaluating opportunities as they arise. But I certainly wouldn't expect anything but continued focus on the operations and making them as efficient as possible and getting our equipment back into the field when the pricing environment is right. We're not currently active in -- on our NCIB right now, where the shares currently trade above our price threshold. And as Klaas was saying, we're currently weighing that investment against potential technology investments or reactivation costs, et cetera. And so we'll be in and out of the market as we see fit from a returns perspective. I think I'll end my comments there, and we'll turn the call over to the operator for questions.

[Operator]

[Operator Instructions] Our first question is from John Gibson with BMO Capital Markets.

[John Gibson, Analyst]

First 1 for me. Can you maybe talk about pricing terms around your seventh crew set to hit the field in Q4. I was wondering if did that fleet receive a bit of a premium? Or is it kind of in line with current pricing levels?

[Bradley P. D. Fedora, President, CEO & Non]

Yes. We're not disclosing terms of the contract. But certainly, given that it is the sort of the newest evolution of equipment in the field, and it provides big cost savings to our customers. And it fulfills all their ESG requirements. We would not have entered into that contract at today's pricing. Or at Q1 pricing, I should say. So yes, there was a price premium, but we're not discussing details.

[John Gibson, Analyst]

Okay. Fair enough. Second one for me kind of leads on to the last one. When you look at opportunities for new work, would you say there's a clear directive for new build Tier 4 fleets? Or is it sort of a combination of legacy equipment sitting on the sidelines?

[Bradley P. D. Fedora, President, CEO & Non]

Well, I think there's demand for all. Like we basically have a 3-tiered equipment fleet now. We've got conventional horsepower that runs on diesel. We've got dual fuel equipment, which is the result of all the retrofits that have occurred in the industry over the last 5, 6 years, mainly. And that provides about 50% to 60% diesel replacement with natural gas. We have lots of that as well as our competitors do. And then there's a third tier, which is our Tier 4 engines which is the 85% replacement. So we now have sort of 3 classes of equipment. And certainly, we get demand for all, but there is a growing interest in the Tier 4 technology. All of our customers are -- we're all getting pressure in the oil and gas industry to run more efficiently and to run cleaner from an emissions perspective. And so the demand for that equipment is substantial. We could definitely put more of that equipment to work today. It's just getting the right pricing and work volume commitments to encourage us to make that investment. They're not cheap, as you can imagine. And so we're not just -- we're not going to put more of that on the street on spec and put it to work for the prices that we're seeing in Q1. We need higher prices to justify that kind of investment. I'm sure our competitors would say the same thing.

[John Gibson, Analyst]

Okay. Great. Last one for me. Utilization, obviously, is a big driver of profitability, and it was nice to see an uptick in Q1. I'm just kind of wondering what's the threshold you need to see across your active fleet before you'd start to think about either adding or even subtracting crews, absent spring breakup, obviously?

[Bradley P. D. Fedora, President, CEO & Non]

Well, if there's any price pressure downward, we will pull the crew immediately. We're not tolerating a reduction in pricing. That's crazy. We're not even running at economic levels in -- from a Q1 pricing perspective. And some of the bids that we've seen by our competitors, particularly the U.S. firms. They can have it. So we'd rather park the equipment and go to work for those prices. So from a price increase perspective to reactivate, I wouldn't say we're in -- we're in the environment that would require reactivations yet. So I would think prices will have to grow sort of even more than what we're anticipating for the summer, before we would start to think about equipment reactivations. I can't give you a firm answer on it because there's just too many variables, but we'd have to see what happens from a pricing pressure from our own suppliers. So that we were able to calculate our net price increases. So there's a lot of moving pieces. But the short answer is, I don't foresee any new fleet activations anytime soon.

[Operator]

Our next question is from Cole Pereira with Stifel.

[Cole J. Pereira, Associate]

Just wanted to come back to your comments on pricing, Brad. I mean it sounds like the E&Ps are fairly understanding. I mean, as it stands today, do you think you have reasonable line of sight to get some modest pricing increases in the second half then? Or is it still too unclear at this point?

[Bradley P. D. Fedora, President, CEO & Non]

No. I mean it's never clear. But absolutely, we're not we're not sort of changing our views on pricing. And certainly, the larger, more sophisticated customers completely understand that 2020 COVID level pricing was not in any way sustainable. And so we've had lots of encouraging conversations with our core customers. So we're proceeding as per our plan. And if we get to the summer and we're not able to achieve price increases with all of our customers, well, we'll pull the crew. Might be a choppy summer and might not be. But we simply cannot continue to operate at these prices. And I think anybody or any of our core customers understand that. And so we still are of the view that we're going to get price increases for the second half of the year.

[Cole J. Pereira, Associate]

Okay. Perfect. That's helpful. As we think about some of your other competitors, call it, the large U.S. frac companies and the small privates, I mean, is it fair to say from what you guys see that you think they will maintain their current footprints through the rest of the year as well?

[Bradley P. D. Fedora, President, CEO & Non]

Yes, I can't speak for them. So I honestly -- I can't answer that. I don't know what they'll do.

[Cole J. Pereira, Associate]

Yes. Okay. Fair enough. And just kind of a general question here. I mean you talked about some of your Montney Deep Basin work? I mean, are you getting much inquiries for Duvernay work at this point in the back half of the year?

[Bradley P. D. Fedora, President, CEO & Non]

Yes. It's not, it's not -- I wouldn't say it's overly significant. But yes, we definitely get -- we are definitely getting more inquiries for Duvernay-style work. I mean everybody knows who's sort of bought into that play recently. And so we've had some of our customers exit and some of our customers enter the Duvernay. So is it significant to our activity levels? No, I wouldn't say so. Certainly, Montney and just general Deep Basin is still the driver of our utilization.

[Operator]

Our next question is from Keith MacKey with RBC.

[Keith MacKey, Analyst]

Just wanted to maybe start off with the comment around potentially using the balance sheet for growth opportunities if conditions warrant. Just curious if you have any more color you can put around that, maybe comfort leverage levels and things like that as you think about your strategic goals?

[Bradley P. D. Fedora, President, CEO & Non]

Yes, we would view debt as temporary. I think it's always a mistake to get lulled into a sense of comfort that the industry's going to stay at existing levels going forward. And as the industry increases, of course, so do your industry activities increase, so to your cash flows. And so I don't foresee us ever really outspending cash flows other than on a sort of temporary basis for a few quarters, maybe. But we're not at the point where we would see any kind of significant amount of debt to be a permanent part of our capital structure. We would use it sort of just as a shock absorber from a CapEx versus free cash flow perspective or an operating cash flow perspective, sorry.

[Keith MacKey, Analyst]

Got it. Got it. Makes sense. And just as ESG becomes a larger part of your strategy, you mentioned that as part of the, one of the reasons to upgrade to the DGB fleet. In that context, do you have a view or a stance on sustainability reporting and that kind of thing? Or anything we should expect to see there?

[Bradley P. D. Fedora, President, CEO & Non]

Yes. We will have a sustainability report out later this year, hopefully, this summer. And it would be something that we would view as sort of a permanent part of our corporate strategy, is incorporated as a subsector of our corporate strategy would be our ESG strategy. And the amount of time and effort we're spending on that is going to grow, we would anticipate and we would -- we're anticipating that we will have an annual report out that we'll have targets and what we're doing to meet those targets that will be published annually just like you've seen with the larger companies.

[Operator]

[Operator Instructions] Our next question is from Josef Schachter with Schachter Energy Reports.

[Josef I. Schachter, Author & President]

I have 2 of them. When you upgraded and created the -- for DGB Tier 4 equipment, which is going to be locked in for 3 years, did you use a Tier 3 upgrade? Or would you use earlier tiers? And if there's more demand in the future, would it be which equipment would you want to upgrade from the different tiers? Is it in your economics to do Tier 3 to Tier 4 at a lower cost? Or would you take your oldest equipment and upgrade?

[Bradley P. D. Fedora, President, CEO & Non]

So we upgraded conventional -- like a conventional frac engine and by upgrade meaning threw it in the garbage and put a new Tier 4 engine on the pumping unit. And then we upgraded the transmission and actually also upgraded the pump, so that it's now considered a 3,000 -- or we are going to be upgrading all of this, so that the pump is now considered a 3,000 horsepower pump, and it would have a more durable transmission and a brand-new Tier 4 engine. And so when we think about further upgrades, yes, we would -- you know what, I can't even make those predictions because it could be a mix of things, but would we upgrade an old 2,500 horsepower pump? No. No, we wouldn't, right? We don't even have any 2,250 pumps. And our Tier 2 engines that have natural gas kits retrofitted on them. There's still going to be an active market for that equipment going forward. And so it's not like we think the whole industry is going to transition to Tier 4 anytime soon. There's still an issue with natural gas logistics on location to fuel those pumps. And they're not always applicable in all parts of the basin. So it's -- I can't really answer that question, clearly. I mean, we would look at our equipment and see what makes most economic sense, but I don't have that kind of -- I don't have my equipment list sitting in front of me now.

[Josef I. Schachter, Author & President]

Okay, super. In past conference calls, you've talked about M&A consolidation. Have you got any further thoughts on that? And do you see potentially Trican making entries into new areas? Or consolidating in the areas you are currently? And is that something that's -- have you seen anything of attractiveness there?

[Bradley P. D. Fedora, President, CEO & Non]

Yes. I wouldn't say there's any interest in expanding outside of Canada at this stage. So we don't look at consolidation opportunities in the U.S. or international, and we won't be for the time -- for the foreseeable future. We obviously look at anything and everything, because we do have the balance sheet, we have the luxury of a clean balance sheet that will allow us to complete almost any transaction that's available in Canada. But our main focus is just making our business as efficient as possible, waiting to see what happens from an activity growth perspective because our most profitable growth in the near term, meaning over the next sort of 12 to 18 months is getting our old equipment off the fence and getting it into the field and getting it working, just because we do have an infrastructure that supports a much higher -- much higher levels of revenue. And all of that operating leverage goes to the bottom line, as you know. So that's our main focus. Now from an M&A perspective, we do look at other service lines from time to time. And we do understand, as a public company, we need to continue to grow in a $500 million enterprise value is not meeting investment thresholds for many of the funds around North America. And so sort of our 5-year plan would, I guess, would be more flexible from an M&A perspective. But our sort of our 12-month plan is going to be very M&A light, I would say.

[Operator]

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Fedora for any closing remarks.

[Bradley P. D. Fedora, President, CEO & Non]

Okay. Well, thanks for attending, everyone. I'd like to also remind our shareholders that Trican's Annual General Meeting will take place this afternoon at 1:30 Mountain Time, and it will be a virtual format. It will be a very short meeting. Please see the Investors section on our website for details on how to call into that and participate in the meeting. With that, thanks, everyone. The management team will remain available for the next few days for questions if any further questions come up. Thanks for calling in.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.