Trican Well Service Ltd

TSX:TCW

Earnings Call Transcript 2020-Q2

[Operator]

Welcome to the Trican second quarter results conference call. [Operator Instructions] I would now like to turn the conference over to Dale Dusterhoft, President and CEO. Please go ahead.

[Dale M. Dusterhoft, Executive Officer]

Thank you very much. Good morning, ladies and gentlemen. I'd like to thank you for attending the Trican Well Service conference call. Here is a brief outline of how we intend to conduct the call. First, Robert Skilnick, our CFO, will give an overview of the quarterly results. I will then address issues pertaining to current operating conditions and near-term outlook. We will then open the call for questions. Mike Baldwin, our Executive Vice President, is also available to answer questions. I'd now like to turn the call over to Rob to provide an overview of the financial results.

[Robert Skilnick, Chief Financial Officer]

Thanks, Dale. 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 for 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 Q2 2020 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 2019 AIF and the business risks section of our MD&A for the quarter ended June 30, 2020, for a more complete description of business risks and uncertainties facing Trican. This conference call also refers to several common industry terms and certain non-GAAP measures, which are more fully described in our second quarter 2020 MD&A. Our second quarter results were released this morning and are available on SEDAR. Although reductions in activity are typical for the second quarter, this particular quarter saw unprecedented activity declines, largely because of COVID-19 market impacts, combined with incredibly weak oil and natural gas prices. Trican's Canadian revenue match these industry declines with revenue reaching levels even lower than Q2 revenue levels in 2016. Despite these unprecedented low industry activity levels and revenue declines of more than 70%, we were able to mitigate negative adjusted EBITDA levels through aggressive cost-cutting measures. These measures included personnel reductions, temporary salary reductions and controlling expenditures in all other areas of the company. The significant cost reductions in our business at the end of March, combined with the cost reduction measures that were already being implemented in advance of the COVID-19 pandemic will result in our annualized 2020 fixed operating overhead and SG&A cost structure being lower by more than $45 million. Given the already slower Canadian market prior to COVID-19, we had previously adapted our business to be responsive to volatile market conditions. This state of readiness allowed us to quickly adjust our business to the changing market. Despite the significantly lower Q2 revenue, Q2 adjusted EBITDA of negative $6.8 million is an improvement over the Q2 2019 level of $15.1 million. Furthermore, negative adjusted EBITDA saw year-over-year improvements even without the benefit of the $5 million Canadian emergency wage subsidy. Without the federal subsidy program, we would have had to make further reductions in our business. Due to 2020's net loss for the period of $28.6 million approximated a net loss of $28 million last year. The comparative Q2 2019 net loss benefited from $6.5 million deferred tax benefit as a result of the reduced 2019 tax rates. The company's business generated modestly negative operating cash flow in the quarter before considering changes in working capital. Operating cash flow before working capital was approximately negative $7 million despite the significant industry headwinds. However, significant receivable collections resulted in positive operating cash flows of $55.6 million. Trican used these cash flows to repay the outstanding bank debt. And at June 30, 2020, the company had $26 million of cash on the balance sheet. This significant cash position combined with our positive noncash working capital of $48 million and our available credit lines will continue to provide the company with significant liquidity to weather this current market uncertainty and will allow us to maintain our equipment in good working condition with the potential for making opportunistic investments. Our Q2 2020 capital expenditures were minimized at $1.6 million. These expenditures were fully funded through redundant and/or permanently idled asset sales of approximately $2 million, which excludes the proceeds on disposition of a non-core service line approximating $2.5 million, which cash was received on July 1. Additional assets may be sold if a reasonable price can be obtained for them. Our financial position will allow us to ensure we receive a fair price for any asset sales. During the past 24 months, we've monetized more than $60 million of stranded noncore capital through ongoing asset dispositions. By recognizing that the Canadian industry was generally overcapitalized, the company was able to monetize significant amounts of equipment, which has contributed to considerable financial strength. This has also made it possible for us to purchase more than 23% of our shares over the past 30 months, including 2 million shares repurchased in Q2. Substantially all of the second quarter purchases were made in May and June as we started to see relatively less volatility. The company continues to view share repurchases as a good long-term investment opportunity for the use of any excess capital. Our recent moderation of share repurchases is not a reflection of our view on the company's value, but rather a desire to maintain strong liquidity in order to navigate these unprecedented near-term market conditions and to have capital available for opportunities that may arise. Approximately 23% of our allotment under our NCIB program remains, which corresponds to the approximate 17% of time remaining until our NCIB expires at the end of September. I'll now turn the call over to Dale, who will be providing comments on our operating conditions and strategic outlook.

[Dale M. Dusterhoft, Executive Officer]

Thanks, Rob. As we noted in our last conference call, we have implemented a number of procedures in the field and office to ensure the safety of all of our staff. And thus far, we have had no cases of COVID-19 in our company. Although activity continues to be lower year-over-year, the safety protocols we implemented in our field operations to protect our people and our customers from contracting the virus has allowed us to continue to perform jobs safely and successfully. Additionally, all support functions continue to operate effectively from offices and remote operations, allowing us to continue with our business while sharing the safety of all of our people during those pandemic. These times are truly unparalleled. Our order activity materialized as we had expected, which resulted in record revenue declines. However, we also applied the necessary cost reductions and significant business adaptations to allow us to navigate the company through this considerable industry slowdown. Specifically, we have reduced our fracturing spent and coil crew counts and adjusted our fixed and overhead cost structures, which should result in 2020 fixed overhead and SG&A levels being $45 million or greater or lower than when compared to 2019. Additionally, the seasonal cost structure adjustments that we -- that were implemented helped mitigate second quarter negative operating results even before the considering the positive effects of the Canadian emergency wage subsidy program. This resulted in adjusted EBITDA seeing improvements relative to the adjusted EBITDA levels of the second quarter of 2019 before considering the fact of the federal wage subsidy program. The third quarter has seen a sequential improvement in activity levels. Thus far, in July, we have been running 3 fracturing crews at good utilization levels for customers who have committed their second half programs such ICAP. Based on customer commitments and conversations, we expect to see 3 crews for the remainder of Q3 and we'll monitor our customers' spending plans and adjust our fleet upwards if we can achieve high utilization and maintain acceptable pricing on any fleet we add back into the market. Our cementing services have seen improvements commenced through it with the increase in Western Canadian drilling rig count. We have 10 primary cement trucks activated, which compares to 20 in the first quarter. So revenue will be affected by the lower industry activity levels. Additionally, we have undertaken some remedial spending work in relation to the federal and provincial well abatement programs. Although the well abandonment program is not likely to be material, to the overall business, this program will help offset some costs and keep some of our people working. Our coil services will not recover in the third quarter to the same levels as our fracturing and cementing service lines. We have 3 crews available but believe near-term utilization will be low through the start of the quarter with improvements toward the end of the quarter as activity will slightly trail the ramp in drilling and completion work. Pricing for Pressure Pumping Services was competitive prior to entering this downturn. For this reason, we do not anticipate further significant pricing pressures. We believe companies will park equipment rather than electing to cannibalize their own market. We intend to remain focused on working with our customers to improve daily pumping efficiencies, which will reduce the cost of -- which will reduce their costs far more than with minor pricing concessions. By partnering with us, a number of clients are achieving pumping efficiencies of 20 to 22 hours per day with the recent achievement this last week with one of our clients, pumping 94% of the minutes in a day. We have operations teams within the company to move all of our clients to higher levels of pumping efficiencies, which improves our clients' cost and also generates more profit from our existing asset base. The North American Pressure Pumping business remains competitive. And companies that can improve efficiencies and offer low-cost safe service will retain the best customers while generating the best relative returns for our shareholders. Price of natural gas in Western Canada has remained high relative to last year. And most of our third quarter activity will be driven by natural gas and liquid search natural gas activity. Our customers' cash flow on liquids-rich gas routes has improved significantly. However, most clients are looking for continued stability in commodity prices and sustained improvements in global oil and gas demand before committing to increases in the second half work programs. Cash flow generation by our oil producer clients has also improved, but it is not yet at a level where there will be meaningful increase in oil-related drilling activity. While we do not anticipate that these cash flow improvements will add significant work in the third quarter, we are encouraged by our customers' improved economics. If these price improvements hold, it will eventually translate into an increase in western Canadian activity. Our company's cost structure was already much improved heading into this downturn, and we have already made the necessary cost reductions to adapt to this new market. We believe that a number of our fixed cost reductions will result in permanent improvements to our cost structure, which will be sustainable and will substantially benefit our company coming out of this downturn. Additionally, we continue to make efficiency gains throughout our organization. In particular, we have a number of Lean Six Sigma projects underway that will lower our costs through automation, component life management, data tracking, tractor less fracturing, increased efficiency in our operations, and as previously discussed, better pumping efficiency on location. Despite all of the market uncertainty, strong balance sheet, Rob noted, will allow our company to continue to invest in and pursue permanent business improvements. The cost reductions we have made to date, combined with the increased level of activity in the second half, and emergency wage subsidy should provide enough cash flow to cover the necessary sustaining expenditures for the remainder of 2020. Since 2015, we have made a conscious effort to significantly deleverage and restructure our business, and we have remained focused on our core strengths in our core market. A big reason for the focus on returning funds to our balance sheet through debt repayments and share buybacks was in response to our strict economic hurdle thresholds for investments. These thresholds helped to ensure we did not continue to pursue a strategy of further overcapitalizing in an already overcapitalized industry. This discipline now uniquely positions Trican to emerge from the severe downturn in a position of significant stack. On June 30, we had no debt with cash on the balance sheet. This position is relatively unique in our industry, which will allow the company to look seriously at several investment opportunities. However, we will not compromise our investment return requirements, as returning funds to the balance sheet through our share buyback remains a strong alternative investment opportunity. We anticipate that unlike the downturn that began in 2014 and there will be significant fracturing equipment attrition within the industry since equipment is older and more likely to be retired that brought back into service after this downturn. Competitors were also large distressed. The ability to replenish and replace equipment will be significantly diminished for many in the industry, which will place some organizations and positions of relative strength and provides a potential opportunity to improve business performance considerably coming out of this incredibly challenging market. Despite these market challenges, our primary goals for 2020 remain consistent with those we presented previously. First, we will continue to focus on having top-quartile returns in our sector by increasing the returns of our core business lines through strong utilization and a permanently lower cost structure. This will improve the ROIC we generate from our active equipment. We will continue to pursue opportunities to generate funds from parked equipment or idle assets that no longer can be used in Canada. Maintaining a healthy balance sheet is still our top priority. We will continue to evaluate returning capital to our shareholders through our NCIB program while monitoring cash flow from operations and not compromising our financial stats. Our strong financial position allows our forces the flexibility to evaluate investment opportunities that may permanently change the industry, such as funding costs reducing technologies and programs. This ensures we can continue to improve our efficiency and cost structure in a highly competitive market. At the same time, we will also be able to explore investments in our existing business and potentially new service lines that yield short-term financial returns, combined with long-term improved return on invested capital for the company. This will be my last conference call. After 24 years at Trican, and 11 years as CEO, I'm retiring at the end of August, at which time, Brad Fedora will take over as President and CEO. I feel confident knowing that I'm leaving the company in an excellent financial position and with a strong leadership team. I believe it is the right time for me to step down from a personal standpoint as well as the right time for Brad to step in to lead the company. I've been with Trican since day 1 and have seen its growth from a small regional cementing company to the largest pressure pumping company in Canada, and have made a tremendous amount of -- and have met a tremendous amount of great people along the way. I want to thank all of our current staff and my task colleagues for their hard work, also, commitment to safety and customer service, passion and pride in the company. I will miss all of you and hope to stay in touch. I want to thank our customers for their loyalty to Tican during both the up and the down cycles of our industry. The majority of our clients are long-term partners with us that have been a huge part of our success. And I also want to thank the ILS investors that I've worked with and met over the years. I've enjoyed our conversations, the insight you have provided, the friendships I have made, and thank you for your commitment to the company. I thank you for your attention today and your interest in Trican, and I'd like to turn the call back to the operator for any questions.

[Operator]

[Operator Instructions]

[Unknown Analyst]

Are you taking my questions?

[Dale M. Dusterhoft, Executive Officer]

Yes, [ Keith ].

[Unknown Analyst]

So just maybe to start off, Q3 looking a tiny bit better on the revenue side based on rig count and activity. How should we be thinking about incremental margins in Q3 given that bump in activity plus the permanent cost savings you've mentioned?

[Robert Skilnick, Chief Financial Officer]

I mean, I think as sort of Dale outlined in his commentary that we want to get to a place where we're generating a little bit of cash and when factoring in the subsidy enough to cover sustaining capital is kind of what we're thinking. So that's really the decrements on the margins.

[Unknown Analyst]

Got you. Okay. And on that wage subsidy, do you have a rough guess for what you might expect to receive over the last half of the year?

[Robert Skilnick, Chief Financial Officer]

I mean Q2 is a good proxy. We're just kind of evaluating some of the new changes to the program, but Q2 is a good proxy for the remainder -- for each successive quarter.

[Unknown Analyst]

Okay. And working capital, should we be thinking about an inflow or an outflow for the rest of the year? And maybe the other

[Robert Skilnick, Chief Financial Officer]

It will be a little bit of an investment in working capital, but it's not going to -- there's a good chance we can keep it under the -- keep debt down at 0.

[Unknown Analyst]

Yes. Understood. And one final one. You mentioned generating enough cash to maintain equipment and opportunistic investments. Is this more in your existing fleet and additional efficiency gains? Or should we be thinking potentially about new business lines either related to your current business lines or new segments of the market altogether?

[Dale M. Dusterhoft, Executive Officer]

Yes. What we've kind of consistently said that we're going to invest in our existing services to improve them. And so that would be at this point in time, it's really small incremental investments that will continue to make in the second half of the year that are going to improve efficiencies. They're going to lower our cost structure or make us more competitive on location. And we do have some investments there that we're going to make. In terms of expanding the business, I mean, we do look at every opportunity that comes across, both within our service lines as well as outside of our service lines. And our strategy is much the same that if we believe that we could strengthen our existing service lines through acquisitions or business opportunities, then we would. But it's very much dependent in today's world on not hurting the balance sheet and also generating -- having the right purchase price and generating the right amount of financial returns from it. We do look at other service lines, and we'll continue to. Strategically, we've always said that we'd like to get some other service lines in the company. But I would say that from a priority standpoint, it would be a little bit further down the list.

[Operator]

Our next question comes from Waqar Syed with ATB Capital markets.

[Waqar Mustafa Syed]

But first, Dale, I want to wish you the best as you start the next phase, and I want to thank you for your friendship for all these years. I've always valued your commentary and you've been my go to encyclopedia for any technical knowledge as it relates to pumping. So again, thank you, your friendship and best of luck in your next phase.

[Dale M. Dusterhoft, Executive Officer]

Thank you for the kind comments. Likewise. I appreciate keeping in touch with you going forward, too.

[Waqar Mustafa Syed]

Just my question more, broadly, a more strategic question. You mentioned about this job where you pumped 94% off a minute. Could you talk about that job, what was done differently that caused that kind of efficiency improvement? And number two, is it easy -- it can just be replicated in a more general way? And then what is it -- how does it impact demand if we continue to see those kind of efficiency improvements, demand in Canada over the long term, even if overall completion activity goes up?

[Dale M. Dusterhoft, Executive Officer]

Yes. So on the efficiency side of it, so this is a -- this is work with a long-term client where we work really closely with the clients. And so we can't achieve 94% efficiency without the client being extremely tied to us in terms of sound delivery, water delivery, all the other services have provided on location being really in sync with us as well. And so I would say that getting to this level of efficiency is very much an incremental exercise of a number of little things rather than one big thing and the little things as I mentioned around the client side but from the Trican side of things. It's basically switching between wells. So we've developed -- Those of you that are familiar with the Lean Six Sigma project, we've gone through the whole process and evaluated every single step that takes place in a wow switch. And by doing that, you can streamline your process and essentially eliminate all the unnecessary steps and not quite a few mines out of well switching. And we've been able to do that and implement that with our clients, get maintenance procedures that allow us to maintain equipment off-line so that we don't have to shut down the job at all to maintain equipment. It is -- it is sand delivery and ensuring that your sand, there's no sand hold ups or anything like that. So I think in general, it's a lot of little things. We're driving some new technology on the back end of our pumps with hoses rather than iron that actually helps a lot more with the rig up, but also is a little bit more efficient. And if we get less vibration on our equipment. And so we're seeing a little less wire and tear there. And we're going to be investing in more hose technology in the second half of this year as well. And so a number of smaller things that distribute to one big thing. And in terms of it's affecting utilization on an overall basin basis, as we move all of our clients there, absolutely, it's going to affect things. But if you looked at our average clients are still having quite a bit of improvement to make. They'd be more in that 14 hours a day efficiency and on an average within Trican, and we have to continue to move them up into at 20% to 22%. But if we can work really closely with clients, we can get most sides of that range.

[Robert Skilnick, Chief Financial Officer]

And I think just to, sort of, close the loop on the industry and how that affects the long term demand, absolutely, the efficiencies are going to effect -- or sorry, affect the supply of equipment. Sort of counteracting that is, I think, as Dale mentioned in his prepared remarks, just the fact that we expect to see fair amount of attrition out of the market as well in Canada because of the -- everything going on and some of the equipment is getting old and fairly used. So there's kind of a balance there. But absolutely, efficiencies do drive a little bit of increase -- effective increase in supply. But I think it's -- as we look at our industry model, we do see that some of that demand may get counterbalanced.

[Dale M. Dusterhoft, Executive Officer]

Yes. I think to Rob's point too, Waqar. It's -- I mean, equipment has to be really well maintained to achieve these high utilization. And if it's older, not very well maintained equipment or equipment that can't continuously pump, that's going to be an issue. So I believe that -- as Rob said, that as you drive these high efficiencies, you're going to lead out quite a bit of equipment from the market. So the supply side probably comes down quite a bit if we continue to head in this direction.

[Waqar Mustafa Syed]

This was like -- what -- in the U.S., they're calling simultaneous fracs with 2 wells being fracked right at the same time at low rates?

[Dale M. Dusterhoft, Executive Officer]

Yes. No, we haven't done a lot of simultaneous fracturing in Canada yet. I suspect it will be coming with certain clients. But at the moment, where the majority of the work we would do would be zipper or single well fracs. And then follow-up with another one.

[Waqar Mustafa Syed]

Okay. And then could you talk about the supply costs? Have they stabilized? Or did they come down in the second quarter? And how do you see those kind of trending going forward?

[Michael A. Baldwin, Executive Vice President]

Waqar, it's Mike Baldwin. We did see some pricing improvements on frac sand and some of our other inputs and chemicals and that kind of thing. I'd probably characterize those more as kind of one-off opportunities. We aren't seeing any pricing increases. But at the same time, there's not a lot of opportunity to see pricing declines either. So I think on a go-forward basis, generally, I think we'll still see some of those one-off improvements coming in. But I would say the run rate is probably pretty similar to what we saw at the end of Q2 for the remainder of the year. I think the big area that we've seen the most cost improvement has been on the repairs and maintenance side of things. We've been very focused on maintaining our active equipment but doing it in a very cost-effective way. And we've seen a bit of a step change in what our costs are on that front. So again, I'm still relatively confident that we'll be able to continue that trend on a go-forward basis.

[Waqar Mustafa Syed]

Given where the supply-demand dynamics are right now, all those savings, whether that's our report maintenance or other input costs, are they being passed on to the consumer or service companies able to retain some of that?

[Dale M. Dusterhoft, Executive Officer]

Yes. So if you kind of -- if you looked at our work scope with our card clients, I would say that we're passing on most of our savings on sand and things like that. And then we're retaining savings that we have internally on efficiencies and cost of as Mike alluded to, if our repair and maintenance costs are lower, then we're able to retain that. But product sales on the big product items. We -- in this market, we're passing that on to our clients. And that's allowed us to keep our margins relatively stable with our core clients, from our side of it, while they still get some benefit from this downturn on sand costs and a few chemical costs and fuel costs and things like that.

[Operator]

[Operator Instructions]

[Dale M. Dusterhoft, Executive Officer]

It looks like we have no other -- There's another question. Sorry.

[Operator]

Our next question comes from John Gibson with BMO Capital Markets.

[John Gibson, Analyst]

Just following on Waqar's questions there. How much horsepower on the basis? And do you think is actually able to move to sort of the 22-hour-per-day range? And would these types of fries be more prevalent in the Montney Duverney, areas? Or are you expecting them to be done as well as the conventional project of Viking and Cardium?

[Dale M. Dusterhoft, Executive Officer]

Yes, the -- I can't really comment on everyone else's horsepower because I don't know what quality. But I think every company will have most companies as probably some capacity that can move to that level. In terms of the areas where you could do it, yes, Montney Duvernay is where we're seeing the success right now. But quite honestly, you could -- we apply this in the -- our previous best efficiencies we had were actually in the southern part of the province and the East Duvernay field, still Duvernay field, but on some of the oil work we were doing down there. And so you can apply it everywhere. It's not really limited to the formation. But where we're seeing -- where we're seeing the best efficiency right now is large pads. We're working really closely with the client. You're out there for 4 to 6 weeks, and you just continually improve every day.

[John Gibson, Analyst]

Okay, great. Second one for me. On the cost reduction side, can you identify a percentage or dollar amount or how much of them are actually going to be permanent and we'll come back when activity levels in?

[Robert Skilnick, Chief Financial Officer]

We haven't -- I wouldn't say we've completely pinned down that permanent nature of all the cost reductions just given how quick things have come and how fast the activities come down. But I would say a vast majority of the cost reductions would be more permanent in nature. If I had to guess, I'd say 3 quarters and the givebacks are going to be more things when you get back to a world where you've got things like profit sharing, et cetera. That's the reality. I think we've done a lot in the last few years on process systems, et cetera, that have vastly improved our ability to scale up the business. So I think we can maintain a vast majority of them.

[John Gibson, Analyst]

Okay, great. Last one for me. Just at your sort of existing level of 3 crews, what level of utilization do you think you need to achieve to get to sort of breakeven EBITDA net of the wage subsidy?

[Dale M. Dusterhoft, Executive Officer]

Sorry,

[Robert Skilnick, Chief Financial Officer]

The utilization on the cruise?

[Dale M. Dusterhoft, Executive Officer]

I would say that we're pretty well there with what we run, and we normally will target 70% to 80% utilization on a crude.

[Robert Skilnick, Chief Financial Officer]

Yes. Look, I think we're targeting that 70% to 80%, whether we kind of get fully there or not, it will be -- it's probably going to be in the 60% range. I would think it's going to be a little bit more choppy here through the third quarter. So we'll monitor it pretty closely and that kind of thing, just to see how things are going. And the reality is what we've done from a business perspective is we've retained our most senior personnel and are adapting the crews with -- and adding to them if we need with junior personnel to move that crew count up and down to kind of flex up and down a little bit through these choppy times.

[John Gibson, Analyst]

Okay, great. And congrats, Dale, on your retirement, wish you all the best in the future.

[Operator]

Our next question comes from Jeff Fetterly with Peters & Company.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

Question on Q4. You talked about the visibility you have for Q3, but what are you seeing for Q4? Or what are your expectations for activity and utilization in Q4?

[Dale M. Dusterhoft, Executive Officer]

The 3 crews that we're running should continue through Q4 and say we've got good customer visibility with our card clients all the way to the end of the year. And then as we mentioned, and I've set, and I said kind of qualitatively in my prepared remarks, I would say that liquids risk gas clients, the economics are quite good on them. And so they're not going -- adding to their program just yet, but we're encouraged by what we're seeing on the economics of their courage. I'd say, positively looking at things. So there's potential to add equipment back in Q4, but we have to kind of see those plans get developed. And as much as anything, our clients are looking for some stability. They want to see how the second wave of COVID plays out in the world. They want to see if commodity prices are going to hold. But if we get stability, I think there's going to be some clients that will be going to be looking at expanded programs at some point in time.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

Any expansion to the programs? Does that solidify the utilization for the 3 crews? Or could that trigger an incremental crew or more capacity coming to work?

[Robert Skilnick, Chief Financial Officer]

It's probably a combination of both. It just firms up some of the -- where there may be small gaps and stuff like that, plus there's -- again, as I mentioned, that we've got a lot of the senior personnel that we just sort of reallocate and bottom-up to form another crew if we need to.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

And any incremental activity you expect it could come in Q4? Or realistically, is it more of a winter phenomenon?

[Dale M. Dusterhoft, Executive Officer]

I'd say the earliest we'd see it is mid-September with a little bit, and then the rest would be in October.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

Just a clarification question on cost structure. So your reference to the $45 million of annualized savings compared to 2019, how much of that would have been realized in the second quarter or in the second half of this year? Like, do you expect that the $45 million will fully show up this year?

[Robert Skilnick, Chief Financial Officer]

Yes, Jeff -- sorry, if we've confused. That is the absolute dollar amount that's come out in '20 relative -- or we're expecting to come out in 2020 relative to 2019 cost structures. So that is, obviously, a majority is weighted to the Q2 time frame and beyond.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

But the absolute dollar change in your cost structure this year should be about $45 million?

[Robert Skilnick, Chief Financial Officer]

Yes. Yes.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

And so if we thought about the annualized impact in 2021, would it be much more or different than that $45 million?

[Robert Skilnick, Chief Financial Officer]

I think it should be more, other than the sort of commentary that I made, again, just on the last one, where if you get back to a world where you're actually thinking about profit sharing and things like that, Jeff, that would be the counterbalance to some of those. You get back a little bit.

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

Don't jinx it, Rob.

[Dale M. Dusterhoft, Executive Officer]

That's [indiscernible]

[Jeffrey Eric Fetterly, Principal and Oilfield Services Analyst]

Dale, best of luck in the next job. Do stay in touch.

[Operator]

There are no more questioners in queue. This concludes the question-and-answer session. I would like to turn the conference back over to Dale Dusterhoft for any closing remarks.

[Dale M. Dusterhoft, Executive Officer]

Normally, I say, I look forward to talking to you next quarter, but I can't do that today. So yes, I want to wish you all well. Rob will be here to talk to you next quarter and have a great rest of the summer. Looking forward to your interest in Trican going forward. Thanks.