Trican Well Service Ltd

TSX:TCW

Earnings Call Transcript 2023-Q2

[Operator]

Good morning ladies and gentlemen. Welcome to the Trican Well Service Second Quarter 2023 Earnings Results Conference Call and Webcast. As a reminder, this conference call is being recorded.

I would now like to turn the meeting over to Mr. Brad Fedora President and Chief Executive Officer of Trican Well Services Limited. Please go ahead Mr. Fedora.

[Brad Fedora, President & Chief Executive Officer]

Good morning everyone. Thank you for attending the Trican second quarter results conference call. To start the call Scott Matson, our Chief Financial Officer [Technical Difficulty] overview of the quarterly results. I will then provide some comments [Technical Difficulty] the quarter, the operating conditions, and [Technical Difficulty].

I'll try to get through my comments as fast as possible. I know there's lots of [Technical Difficulty] calls. So, we're hoping to wrap this up within 20 minutes or so and then we will then open the call for questions. Several members of our executive team are here today on the call and are available for questions.

And I'd now like to turn the call over to Scott to start things off.

[Scott Matson, Chief Financial Officer]

Thanks Brad. So, before we begin I'd like to remind everyone 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 that were applied in drawing conclusions or making projections are reflected in the forward-looking information section of our MD&A for Q2 of 2023.

A number of business risks and uncertainties could cause actual results to differ materially from these forward-looking statements and our financial outlook. Please refer to our 2022 Annual Information Form and the Business Risks section of our Q2 2023 MD&A and our MD&A for the year ended December 31st, 2022 for a more complete description of the business risks and uncertainties facing Trican. These documents are available both on our website and on SEDAR.

During this call, we will refer to several common industry terms and use certain non-GAAP measures, which are more fully described in our Q2 2023 MD&A. And our quarterly results were released after close of market last night and are available both on SEDAR and on our website.

So, with that, let's move on to the results for the quarter. Trican's results were significantly improved with continued solid industry activity levels and a more moderate inflationary environment, which led to a more sustainable margin profile and improvements across virtually all major financial categories.

Revenue for the quarter was $168.2 million, about a 10% increase compared to the same period in last year. This was mostly attributable to a more constructive pricing environment, which allowed us to offset some of the inflationary pressures we were facing at this time last year.

Adjusted EBITDA came in at $31.9 million, a significant improvement over the $19.2 million we generated in Q2 of 2022. And I would note that our adjusted EBITDA figure includes expenditures related to fluid end replacements, which totaled $1 million in the quarter and were expensed in the period.

Adjusted EBITDAS for the quarter came in at $32.9 million or 20% of revenues, which is stronger when compared to the $23.6 million and 15% of revenues we printed last year.

To arrive at EBITDAS, we add back the effects of cash settled share-based compensation costs recognized in the quarter to more clearly outline the results of our actual operations and remove some of the financial noise associated with the changes in our share price as we mark-to-market these items. We recognized approximately $1 million in expense related to those items in the quarter.

On a consolidated basis, we generated positive earnings of $9.8 million in the quarter, which translates to $0.05 a share basic and $0.04 per share on a fully diluted basis. We generated free cash flow of $22.7 million during the quarter as compared to the $14.6 million we printed last year.

And again, our definition of free cash flow is effectively EBITDAS less nondiscretionary cash expenditures, maintenance capital interest, cash taxes paid and cash [Technical Difficulty] stock-based comp.

CapEx for the quarter totaled $14.4 million split between our maintenance capital program, about $8.8 million of that was maintenance capital and upgrade capital of $5.6 million. The upgrade capital was dedicated mainly to our Q4 capital refurbishment program and the ongoing electrification of some of the ancillary frac support equipment which Brad will touch on later.

Balance sheet remains in excellent shape. We exited the quarter with positive working capital of approximately $128 million, including cash of about $40 million. And finally, in terms of return of capital, we were quite active in our NCIB program during the quarter and repurchased and canceled 7.5 million shares at an average price of about $3.24 per share during the quarter. We remained active in July and repurchased and canceled an additional 2.7 million shares, which successfully concluded our 2022, 2023 program.

As noted in our press release, the Board of Directors yesterday declared a dividend of $0.04 per share to be paid on September 30, 2023 to shareholders of record as of close of business on September 15, 2023. And I would note that the dividends are designated as eligible dividends for Canadian tax purposes.

So with that, I'll turn things back to Brad for some comments on our current operating conditions and our outlook.

[Brad Fedora, President & Chief Executive Officer]

Thanks. I'll try to get through this as fast as possible. Overall, Q2 pretty much went as forecast. We're happy with the quarter. We always budget for bad weather and activity interruptions. So the fires and then I believe it or not, some of the floods did not have a material impact on our quarter. Some of the work was delayed until the summer, but that's [Technical Difficulty].

We did -- on the cost side, we did -- we are still experiencing inflation on certain items. But overall, I would say inflation has really slowed down and with the improving exchange rate and some of the removal of some of the fuel surcharges, some of our items like sand [Technical Difficulty] refreshing change for our customer base.

On the pricing side, although the pricing has generally been stable for the last year or so, we did experience some pricing pressure during mid-season late in the quarter. It's always disappointing to see, but it feels like it's sort of stabilized here, now that the bids are over. And I wouldn't expect there to be a lot of pricing changes for the remainder of this year [Technical Difficulty] everybody is sort of [Technical Difficulty] I would say overall [Technical Difficulty] fairly full. I think [Technical Difficulty] pricing pretty much stable [Technical Difficulty] of 2023.

On the fracturing side, we're still operating seven frac crews. It's important to note, this means that we're operating about 60% of our equipment. We have sort of a maximum capacity of 11, 12 crews depending on the size of the crews. But in comparison to our competitors, who are operating basically at capacity, Trican is still at a stage where I wouldn't say our business is operating [Technical Difficulty] we can still improve our situation as we add crews to the basin. And we will not add those crews to the basin unless there is incremental [Technical Difficulty]. Certainly, I would say, even quite profitable third quarter in our space, we can definitely improve on that as we bring more [Technical Difficulty] field.

On the cementing side, I'm really happy with that division. That's [Technical Difficulty] our cementing [Technical Difficulty] really speaks [Technical Difficulty] how activity has [Technical Difficulty] the year, as I've made reference to in prior [Technical Difficulty] I think so we’ll get better and better [Technical Difficulty] as the years go by [Technical Difficulty] see more of a material slowdown in December just for the Christmas season like sort of every other business [Technical Difficulty] I think that's a welcomed change and certainly something I hope continue along this trend.

Our market share in cementing is about 35% overall but 50% in the Montney and the Deep Basin [Technical Difficulty]. We feel we have the most value to add with our technical facilities and our [Technical Difficulty] blends and our laboratory [Technical Difficulty] full-service product offering.

We're looking to add more into plays like clear water and heavy oil. We've previously pulled out of [Technical Difficulty] labor shortages. So we're looking to get back [Technical Difficulty] into those areas as we think they will be a continued focus of the [Technical Difficulty] next five to 10 years. And our ability to add in those spaces is really only limited by our ability to add staff [Technical Difficulty] as everybody knows [Technical Difficulty] for good quality labor is tough.

People have lots of choices. So we'll [Technical Difficulty] high-quality labor so that we can continue on with our best-in-class service. On the coil side, we had a fairly slow quarter in coil, but so far Q3 has started with a bang. So we're not discouraged by [Technical Difficulty] we're operating sort of [Technical Difficulty] units and although it's not a significant portion of our sales, we're still working to improve that division. I think, I've mentioned in the past it's not operating at a level that we're happy with. So we'll just continue to spend time on that.

We've hired people that are dedicated full time [Technical Difficulty] to getting that vision operating at a level that we're happy [Technical Difficulty] it's keeping up with [Technical Difficulty] internally with fracturing [Technical Difficulty] perspective. So we'll just continue to grind away on that to make improvements.

Outlook for the second half of this year, I think, it's pretty similar to last year. The rig count, although, it was much higher in Q1, it seems to be basically tracking so far in Q3 similar to last year's levels. And so I think the second half of this year looks a lot like last year. Maybe Q3 is slightly higher and maybe Q4 is even maybe slightly lower. But overall, I would say, should be kind of a repeat of last year to a large extent [Technical Difficulty] even though our revenue is up 25% year-to-date [Technical Difficulty] the second half is the range like you said to [Technical Difficulty] last year.

I would say the pressure [Technical Difficulty], I don't think we're under supplied and I don't think we're oversupplied, and it seems like it's sort of steady as she goes here. Our customers [Technical Difficulty] capital budget very thoughtful in the way, they're allocating capital [Technical Difficulty] and even just the timing of the completions, I think, the industry is getting more and more sophisticated.

So they're spending less than [Technical Difficulty] free cash flow and [Technical Difficulty] completions. And so as commodity prices [Technical Difficulty] will always have volatilities [Technical Difficulty] that sort of percentage of cash provides, a really good shock absorber [Technical Difficulty] and I don't think you'll see big [Technical Difficulty] activity reactions to changes in commodity [Technical Difficulty] marketing in the U.S. [Technical Difficulty] They were sort of surprised how stable Canada [Technical Difficulty] be and one of our answers was, hey, last year when we had $100 oil [Technical Difficulty] you didn't [Technical Difficulty] to that. And so they sort of [Technical Difficulty] activity through these ups and downs in the commodity cycle. We've got a hot summer in the US and Europe, helping to clear out some of the gas storage to more normal levels. And so if we get a normal winter, I would expect we'll see gas prices go high [Technical Difficulty] and maybe we'll start [Technical Difficulty] the activity [Technical Difficulty] incrementally.

We're very encouraged with the advancements of the industry's relationship [Technical Difficulty], but we look at the LNG facilities being [Technical Difficulty] over 7 Bcf [Technical Difficulty] two of which is very near term. LNG drilling activity has started. The project is a very long life 50-plus years something the First Nations are very happy to be involved with. It's very much aligned with their investment profile and time line. So with various facilities, whether it's in Squamish BC at Woodfibre LNG, Canada in Kitimat, we expect this to be -- to build over time and really underpin long-term stability in this basin.

Of course, the Montney, Deep Basin [Technical Difficulty] primarily gas-focused which means they're very fraction intensive. So we think this is [Technical Difficulty] Canada is a great place to invest in and do business with over the long term. And we think our product offering in particular is really well suited to this incremental LNG demand, high-pressure wells, customers want low emissions both the customer and the First Nations want small footprints. They want less water consumption, clean air all of that -- all of the technology that we've been investing in.

On the supply chain, we are seeing just as the amount of the tons of sand per well is growing and we have some big numbers in the Montney in particular. We are seeing what we will believe are current and future constraints within the logistics of sand. We think the whole transloading system rail system trucking industry is basically running at capacity. And we've already seen instances where there's a sand shortage in certain areas of Western Canada. We don't think this will get anything, but worse frankly, third-party trucks and just the logistics system in general is very tight. It's not that well built out as we expand into Northeast BC. There's less and less Class I drivers one to drive in the oilfield today. So this of course we see as an opportunity.

We're looking at lots of different stuff. We want to invest in sand logistics and making sure that the last mile logistics is as low as possible which has a drastic impact on [Technical Difficulty] our product offering [Technical Difficulty]. Again, we're very bullish on Western Canada. We think we're going to play a growing role in the overall global natural gas picture. So we [Technical Difficulty] invested for the long term and make sure that we can deliver our services as efficiently as possible.

We believe plays like the Montney combined with LNG exports [Technical Difficulty] long-term base of activity. So we're [Technical Difficulty]. We still have a pristine balance sheet. We exited the quarter with about $40 million of cash, lots of positive working capital and that just gives us the -- frankly the luxury of looking at anything and everything to improve our business. We're going to invest [Technical Difficulty] predictable long-term returns and making sure that [Technical Difficulty] good for our shareholders [Technical Difficulty] we continue on with our differentiation and modernization. The strategy state-of-the-art equipment making sure our systems are leading edge really focusing on the ESG side of the business developing out our partnerships with [Technical Difficulty] in Alberta that will play a role as we go forward. And this is all under the guiding principle of clean air and clean water.

And we're making sure that, our investments align with all of those principles. We've rolled out our first low emissions spread last year. We're really happy with how that technology is performing. We get our fifth Tier 4 fleet in late Q4 of this year. So, five out of seven crews will be state-of-the-art brand new Tier 4 spreads with low emissions low footprint less people [Technical Difficulty] able to withstand [Technical Difficulty] pumping times.

We started this program [Technical Difficulty] 38 million liters of diesel with natural gas. So something we're really proud of. It's something that our customers and the communities really want to see more [Technical Difficulty] the lines [Technical Difficulty] oil and gas activity and development with [Technical Difficulty] what the public wants [Technical Difficulty] smaller footprint less carbon emissions [Technical Difficulty] et cetera.

We expect this technology will continue. We expect it will become the standard in the industry. And so as a result we need to continue to look at ways to differentiate ourselves. And as Scott was mentioning, starting in Q1 we've electrified the ancillary equipment [Technical Difficulty] fleet which means that means [Technical Difficulty] enables us to reduce the number of people that we have in what we call the hot zone where the pressurized pipe has laid out. And it also combined with Tier 4 technology, allows us to have gas substitution rates of over 90%.

So again, our goal is to have 100% natural gas on location to pump no diesel at all. And this is just the next step in that overall goal. We'll continue to invest in that electrified equipment as we go forward as we think, it's a win for us, and for our customers just the design of the [Technical Difficulty] in particular. I think, we've [Technical Difficulty] reliability [Technical Difficulty] still working out some gains in the design, but we think overall it will be a much improved piece of equipment.

It's important to note, since we've upgraded so much of our fleet that, we now actually have sort of 11 of 12 fleets that are field-ready -- generally been upgrading parked equipment and as we've been upgrading that equipment [Technical Difficulty] or we've been sort of displacing a traditional diesel spread. But now 11 -- we have 11 fleets field ready. And so when you think about the spare capacity in Canada, we pretty much have the bulk of it and it is ready to go [Technical Difficulty] any more capital investment for us.

When you look at the parked equipment at -- our competitors just like [Technical Difficulty] so not only do we have the most technically advanced new fleet, but our entire fleet has basically been reworked. So you look back past to this industry and where we were at even just a short few years ago, we've gone from an aging fleet that required a lot of capital to basically [Technical Difficulty] half our fleet is brand new and the [Technical Difficulty] half is ready to go [Technical Difficulty] so we feel like we're in a great position to take advantage of increasing activity, and even just increasing focus in Northeast BC Northwest Alberta. So really happy with where we're positioned [Technical Difficulty].

On the return on capital side, our priorities have not changed. We want to build a resistant sustainable and differentiated company invest in growth opportunities that provide returns for our shareholders and our customers long-term and of course provide a consistent return on capital for our shareholders through dividends and buybacks. So we finished -- we focused heavily on the NCIB this year. We finished it early.

Like Scott was saying we bought 23.1 million shares since last October at an average price of $3.37 a share. When you roll back -- when you roll this program back to 2017 overall, we've bought 143 -- over 143 million shares at an average price of Technical Difficulty] a share which represents just over 41 [Technical Difficulty] very successful program regardless of how the market is valuing us in our space.

We look at these multiples and think it's screaming buy you can't go long. So we expect to renew our NCIB in October and remain committed to this program for what may be the long-term. We now pay a quarterly dividend [Technical Difficulty] above just to provide some certainty [Technical Difficulty] in our return [Technical Difficulty] strategy, but we look [Technical Difficulty] be active again in the fall on [Indiscernible] shares back. I think I'll stop there and I'll turn the call over to the operator for questions.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Aaron MacNeil with TD Cowen. Please go ahead.

[Aaron MacNeil, TD Cowen]

Good morning. Thanks for taking my questions. As it relates to the quarter, I was a bit surprised to see proppant pump down 15% on a year-over-year basis, but revenue is up 10%. I know you referenced both stronger pricing and a change in customer well designs in the disclosures, but I'm hoping you can sort of parse that out a bit more for us. Like what was pricing? What was well design and what specifically changed in well design on a year-over-year basis?

[Brad Fedora, President & Chief Executive Officer]

We don't have all of that information with us here, but I wouldn't get too fussed by those stats like just depending on the customer base and what they're developed what they're completing that can change quite drastically from quarter-to-quarter frankly. But I don't have any more detail handy here Aaron to give you much more than that. It's not something that we track that closely frankly.

[Aaron MacNeil, TD Cowen]

Fair enough. You sort of touched on this at various points of your prepared remarks, but you've seen ARC sanction [indiscernible] just went public or intends to go public via Pipestone and are guiding to growth in the sort of high single-digits Logan again small but also committing to more of a traditional growth model. You highlighted the parked equipment in your prepared remarks. I guess, I'm just trying to understand what do you think the likelihood is in your view that some of this equipment goes back to work in 2024 or another time frame that you think is reasonable?

[Brad Fedora, President & Chief Executive Officer]

I think for sure we'll be bringing one maybe two spreads into the basin in the next 12 15 [Technical Difficulty] just the momentum. It feels like – there's always slowdowns and there's always little pauses along the way but it's in this business for the long-term. And when you think about LNG and the transactions that you just mentioned, I mean those transactions they result in increased activity, right? They don't – you've taken sort of not as is but maybe under capital [Technical Difficulty] into a much stronger hands [Technical Difficulty] financially stronger hands. So that just means an increase in activity. And when you've got – LNG is real, TMX is real, the world wants more Canadian natural gas in particular more Canadian oil.

As we know it's the cleanest [Technical Difficulty] world. I look at this and I never felt – I've said this before, I think a few times but never felt good this good about the business when I look out five, 10 years. And I don't think it's going to go crazy and I don't think we're going to see these huge swings in activity level from year-to-year that we all thought was normal when you go back pre-2017. So no, I think it's going to – I think all of that parked equipment that we have or those five spreads that are built some of it comes off [Technical Difficulty] and the next year.

[Aaron MacNell]

That’s great. Thanks, Brad. I’ll turn it over.

[Operator]

The next question comes from Cole Pereira with Stifel. Please go ahead.

[Cole Pereira, Stifel]

Good morning, all. Just thinking about capital allocation in 2024, I mean with your five Tier 4s, do you feel there's adequate demand and upside for more of those upgrades? Are you kind of fine with your footprint in that regard? And how do you kind of think about – you talked about share buybacks but maybe further dividend increases, potentially M&A, et cetera?

[Brad Fedora, President & Chief Executive Officer]

Yes. I mean we are always pausing and reviewing different technologies. So we've got five [Technical Difficulty] we're currently waiting on the results from what was 100% natural gas engine. We're still waiting to see how that works out. And so we might [Technical Difficulty] our never ending pursuit of having [Technical Difficulty] natural gas. But we don't sort of feel – we feel like we're very much ahead of the game and that gives us the luxury of being able to pause and look around and say, hey, let's not get to – let's not have the blinders on with our technology. So we'll figure out what's happening and I still think more of our fleet will be converted.

I think the industry is going to [Technical Difficulty] just bake everything I've already said [Technical Difficulty], so we have a placeholder for capital. It's very similar to this year. Our NCIB will be [Technical Difficulty] this is a Board decision not my decision. But I would expect sort of once a year we'll recalibrate our dividend so that the [Technical Difficulty] overall aggregate dividend payout doesn't change from year-to-year. But just as our share count shrinks, you would expect the dividend per share to go up. That seems like a logical approach.

And as far as M&A goes, nothing has changed. I mean we're all trading at crazy low multiples which maybe makes it hard. But as with oil, looking back 20 years, the market for M&A and oilfield is always [Technical Difficulty] it's maybe a small -- it's a consolidated space already. So, we continue to look at that and look at other operating divisions [Technical Difficulty] company. So, we're [Technical Difficulty] clean balance sheet excess cash in the bank. We have a relatively well-priced stock within [Technical Difficulty]. So, we think we're in a great [Technical Difficulty].

[Cole Pereira, Stifel]

Okay, got it. Thanks. And just quickly Scott, can you talk about how we should be thinking about working capital changing into Q3? And can you refresh the time line when you think Trican goes cash taxable? Thanks.

[Scott Matson, Chief Financial Officer]

Yes, I think we'll see a similar cadence in terms of working capital that we saw through 2022 like we saw a pretty big release coming out of Q1 into Q2. That will start to build a little bit as we come through Q3 and Q4 as you would expect as activity increases from there.

You'll note -- one of the things we did make note of is that we are now moving into a cash taxable position. So, we expect to actually fund some of the current tax liability that we've got in crewing on the books early next year when that goes out. So, you'll see that number build through the year and then we'll make our first payment likely in Q1 next year and then we'll install as normal from there.

[Cole Pereira, Stifel]

Okay, got it. Thanks. That’s all from me. I'll turn it back.

[Scott Matson, Chief Financial Officer]

You bet.

[Operator]

The next question comes from Keith MacKey with RBC Capital Markets. Please go ahead.

[Keith MacKey, RBC Capital Markets]

Hi, good morning. I just wanted to start out on your differentiation strategy, which you've been very clear on in the last year to two Brad. And so you've got four to five DGB fleets, you're starting the electrification of the ancillary items. But I imagine as you think about your competitors, potentially catching up on some of those things, the differentiation strategy has to be a continuum.

So, what is next in your view on where you need to differentiate in order to maintain the position you've got and put yourself in potentially the best position to capture some of the emerging work, whether it's LNG or other types of work?

[Brad Fedora, President & Chief Executive Officer]

We're not going to -- yes, maybe I'll just say this. I absolutely agree with you that differentiation in our space is temporary because in general, you can replicate [Technical Difficulty] almost any technology and so it's very, very hard to continue to say that you are going to be a leader in technology. But so far, it's been working and we're -- but that's why things like okay [Technical Difficulty] that's nice, but what [Technical Difficulty] right and probably will remain that way for some time.

And [Technical Difficulty] so the differentiation gets maybe more difficult if technology isn't rapidly changing and you got to obviously make sure you get a return [Technical Difficulty] in the near-term.

So, I would say what's next for us is more on the logistics side of the business and I'm not going to give you any more color than that. But it's -- there are a lot of product moving around. And when you've got Montney wells with -- and I'm talking metric tons here, it doesn't much matter, but you've got 10,000-plus tons in a well. There's an awful lot of product to get from A to B in a very [Technical Difficulty] [indiscernible] knowing full well that you just can't store it. And every time you take it from truck to rail or rail to truck it's -- you add $10 a ton to the equation very quickly. So, we're starting to look at -- almost turning the clock back and starting to look at the basics again, because logistics can really have an impact on, not just the quality of your service offering, but on the profitability of [Technical Difficulty] looking for little places to squeak out little savings and efficiencies [Technical Difficulty] when you're looking at this many tons per year of sand pumped man, you scrape a few nickels off the edge as they add up quickly.

[Keith MacKey, RBC Capital Markets]

Yes. Got it. And just to follow up on that. So, with the potential to get into more logistics type of offerings or whatever it ends up being in general, would you see a necessity for your capital intensity to change? Like, could you continue to do those types of investments meaningfully without spending materially different from how your -- the amount of capital you're spending today at that kind of $100 million, $115 million? Or how should we think about that?

[Brad Fedora, President & Chief Executive Officer]

Yes. I mean, that probably depends on the year, but I think it's a pretty good placeholder, when you look out a few years. I mean, I don't know the answer and it can change every day. But it feels to me, I mean, you know how it goes in this business, you can only spend so much money intelligently without overbuilding or causing a bunch [Technical Difficulty] product inflation and just [Technical Difficulty] the supply chain of stuff, whether it's an engine or a railcar, it's [Technical Difficulty] you just can't get everything you want in the time you want it. And so, when you think about aggregate capital spend on a per year basis, it feels like, what we've been doing [Technical Difficulty] probably should be relatively consistent going [Technical Difficulty] maybe -- and there's going to be years where it's less than there's going to be more, but I think that's a pretty good placeholder from building a cash flow model [Technical Difficulty].

[Keith MacKey, RBC Capital Markets]

Okay. Thanks, Brad. Appreciate the comment.

[Brad Fedora, President & Chief Executive Officer]

Thanks.

[Operator]

[Operator Instructions] The next question comes from Waqar Syed with ATB Capital Markets. Please go ahead.

[Waqar Syed, ATB Capital Markets]

Thanks for taking my question. Brad, as you think about building your logistics business, your thinking is mostly confined towards fracs and logistics or you're also thinking of maybe fuels as well distribution like natural gas others? Number one. And number two, the logistics business you're thinking about only to cater to your own fleets, are also to be providing services to third parties as well?

[Brad Fedora, President & Chief Executive Officer]

I don't want to answer any of those questions, Waqar. I mean, we didn't look at anything and everything and you've pointed out a good -- you found a good point. Like it's not just sand, right, our business is not just -- it's not just sand that's moving around. When you have these natural gas fleets, there's an awful lot of natural gas that needs to be delivered on location in a short period of time. And not everybody has the luxury of 10 wells that were drilled last year to tap into for gas supply, right. So it could be fuel, whether it's diesel and natural gas or the other big items, obviously are sand and then there's some chemical, but that's probably time [Technical Difficulty] and as far as we're going to do it for our own benefit or are these like sort of independently operating businesses.

The answer is, we're looking at everything. And there's no press release coming tomorrow. This is -- we are looking at it, we're being very thoughtful, very analytical. We're looking at the whole sort of value chain I guess [Technical Difficulty] right from the beginning [Technical Difficulty] and we love Canadian market. So we'd much rather grow our presence here than sort of take Hail Mary in other countries. So we're looking at -- that means we look at everything.

[Waqar Syed, ATB Capital Markets]

Makes sense. And then, in terms of the supply chain for Tier-4 DGB, how has that improved or changed? And so what's kind of the previous delivery if you were to order a new fleet today?

[Brad Fedora, President & Chief Executive Officer]

Yeah. I'll hand that over to Todd Thue, our COO.

[Todd Thue, Chief Operating Officer]

Yeah. The supply chain has improved slightly, but it's still quite a long lead time probably in the neighborhood of 12 to 18 months to -- for delivery and retrofit of equipment.

[Waqar Syed, ATB Capital Markets]

Okay. And any changes on the pricing side for that equipment?

[Todd Thue, Chief Operating Officer]

Yeah.

[Waqar Syed, ATB Capital Markets]

Okay. Thank you, sir.

[Todd Thue, Chief Operating Officer]

Thanks.

[Brad Fedora, President & Chief Executive Officer]

Okay. Thanks everyone. I guess this concludes our call. There's no more questions in the queue. So thanks for joining. Thanks for taking the time. The executive team is available for the remainder of the day for questions [Technical Difficulty] please call us directly, if there's any other questions you [Technical Difficulty]. Thanks. We'll talk to you again next quarter.

[Operator]

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