Trican Well Service Ltd

TSX:TCW

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, ladies and gentlemen. Welcome to the Trican Well Service Fourth Quarter 2020 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. Please go ahead, Mr. Fedora.

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

Thank you very much. Good morning, ladies and gentlemen. I'd like to thank you for attending the year-end conference call for Trican Well Services. Today, we're going to provide you with a financial update, and then I'll make some comments on the current operating conditions. Before we do that, I'd please refer you to our website where you'll find our investor presentation. And on Page 2 of that, you will find the legal disclaimer, and I ask you to please read that in conjunction with this call.I'll now turn the call over to Klaas, who is our newly appointed interim CFO, and he'll provide you with a financial summary.

[Klaas Deemter]

Good morning. 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 for the company. Certain material factors or assumptions are applied in drawing a conclusion or making a projection as reflected in the forward-looking information section of our annual 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 2020 Annual Information Form and the business risks section of our MD&A for the year ended December 31, 2020, 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 annual 2020 MD&A. Our annual results were released and are available on SEDAR.By historic standards, industry activity in the Western Canadian Sedimentary Basin has remained at cyclical lows. The average western Canadian rig count was 89 drilling rigs, which compares to 134 in Q4 2019 and 52 in Q3 2020. The recovery in the Q4 rig counts over Q3 led to sequential improvements in almost all financial categories.Fracturing operations activity was more consistent through the quarter and remained relatively steady with typical December slowdowns during the holiday period. The company operated an average of 5 fracturing crews at a utilization level of 60%, which compares to 8 crews at 71% in Q4 2019. Despite the lower crew counts, lower utilization and lower average pricing, strong operational performance and efficiencies allowed us to generate reasonable margins in the context of the current economic climate.Cement and coil continued to show a steady improvement through the quarter with both service lines achieving noticeable improvements in activity and revenue levels as the quarters progressed. These improvements allowed us to increase our crew counts to a Q4 exit level of 17 cement crews and 6 coiled tubing crews. The significant efficiencies achieved in our business at the end of March 2020, combined with efficiencies already being implemented in advance of the COVID-19 events have resulted in a much more resilient business cost structure. Despite year-over-year industry activity reductions and our corresponding year-over-year revenue reductions of $60 million, our adjusted EBITDA was $14.5 million, similar to Q4 2019 levels of $14.6 million, which is a testament to the efficiency gains made by the company.Q4 2020 adjusted EBITDA was negatively affected by a cash stock compensation expense of $1.9 million, which fluctuates with the company's movement in share price and fluid end expenditures of $1.2 million. The Canadian emergency wage and rent subsidies contributed $4.9 million to EBITDA during the quarter. Fourth quarter earnings were negative $25 million, which includes an impairment charge on specific assets of $22 million or about $0.085 per share. Excluding the impact of the impairment charge, the company's net loss improved significantly relative to the Q4 2019 loss of $20.9 million as the positive effects of optimizing both the company's asset base and operating cost structure are starting to be realized.The impairment charge recognized was largely comprised of equipment which the company does not expect to activate again. We have been successful in selling surplus equipment over the past several years at reasonable prices and will market this equipment for sale as well. The company's strong financial position means we can continue to be disciplined as we look for opportunities to sell these assets. The company's business generated strong operating cash flow of approximately $23 million in the quarter, including $9 million from working capital. This strong operating cash flow, combined with $4 million cash generation from the monetization of stranded balance sheet capital continues to add to Trican's already strong financial position. Trican exited the year with $22 million in cash and no draw on bank debt. Additionally, the company has positive noncash working capital of approximately $40 million. Since the start of the year, our financial position has continued to improve as we have agreements in place to sell $7.5 million of businesses and assets that the company is unlikely to use for future cash flow generation. Our strong cash position and available credit lines continued 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, while also keeping our powder dry to make opportunistic investments.Our Q4 2020 capital expenditures remain modest at $4.2 million. We were able to invest in 10 new dual fuel upgrade kits for our fracturing pumpers and are trialing a fracturing pumper with a new Tier 4 dual fuel engine. These investments are part of Trican's commitment to becoming an ESG leader in the WCSB oilfield services industry while providing superior technical capabilities to our customers.In 2020, our capital expenditures approximated a little more than 3% of revenue. And our 2021 sustaining capital plans will remain similarly disciplined. Our current sustaining capital is estimated in the range of 2% to 4% of revenue for 2021. Preserving our balance sheet flexibility remains a top priority for the company, and we will only invest in projects that provide long-term efficiencies and quick paybacks while working with our customers to meet their ESG commitments.During the fourth quarter, we invested $4.5 million into our NCIB program. Although the company continues to view share repurchase as a good long-term investment opportunity for the use of any excess capital, we will always evaluate opportunities that will offer the best long-term investment for the company.I'll now turn the call over to Brad, who'll be providing comments on operating conditions and strategic outlook.

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

Thanks, Klaas. So I think, certainly, the market has improved considerably. When we think about the summer, Q3 was -- with the benefit of hindsight was definitely, I think, below over the last 5, 6 years even. And in Q4, activity significantly increased across all of our business lines, especially when you compare them to Q3. We continue to be really active with our core customers. The rig count has grown from a low of20 at the beginning of July until as high as 185 sometime in Q1. And so certainly, the activity and the outlook has greatly improved in the last 6 months. Pricing, unfortunately, has not improved nearly as much as I would have predicted. And we had actually predicted a price increase mid-Q1, and we haven't seen that. Pricing was quite stable in Q4 versus Q3, but didn't actually increase as activities started to ramp up. And I would have -- I do expect that we will see a price increase in the second half of 2021. In fact, we're messaging with our customers quite directly that certainly, we're priced at subeconomic levels. And that regardless of sort of activity levels for the second half of 2021, that we are going to have to put in a price increase just to make the business sustainable. And as everybody knows, it's a high fixed cost business. And so all of those price increases with the exception of the inflation that we have to absorb, and we have absorbed since the beginning of the year, all of that price increase will generally go to -- straight to EBITDA into earnings. But certainly, a price increase is required to make this business even remotely economic.So we've averaged -- in Q4, we averaged about 5 frac crews. We ran about 190,000 horsepower at the peak, and we averaged about a -- just over 100,000 horsepower through the quarter. We ran 16 primary cementing crews and 5 coil crews. The majority of our work, I think, in fact, almost 90% of our work is generally the Montney and the Deep basin. And we -- I would have said in the past, most of that work would have been both dry gas and liquids-rich gas, but when we look at Q4, actually 2 of the 5 frac spreads that we were running, were focused on oil. Now that oil is not Southwest Saskatchewan or Southeast Alberta. It's Duvernay and Montney oil. And so certainly, when we look at the oil price increases, we're excited about the activity that's going to happen in -- for the rest of 2021.When we think about the year going forward, we would expect that about 30% of our work would be sort of oil-focused, the rest would be both liquids-rich and dry gas. But over 90% of our revenue is sort of in the Northwest part of Alberta and Northeast B.C. Proppant -- we're still seeing proppant per well increase. Our customers are very focused on how much proppant they're placing on a per meter basis in the horizontal sections of our wells. And we're seeing about a 50-50 split between Ottawa White, which is sourced out of the Northeast U.S. and domestic sand, which is sourced throughout Alberta.We did a really good job reducing our cost. The company has been focused on reducing its cost now for about 3 years. And we're at the stage now where we think we have our costs to a level that we're happy with going forward, and our costs will stay fixed at these levels even as we add more fracking and cementing crews. Just to put this in context, we're quite vocal with the fact that our -- both our G&A and our fixed cost would be half of what they were even just 2 years ago. So when we think about our cost going forward, we're happy to leave them as is, we can add revenue. And of course, all of that contribution margin or field margin from the incremental revenue will go straight to the bottom line.So when we think about the outlook for the remainder of 2021, we had a great start to Q1. We -- our customers were busy right after Christmas, which allowed us to have a really good January and a really busy February. We generally expect that the market is going to continue like this into the second half of the year. We've -- our Q2 bookings to date are better than they've been in years. And it's nice to see, especially year-over-year Q2 that we won't take a big EBITDA loss. We're actually -- we hope that EBITDA will be relatively flat in Q2 of this year. And it's just a reflection of the fact that all of our customers are getting back to work. They're doing a much better job level loading their work throughout the year, taking advantage of the warmer weather and just generally increasing their activity as the year unfolds.We've had very cold weather in Q1 to date, especially -- particularly in February. So I just want to thank all of our field staff, they did great work through that cold snap. We didn't have any operational issues, no equipment issues, no supply chain issues just due to planning. And so everybody here at Trican did a great job, and it's going to be reflected in our financial results in Q1.We're still below last year's rig count, but we did peak at sort of in the sort of 185 rigs in Western Canada. And we're not -- we didn't see all of that activity from the fracking perspective yet in Q1. And so we do think there'll be a good inventory of wells to be completed in the second half of this year and in Q2 as well. So we did we did add a 6th crew to the company -- our 6th frac crew to the company. So we averaged about 5 crews in Q4. We added an additional frac crew in Q1 and we expect that we're going to run with 6 frac crews and about 17 to 20 cement crews for the remainder of 2021. We don't expect to add any incremental frac crews unless there's a significant increase in activity.We don't have a great visibility into the second half of the year, but certainly, our customer conversations have indicated that work is going to continue to be active. They're starting to look at their budgets, and they're starting to add wells here and there. It's still very Montney and Deep Basin focused, northwest Alberta and Northeast B.C. So we're expecting the remainder of the year to be generally busy, not necessarily reflective of Q1 activity, but certainly much busier than we saw Q3 and Q4 of 2020.Our margins, we've done a great job of reducing costs. We haven't seen the price increases that we were hoping for. But we've actually been able to provide decent margins just due to the efficiencies that we've built into the company over the last few years, and we expect that to continue. We've done a great job with supply chain. We've done a great job in the field, getting proppant placed in a short period of time. Most of our work now, if not almost all of it is 24 hours. We've achieved pump times of 23 out of 24 hours in certain locations so certainly, I think our customers are happy with the efficiencies we've achieved, and it's helping to reduce their well costs, and we continue to focus on that. And we continue to invest in not only systems and people, but equipment that will help us achieve these ongoing efficiencies as the activity in the basin heats up.We haven't seen a lot of inflation in the system yet. We -- I mean, we obviously -- things like diesel, third-party trucking go up immediately with oil price increases. We have seen logistics charges just as the activity increases with respect to sand. We are seeing third-party costs starting to creep up as well, just as the rig count has gone from a low of 20 last summer to over 180 in Q1. And certainly, every time you have a cold snap, that does increase your cost. But generally, I think we've done a pretty good job, and our suppliers have -- they're also working on their efficiencies. And we've done a pretty good job to keep our costs contained to make sure that our customers' well costs haven't increased as -- even nearly in proportion to the activity increase.We did set a Canadian record in Q4 in December. We pumped over 4,300 tons of sand, 2 days in a row on an Ovintiv location which is unbelievable. It's over 100 truckloads of sand in a 24-hour period. So we're really happy with that. Our people in the field did a fantastic job. And certainly, anytime you can deliver that type of service to your customers, they take notice of it. And we expect more of that type of performance in 2021. And certainly, our customers are rewarding us for that.We have made -- we have started to think about the market from a perspective of ESG. I think we can all agree that ESG is going to become a more powerful force not just in the oil and gas industry, but across the economy. And we think about what our customers need to fulfill their ESG commitments and their targets. And we've started to make investments into technology, particularly engine technology to help them reduce emissions and get their costs down. And like Klaas was mentioning, we did take delivery of the first, what's called a Tier 4 engine in Canada. And what that does is it displaces diesel consumption and uses natural gas to run the engine. And of course, the significance of that is it's greatly reduced cost and greatly reduced emissions. So anytime you can run engines on natural gas versus diesel, I think it's a win not only for us from a cost perspective, but certainly for the public from an emission's perspective, and it's always nice to use natural gas that's sourced locally. And so we're using that gas that comes right off the pad to run our equipment. And you will see further investments into the type of technology whether it's Tier 4 technology to displace diesel with natural gas or idle reduction technology, safer chemicals and more flexible chemicals that allow our customers to use more produced water versus freshwater. We're looking at every angle, and not just from an environmental perspective. When you think about ESG, we often talk too much about the E and not about the S and the G. And so certainly, when we think about our diversity policies and our relationships with indigenous bands throughout Western Canada, we're attacking all of those fronts to make sure that not only our customers are fulfilling their ESG targets, but Trican is as well. We set our own internal targets, and we're going to continue to focus on this in all categories being E, the environment and the social and the governance to ensure that we're fulfilling the expectations of our employees and our investors.Very -- just before I wrap up, we have very limited capital plans at this time. And that will continue to evolve as the year goes on. But we're -- certainly, from a capital perspective, we think about investments in technology that not only reduce costs and emissions, but make our customers' costs lower, and we'll continue to look at anything and everything. And I think a lot of people have heard about electric fracking, and that it's taken a lot of press in the U.S. It's probably not that applicable in Canada -- just in Canada -- just due to the logistics issues. But certainly, when you think about electric, of course, it's generally sourced from natural gas. You run a turbine off natural gas, it generates electricity, and that electricity runs the frac pumps. We've sort of taken the approach that we're probably a ways off from a fully electric frac pump anytime soon. And we're looking more like the Tier 4 engines that run off natural gas directly. And -- but we're achieving the same emissions reductions, the same cost reductions. And so I think so far, our customers have been very happy, and we'll continue to invest and explore those areas to provide better service for our customers and be a better corporate citizen.We continue to be active in our share buyback. Certainly, at these prices were not nearly as active as we were. We currently trade at about tangible book value. And so we're more opportunistic at these price levels. But certainly, that will stay in place, and it'll probably be -- likely be a permanent part of our capital spend going forward. And we'll take our opportunities where we find them from a pricing perspective. And so, we're not as active as we were, but it is part of our capital spend going forward.We're really happy with our balance sheet, and we get asked a lot of questions about sort of what's next. And our answer is we're still exploring our -- the opportunities that are available to us. And we're fortunate to be in a position where we can look at anything and everything. And it's just making sure that we spend our money in a way that provides a return for our shareholders, grows our company's presence in the market. And we'll continue to evaluate the opportunities in front of us, but certainly won't make any decisions unless we're assured that we're going to get a financial return for the company and our shareholders.So I think I'll wrap up the call, and we'll turn over the call to the operator for questions.

[Operator]

[Operator Instructions] Our first question comes from Keith MacKey of RBC.

[Keith MacKey, Analyst]

Just maybe first to start off on pricing. You mentioned you maybe seek an improvement in the second half. Now do you think that the price improvement you'd ask for or get would be enough to cover the inflation that you've also talked about or be more than that amount or less than that amount, would you kind of say?

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

Yes. The inflation we've experienced in Q1, in particular, it's significant because it is sort of 1% to 2% of revenue. And given where pricing is today, we just don't have the room to absorb that type of cost increase in our end. And so -- but I think our customers have been really understanding with having us -- letting us pass on some of that -- those costs going forward. But -- so certainly, when we think about price increases, we do break it down into cost recovery and then just a general price increase for our margins. And so the answer is, the price increases that we're contemplating for the second half would be in excess of inflation.

[Keith MacKey, Analyst]

Got it. Okay. That's helpful. And just on the dual fuel and pricing of that versus non, like do you do you get a significant or noticeable increase for that type of equipment versus the non dual fuel? Or is it moot these days because you're only really running your dual fuel?

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

Yes. There's sort of 1.1 million horsepower operating in Canada today, industry-wide. And about half of that horsepower is dual fuel. Both ours and our competitors, we're fortunate enough to have the largest dual fuel fleet in Canada. But there typically is not enough dual fuel equipment for our customers' requirements. And so it is priced at a premium. It certainly isn't priced at the premium you would expect given the shortage of the equipment in the basin. But yes, we do charge a premium dual fuel engines and pumps.

[Keith MacKey, Analyst]

Got it. Okay. And one more just on pricing again. Has there been any concessions at all with respect to anything like standby fees or little terms before you get to pricing increases? Or have you not really had much of that -- much of those conversations there?

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

Yes. I mean, I think you clearly understand how this works. And certainly, before you just put an across the board price increase, you start to get back some of the things that you've given up, and that would be throw-ins or add-in services that don't get charged or even standby fees or not passing through all of your third party costs. And so we've already started to recover some of that and be less, I guess, less forgiving on what we're prepared to provide our customers without charge. So that has already started to happen. And our customers understand that we need to do this. There hasn't been an adversarial communication with our customer base. They understand that we need to recover some of these costs going forward, and that pricing has got to a level that just isn't remotely sustainable. So yes, we have started to recover some of those sort of off-the-invoice items. And then for the second half of this year, we'll not only recover some of those items, but we would expect a top line price increase as well.

[Operator]

Our next question comes from Cole Pereira of Stifel.

[Cole J. Pereira, Associate]

Just on the upgrade CapEx, you said it was limited, but are you willing to share any details, just more specifics on the approximate timing and the amount of that spending?

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

No. We're still evaluating any upgrades that we make to our fleet. And when we have something more definitive -- if we have something more definitive, we'll let our shareholders know at that time, but there's nothing to pass on at this date.

[Cole J. Pereira, Associate]

Okay. Got it. That's fair. As well, lots of details around ESG's strategy in the release. I guess my question would be, how are you thinking about something like perhaps a formalized ESG report?

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

Yes. We would expect to have our sustainability report out in 2021 in the second half of this year. And like with all of these, it'll -- we'll put over a report, it will be general in nature, and we'll build on it from that going forward.

[Cole J. Pereira, Associate]

Okay. Got it. Some good detail on how you're thinking about organic investments, return hurdles, et cetera. Are you willing to share anything about how you're thinking about potential M&A in the current markets?

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

Yes. I think we do look at consolidation opportunities, both within our sector and other oilfield service lines. And we understand that investors are looking for bigger companies, they want to see cost synergies across the basin. But we want to make sure that anything that we do is, a, we think about it sort of from a 3-tiered approach, is it a significant business? Can it add significant revenue and EBITDA to our business? And is it something that we can add value to, like do we have the knowledge to not only -- to run the company, but can we also grow it? And so when you think about that, when you think about those 3 things, we'll make sure that if we do, in fact, transact, it will be thoughtful, and there will be a clear line of sight as to how we're going to add value to the business.

[Operator]

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

[Waqar Mustafa Syed]

So first question, in the cementing and coiled tubing business, what are you seeing in terms of pricing in the first quarter? Is it similar to fracturing or better or worse?

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

I guess, you would say, it's similar to fracking in that we haven't seen price increases yet. But it's better than fracturing in the sense that it didn't get as beat up as fracturing pricing did. And so when we look at the profit in those 2 divisions or the bottom line in those 2 divisions, they're certainly performing much better than the fracturing division is just because those -- the pricing just didn't get nearly as low or didn't trend down as low as fracturing prices have. And so we expect price increases in cement and coil, but probably not to the same extent that we're expecting in the fracturing division.

[Waqar Mustafa Syed]

And in the fracturing side for the second half pricing, has there been any negotiations done that gives you this level of confidence that pricing could be higher? Or is it still too early to have anything actually signed up?

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

Yes. Nothing ever really gets signed up, but we do have ongoing discussions with our core customers. And I guess discussions to date would indicate that we are going to be able to pass on some price increases. And like I said, I think our customers have been really understanding, and they understand that pricing levels have gotten to the point where they're just not sustainable, and they do need to go up. And it's not as simple as that, though because when we talk about price increases with our customers, we also talk about operating efficiencies. And so the commitment we're making to them is we'll continue to look for efficiencies to reduce their costs and even just reduce our time on-location. And so we're able to charge more for our services, but their overall well cost may not increase.

[Waqar Mustafa Syed]

Yes. You mentioned -- talked about input cost inflation that you've experienced and you've been able to maybe pass some of that to the customer and some you've absorbed. So should we assume that gross profit margins in the first quarter would be lower or kind of still you can maintain or maybe improve in the first quarter versus the fourth quarter?

[Klaas Deemter]

The margins should maintain be pretty similar. Of course, in Canada, you get the EI and CPP resets in so I think that grinds in your costs in a people-intensive business a little bit in Q1, but just on higher activity, higher revenue levels, right? So you get the flex on your -- more of your fixed costs and G&A structure.

[Waqar Mustafa Syed]

Right. Okay. And then there was a comment made that EBITDA would be -- should be flat Q1 versus Q2. Was it -- you meant flat? Or did you mean that second quarter should be breakeven type EBITDA?

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

Yes. Thanks for clarifying that. So yes, we're not expecting Q2 EBITDA to be consistent with Q1. That would be great, but it's not going to happen. But yes, you're right. When we say -- we expect our EBITDA to be sort of 0-ish in Q2 opposed to a loss that we've had in prior years.

[Waqar Mustafa Syed]

Sounds fair. Okay, good. And then in terms of maintenance CapEx per crew per fleet in pumping, what is it running at on an annualized basis?

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

Go ahead. Yes, go ahead.

[Klaas Deemter]

Yes. For crude, to break it down, like we're looking at it more holistically with all the service lines in that 2%, Waqar, we were 3% and actually sub-3% in 2020 when you take out a little bit of the growth stuff we did. So maintenance capital, if you kind of looked on a per fleet basis right now, we're probably running $2 million to $2.5 million. I'm not sure if we can sustain that. It's probably going to start to creep up a little bit. But we wouldn't be as much as the American competitors, which are probably $4 million to $5 million per crew. I think normalized, you'd be looking more $3 million-ish per crew.

[Operator]

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

[John Gibson, Analyst]

Four questions. Just we've seen quite a bit of consolidation in the Canadian E&P space. I'm just wondering how you expect this to impact Trican here as we go forward throughout the year?

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

Yes, we generally view consolidation as positive for us. As the companies get bigger and more sophisticated, their planning gets more transparent in long term. And the ESG push that you find with the larger companies, we think we can play into those requests very well and are probably better positioned than our competitors to provide our customers with services and technology that fulfill their ESG targets. So yes, we welcome and are excited about the consolidation in our customer space. And certainly, our work is all Deep Basin and Montney focused. And so high grading those assets and making them more economic will do nothing but encourage further spending. And so we view the consolidation as a positive for us.

[John Gibson, Analyst]

Okay. Great. Not to harp too much on the pricing increase. I'm guessing -- just wondering what has changed in terms of market dynamics relative to the pickup we saw to start 2021 that gives you confidence that you can implement a price increase in the back half of the year?

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

Well, it's a number of factors, but certainly, when you think about where we've got to over the last 5, 6 years. It's just been a continued erosion of pricing. And at the same time, a continued increase in operating efficiencies. And so I think we just -- we've reached the level now that it's quite active. We're having to reinvest in our equipment. We have an aging fleet, and there hasn't been any investments in the Canadian fracturing fleet now in 5 years. And so now it's sort of -- when we think about the ESG targets and the ESG requirements of our customers, we have to make -- we start -- have to start making investments in -- whether it's from a maintenance capital or high-grading our assets, and we're just not in a position to do that at today's pricing. And so as our -- if our customers want continued high-quality service with continued investigation into new technologies and how to get better operating efficiencies, we just can't do that at these pricing levels. And so we've discussed these issues with our customers, and they seem to understand that. So it's not complicated. They know that pricing has just gotten to the level that just isn't sustainable. And it's one thing when you're running less than 100 drilling rigs in Canada, maybe those conversations are tougher to have. But certainly, with -- you've seen a giant increase in commodity prices, both on the oil and the gas side. And so our customers' cash flows have greatly increased. It's time for us to share in some of that upside and make sure that our fleet is going to meet their needs on a go-forward basis. But that requires investment. In order to make that investment, we need to have a price increase.

[John Gibson, Analyst]

Okay. Great. Last one for me. Just wondering if you have any early indications for wage subsidy guidance for the year.

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

I'm going to hand this over to Klaas and Rob.

[Robert Skilnick, Executive Officer]

Yes. We're looking at similar levels to probably slightly down from Q4, John. And Q2 will come off a little bit more because I think it expires sort of mid- June-ish. So it will -- slow trail off from Q4 levels.

[Operator]

[Operator Instructions] Our next question comes from Alex Squires of Brant Securities.

[Unknown Analyst]

Could you hear me all right?

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

Yes.

[Unknown Analyst]

I wanted to find out if you anticipate getting any of the fracking business on the LNG project?

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

Yes. Just -- thanks for that, actually. It's a good reminder that LNG -- the construction of our LNG facilities has continued over these last few years and certainly has continued through 2020 even with COVID, and there's thousands of people on location every day, sort of diligently working on that project. And we're expecting that to start exporting gas in late 2024, 2025. And so yes, it's -- even though it is sort of 4 years away, our customers are starting to think about how they're going to fulfill their production needs. And so you are seeing the customers that are involved in that LNG project and it may be associated with providing gas, starting to think about the runway on how they're going to get there. And so we're not seeing a lot of what you would call direct LNG activity today. But certainly, some of the larger companies and the participants in the LNG project are starting to plan over the next few years. And the answer is yes, we would expect to be an active service provider to those companies as they ramp up their activity leading into 2025, where we're going to be having significant natural gas exports.

[Unknown Analyst]

But it would likely not be in -- until about 2023 to 2025?

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

No. I would say it's not a 2021 item or it's not on our activity board for this year. You certainly couldn't directly correlate back to the LNG. But I think when you start thinking about 2022 and 2023, yes, certainly, there is a focus on making sure that they have the production base required to sustain what's fairly significant exports, and it's on a daily basis, as we all know. So yes, certainly, next year, I think they're going to be more directly directing activity to ensuring that there is the reserve base and the production base to fulfill their requirements. So it's starting in -- more definitely starting in 2022.

[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 & Director]

Thank you, everyone, for joining the call. The management team here at Trican will be available throughout the day. And so if there's any further questions, please don't hesitate to e-mail us or call us. And we'll get back to you as soon as we can. Thanks again.

[Operator]

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