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Edited Transcript of BAS earnings conference call or presentation 10-May-19 1:00pm GMT

Q1 2019 Basic Energy Services Inc Earnings Call

MIDLAND May 11, 2019 (Thomson StreetEvents) -- Edited Transcript of Basic Energy Services Inc earnings conference call or presentation Friday, May 10, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David Schorlemer

Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO

* Trey Stolz

Basic Energy Services, Inc. - VP of IR

* Roe Patterson

Basic Energy Services, Inc. - CEO, President & Director

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Conference Call Participants

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* Daniel Burke

Johnson Rice & Company, L.L.C., Research Division - Senior Analyst

* John Daniel

Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service

* Tommy Moll

Stephens Inc., Research Division - Chief Economic Consultant

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Presentation

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Operator [1]

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Greetings and welcome to the Basic Energy Services First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Trey Stolz, Vice President of Investor Relations. Thank you, sir. You may begin.

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Trey Stolz, Basic Energy Services, Inc. - VP of IR [2]

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Thank you, operator, and good morning, everyone. Welcome to the Basic Energy Services First Quarter 2019 Earnings Conference Call. We appreciate you joining us today.

Before we begin, I'd like to remind everyone that today's comments include forward-looking statements reflecting Basic Energy Services' view of future events and therefore, potential impact on performance. These views include the risk factors disclosed by the company in its Form 10-Qs and 10-Ks for the year ended December 31, 2018. Further, refer to these statements regarding forward-looking statements incorporated in our press release from yesterday. Please also note that the contents of this conference call are covered by these statements. In addition, the information reported on this call speaks only as of today, May 10, 2019, and therefore, you're advised that time-sensitive information may no longer be accurate at the time of any replay.

With that, I'll turn the call over to Roe Patterson, President and CEO.

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [3]

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Thank you, Trey, and welcome to our 2019 first quarter earnings conference call. We appreciate your interest in our company. Joining me on the call is David Schorlemer, our Senior Vice President and CFO.

Today, I plan to discuss our 2019 first quarter results and operational focus and strategies for the remainder of the year. And David will walk through some more detailed financial metrics for our recent quarter's performance and outlook.

Late 2018 provided the industry with a perfect storm, including holiday disruptions, record rainfall in key areas and falling crude prices, all during the critical budget season. Simultaneously, the overall investment climate shifted, forcing our entire industry to focus not only on growth, but disciplined cash deployment and management. Accordingly, we signaled a slow start to 2019 progress, while our customers digested this changing environment and tried to match their own CapEx budgets to their cash flow outlook. Swinging crude prices only confused the exercise. Consequently, when we accurately guided the revenues to mid-teen declines sequentially for the first quarter, we already knew that our work in 2018 to realign and streamline the Company was about to pay off with respect to our margins. These improving margins in the production business segments helped offset the declines in completion activities. As we anticipated for Q1, this slowing completion activity contributed to the buildup of drilled but uncompleted wells.

Customers generally fulfilled their drilling commitments, but some held off on completing wells so that they could curb their overall cash spend. In the meantime, customers sought out cheaper maintenance projects to grow their revenue. So, although segment revenues in Completion & Remedial Services were hit hardest in the first quarter, growth in our production service business buoyed our financial results. In fact, our production-related lines outperformed expectations in the first quarter with significant margin improvement due to the positive impact of the strategic realignment initiative and stable pricing. This occurred even with the headwind of the payroll tax resets in the first quarter.

Beginning last year, we worked hard on operational and financial strategies to position the company for more resilience, better flexibility and both capital and cost discipline heading into the new year. First quarter results demonstrated that our realigned field structure allowed us to achieve higher margins in our Well Servicing and Water Logistics segments, while stemming declines in the very competitive frac business. Today, we have a strong balance sheet, good liquidity and a fully aligned management incentive process to drive disciplined decisions on capital allocations and cost control.

Similar to our customers, we are keenly focused on cash generation. Last year's strategic realignment initiative has set us up for far better performance in 2019 in our core markets such as the Permian Basin, the SCOOP/STACK and the Eagle Ford. We believe that our Q1 segment margins demonstrated the impact of these efforts. As David will discuss in more detail in a moment, Well Servicing revenues increased slightly and segment profits improved by impressive levels. We marketed 310 rigs in Q1, of which 274 are high-spec class 4 rigs. Average rate utilization grew to 74%, up from 72% during Q4. Well servicing rig hours grew 3% to 165,000 hours compared to 159,000 hours in Q4. Weather did impact operations in the first quarter, and we estimate the lost revenue related to the weather of approximately $3.4 million in Q1.

We expect first quarter tailwinds in the Well Servicing segment to continue into the second quarter and the remainder of 2019. We continue to run a high number of large rig packages where we combine our high-capacity rental and fishing tool packages with our high-spec rigs. In fact, demand for our 24-hour packages was positive with activity in the Central, Gulf Coast and the Rocky Mountains, averaging 21 active packages for the quarter. This average was down 1 from Q4 as lower completion activity in the Permian had a minor impact on our 24-hour rig package count. We expect demand for these packages to increase as completion activity builds throughout the year. We currently have 15 large rig packages on multiyear dedicated customer agreements and customer indications suggest this number will only increase. These agreements are not take-or-pay in nature, but they do cover broad multi-well development projects with large customers in busy basins such as the Permian.

As we discussed a few months ago, E&Ps are focused on assets returns and cash flow generation. And we will likely continue to move workover and maintenance projects up in priority along with completion activity, our drilled and uncompleted wells, as takeaway capacity improves throughout the year. Our rig fleet and rental equipment are uniquely equipped to handle this demand.

Turning to the Water Logistics segment. We continue to convert customers to more efficient pipeline services, and as a result, the total number of fluid service trucks declined to 818, down 2% on average for the quarter. Despite this continued truck-to-pipeline transition, Water Logistics maintained stable revenues for the quarter and strong margins of 33%, 350 basis points higher than the fourth quarter. Overall total Q1 saltwater disposal well volumes were approximately 9.7 million barrels, with 32% representing disposal water volumes from pipes. As we continue to support the transition to pipeline, we will reduce the number of active fluid service trucks, thereby reducing our lease costs. We expect more long-term midstream pipeline contracts and further momentum in the Water Logistics business in 2019.

As I mentioned, Completion & Remedial Services sustained significant Q1 revenue declines, down almost 29% for the quarter. Frac was by far the most impacted business line, with Q1 frac revenues down 38% sequentially as we stacked 3 spreads. Overcapacity in this business remains the biggest challenge. However, March results stabilized in this segment and even rebounded some. As we predicted, Q1 exit rates were much improved over the bottom we saw in the middle of Q1. The frac business looks to slowly improve in the second quarter.

Our results in April, as well as our calendar for the remainder of Q2, support this view. So, we will remain ready and able to unstack equipment on short notice, but only when margins are sufficient to support maintenance CapEx -- and still produce positive free cash flow. To be clear, a substantial rebound for the frac business is not built into our guidance and so, there remains a source of considerable upside if well completions increase from current levels.

Overall, we ended the quarter with positive adjusted EBITDA of $14.4 million, ahead of our expectations as our cost-cutting measures are having significant impact. In terms of our CapEx plan, we are constantly evaluating our capital spend, and we will remain disciplined in our approach to capital allocation this year. Based on the measured and slightly sluggish start to 2019 for some of our customers, we are moderating our full year CapEx guidance from approximately $94 million to under $70 million, with approximately 60% dedicated to sustaining CapEx, including capital leases. Based on current market demand, as well as recent customer feedback, we plan to continue to invest the majority of our growth in Permian-focused midstream water infrastructure projects in 2019. As a reminder, these long-lived low-maintenance CapEx assets will come with long-term contracted revenues. But even on these projects, we will make capital decisions based on the latest customer information at capital deployment milestones this year, and we may defer some portions of these projects until 2020, if the returns or the commitments are not satisfactory.

Under the new lower capital plan and due to improved margin performance, capital efficiency and timing, we do not expect any degradation in 2019 EBITDA and expect to finish the year with approximately $84 million to $89 million in adjusted EBITDA. We're excited about 2019 as it is shaping up under the current plans, but we also believe there is upside in our EBITDA and free cash flow for 2019 and 2020 that can be quickly unlocked by modest opportunistic increases in CapEx.

With that, I'm going to turn the call over to David for more financial details.

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David Schorlemer, Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO [4]

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Thank you, Roe, and good morning to everyone. I plan to provide details on our first quarter financial performance compared to the sequential results from fourth quarter 2018, unless noted, and an outlook for Q2 on selected items.

First quarter results were generally in line with our expectations, and we reported revenues of $197.2 million and adjusted EBITDA of $14.4 million. Although revenues came in at the low end of our previous guidance, our core businesses experienced higher revenues and strong margin improvements. As a result, we reported better overall performance than Street expectations. For the first quarter, Basic reported a net loss of $27.5 million and a per share loss of $1.02, which reflects both sequential and year-over-year improvement. For the 3 months ended March 31, 2019, our weighted average shares outstanding were 26.85 million.

Now turning to our segment results. We continue to grow our production-oriented business, combining for almost 60% of total company revenues, up from 50% in the prior quarter with Well Servicing and Water Logistics representing 31% and 28%, respectively, compared to 26% and 24% in the prior quarter. In these two core segments, revenues increased $1.8 million sequentially with direct margins expanding by nearly $4 million. These generous incremental margins were the result of significant work rationalizing these businesses last year and into the first quarter.

Our other segments, Completion & Remedial Services represented 39% of total revenues with the remaining 2% in the Other Services segment comprised of our contract drilling and manufacturing divisions. More on C&R in a moment. The Well Servicing segment generated first quarter revenues of $60.5 million, a sequential revenue improvement of 3% compared to Q4. Segment profits increased to 22% in Q1 from 19% in Q4 of last year due to better utilization and good cost management. Rig utilization rates improved in Q1, resulting from the marginal improvement in customer demand and activity on flat pricing, primarily for our 24-hour rig packages.

The Water Logistics segment generated revenues of $55.6 million, flat compared with the fourth quarter. Segment profits, however, increased to 33% in Q1 compared to 29% in the prior quarter, primarily due to higher-margin pipeline revenue. Because we can provide a full complement of fluid services, trucking, storage and disposal required on most drilling and workover projects, the add-on services associated with drilling and workover activity enable us to generate healthy segment profits.

Our Completion & Remedial Services segment generated revenues of $76.8 million, down 29% from the fourth quarter results. The decrease was primarily related to an almost 50% decrease in frac stages completed as compared to the prior quarter. However, rental and fishing tool operations continue to provide more stability in this segment. First quarter C&R segment profits decreased to 17% of revenue compared to 21% in the fourth quarter.

We expect total company revenues to be up sequentially in the low to mid-single-digit range for the second quarter of 2019. Reported G&A expenses for the first quarter were $35.5 million or 18% of revenue compared to 15.4% in the prior year fourth quarter and 17.5% in the first quarter of last year. First quarter G&A expenses include $3.3 million of non-cash stock compensation expense. We also incurred $900,000 of professional fees in G&A related to a contingency fee on a tax refund of $1.9 million. Essentially, we invested $900,000 in professional fees for a cash return of $1.9 million in a refund, which we already received during this quarter. We've also taken action to reduce other costs, including overall payroll and related costs, property taxes, IT infrastructure and administrative expenses, which will impact future quarters favorably, and we will continue to right size our business accordingly.

We expect G&A expense in the second quarter of 2019 to range from $33.5 million to $35 million, including non-cash stock compensation of approximately $4 million. First quarter depreciation and amortization expense were $27.5 million compared to $32.3 million in the fourth quarter of 2018, and we anticipate depreciation and amortization expense in the second quarter to be approximately $27 million. Reported net interest expense was $10.5 million in the quarter compared to $10.7 million in the prior quarter. We expect 2019 quarterly net interest expense to be approximately $10.5 million.

Tax benefit for the first quarter of 2019 was $1.9 million. The effective tax benefit rate was 6.3% in the first quarter due to the $1.9 million refund claim we filed during the quarter. As of March 31, the company had approximately $810 million of net operating loss carryforwards for federal income tax purposes for which we carry a full valuation allowance. Due to our NOLs, we do not anticipate paying federal income taxes for the foreseeable future.

Cash capital expenditures for the quarter ended March 31, 2019, were $18.9 million compared to $20.1 million in the fourth quarter. Proceeds from dispositions were $2.7 million in the first quarter. Approximately, 41% of the cash CapEx was spent on growth or expansion projects and the remaining was used for sustaining needs, which include replacements, refurbishments and other maintenance. We also had capital lease additions for sustaining fleet replacements of $6.1 million in Q1 and expect to continue to decrease our reliance on finance leases going forward.

We currently expect 2019 full year CapEx to be under $70 million, including lease additions with estimated cash proceeds from dispositions for the year of approximately $10 million to $12 million. This would result in cash CapEx net of proceeds from dispositions of approximately $50 million for the year. While net working capital was stable sequentially, we paid down over $20 million of our payables balance at year-end, and our DSO increased modestly, although DPO was essentially flat, and our over 90-day receivables represented just under 6% of our AR balance at the end of the quarter.

We are investing in our organization and technology to improve working capital management and streamlining core business processes, with particular focus around order-to-cash. We're making great progress and attributing a fully electronic order entry dispatch customer approval and invoicing system. In fact, we now have two Permian customers that are approving our work tickets electronically, with significant monthly ticket volume and additional customers expected. We expect these and other initiatives underway will enhance our capital efficiency into the future.

Our cash and cash equivalents were $63.8 million and our borrowing capacity net of letters of credit was $66.2 million, with no amounts drawn on the revolver at March 31. Total available liquidity at the end of the first quarter was $130 million, and our long-term debt was $322.4 million. We have a strong balance sheet with no debt maturities through 2023, and we will protect our liquidity and continue to rationalize capital investments through the year. In addition, we will continue to follow a disciplined approach to capital allocations and remain focused on generating free cash flow. As noted in our release, with the revised lower capital spending plans for this year, we expect our cash balance at year-end to be in excess of $60 million.

And with that, I'll turn it back to Roe for some concluding remarks.

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [5]

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Okay. Thank you, David. Despite its slow start, 2019 looks to be shaping up nicely for Basic. Though the recent trend in commodity prices has been much improved, we understand that E&P capital forecast are generally expected to be down year-over-year, which is reflected in our 2019 budgets as well. We entered Q2 with a positive momentum as both production and completion activity have improved in our Central and Gulf Coast regions. In addition, Permian Basin customer inquiries and project planning indicate a stronger second quarter.

As our work on the business over the last couple of years indicates, the production-related side of our business continues to represent an increasingly larger percentage of total revenues, which promises greater stability and higher cash flow generation. You can expect us to further transition assets and invest in technology and infrastructure to serve the production side of the industry. We are particularly excited about the potential in our Water Logistics segment and will deploy capital and resources to meet the rapidly growing need in the Permian Basin. Our water disposal business will continue to transition to a more midstream business model with more stable revenue streams and predictable cost. We are also anticipating a gradual easing of takeaway capacity challenges in the Permian Basin during 2019, which coupled with the record high DUC count, should have a positive impact on our 24-hour rig package activity in the second half of 2019.

I think it's extremely important to note that while we work hard to be as efficient and successful as we can be with our own strategies, assets and businesses, we still believe the best and most expeditious way to enhance our company's value remains in consolidation with peers in our space. With market caps seemingly out of touch with replacement cost values, deals that perfectly thread the needle of synergies and competitive dynamics seem less important. While synergies yield attractive economics, pure scale of revenue and EBITDA that can be achieved accretively without additional leverage should be the priority of all companies in our space. We continue to explore potential consolidation opportunities that would create this scale, de-lever our capital structure and drive free cash flow generation. I'd like to stress that of all the initiatives this management team works on daily, we consider consolidation to be one of the most important.

With that, Operator, I'm going to turn the call over for any questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Thank you. Our first question comes from the line of Tom Moll with Stephens.

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Tommy Moll, Stephens Inc., Research Division - Chief Economic Consultant [2]

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I wanted to start on frac. First, just to make sure that the full year outlook you gave for total company EBITDA does not assume any of those 3 stack spreads come back. And then on a related point, if you just look at the current conditions for that business, it's extremely competitive. How far below free cash flow breakeven do you think current market pricing is? And what's your sense of where that might head in the next couple of quarters? And just any help you can give us on likelihood that maybe some of that equipment could come back sometime this year?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [3]

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Okay. Well, first part of your question was about our spreads. We don't anticipate any of the 3 coming back in the current model. They could come back quickly. We've taken good care of warm stack in those fleets, so we could reactivate quickly if the financial returns were to justify it. Right now, with our pricing and where we're running our fleet, we're right at cash flow breakeven. So, the maintenance CapEx is moderated in that business for us. When we left the Permian, we moved into more of the central market for us, which is Mid-Con and the pressures are lower, the volumes are a little lower and the wear and tear on equipment is a little lower. So, the margins we're making in that business, it's generating a field-level EBITDA that's double-digit low teens. That's enough for us to effectuate cash flow breakeven. As far as the rest of the year, we expect some improved activity. We saw it at the end of March, middle of March forward. April looks to be about the same. More inquiries, more planning. Looks like some of the DUCs are going to get fracked up in some of our markets. So, we're expecting a slight improvement. Not enough, however, to, right now, make us feel like we're going to reactivate one of those spreads. Just enough to fill in the whitespace in the calendars, which automatically raises our margins in that business slightly, so -- with just operating leverage. So, I'm not expecting a lot of heroics out of that business, but we're -- our fleet's in good shape. We feel like our maintenance programs are in good shape. And for now, we can tread water right where we're at.

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Tommy Moll, Stephens Inc., Research Division - Chief Economic Consultant [4]

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Great. And as a follow-up, as we look at the full year outlook for EBITDA and cash at the end of the year, and thanks for the visibility on both of those, one of the themes that's been batted around recently is the extent to which operators are going to spend ahead of the calendar, so to speak, and that 4Q would be quite light versus earlier in the year just as budgets are exhausted and not increased. So, as you guys think about your plan for the full year, what kind of assumptions do you have for Q4? And to the extent that revenue and earnings would be down that quarter, are you counting on a working capital release to hit the cash balance? Or how should we think about working cap in Q4?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [5]

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I'll let David answer the working cap adjustment that happens at the end of pretty much every year, and this year, we don't expect it to be a lot different. But as far as overall activity for Q4, we agree with you and what's been batted around. We think Q4 will tail off pretty significantly. It did in 2018 as those budgets ran out. So, we're not expecting anything different this year. You want to speak to working capital?

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David Schorlemer, Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO [6]

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Yes. And I think as far as working capital, I mean, we -- we're managing networking capital to be pretty flat for the year. And if we see increases over the next 3 quarters, which I think we anticipate, we'll certainly see working capital expand a little bit. But with the normal seasonality and contraction in the fourth quarter, there will be some harvesting of working capital at year-end, which is typical.

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Operator [7]

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Our next question comes from the line of Daniel Burke with Johnson Rice.

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Daniel Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [8]

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Roe, I was wondering if you could spend a bit more time addressing the CapEx reduction. It looks like it falls almost entirely on the sustaining side, and I'd imagine there's a pumping narrative involved in this. But I was wondering if you could comment a little more directly on what you've been able to achieve versus the previous budget?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [9]

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That's right. I mean, when the stack 3 spreads, obviously, that sustain for those spreads goes to 0, so that's a big part of the reduction. There was a little bit of growth that we've -- that's pushed slightly for -- in -- farther into the year, so that will affect what we had planned to do at Q4. It'll probably move into Q1 of 2020. So, a little bit of growth, a little shift during the year. But overall, it's just a reflection of the activity that we have seen, and we just don't feel like we're going to need as much sustaining CapEx as we thought. The fleet is in pretty good shape. Our rolling stock's in good shape. And frankly, we've -- as we went through the realignment initiative, we found that we could do the same amount of revenue or even more with a little less equipment put in the right spot. So, the cleaning up of the fleet and putting it in the best markets has really impacted the necessary maintenance CapEx that we have to have. We don't have to replace as many vehicles and pieces of equipment, et cetera. So, we're making a better use of the overall fleet, which is bringing down the maintenance CapEx. You want to...

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David Schorlemer, Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO [10]

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Yes. Just to add to that, Daniel, Roe talked about having our incentives to really drive capital efficiency and one of the things that we're focusing on is utilization of our assets and dispositions. We've got over $800 million of book value of assets, and we need to turn those assets over and bring in new technology and more efficiently operating assets and dispose of those that we don't have adequate use for. And so, we've got $10 million to $12 million of dispositions this year where we are really focusing on making sure that we're converting that excess equipment into cash. And that needs to be incorporated into the model here as well.

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Daniel Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [11]

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Got it. That's helpful. Couple of other little follow-ups. Roe, could you just talk a little bit about the cementing business. How is that business performing, if we try to differentiate that from what you're seeing in the fracturing business?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [12]

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Well, it follows more of the rig counts more than anything else, not really the completion count. So, it's performed pretty well. And it's been stable, I would say, throughout the first quarter. Pricing in that business has held up okay as well. It's not as competitive as frac. So, it's performing pretty good, but it'll follow the rig count more than anything else.

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Daniel Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [13]

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Okay. And then maybe one last one, David, if you're willing. Can you give -- just given the volatility in C&R, can you -- any thoughts on the incrementals we would see from Q1 to Q2 on that mid- high single-digit C&R revenue increase you guys expect to see?

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David Schorlemer, Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO [14]

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I think we try to target incrementals in the 30% to 40% range. We achieve much more than that in our core businesses in the first quarter. With $4 million of incremental direct margin on $1.7 million of increased revenue, I think that that's really not a sustainable assumption. But I think in the C&R segment, we're probably going to really target in excess around 50% just because the types of assets that we're putting in place there and in many cases, we're investing in equipment that's already within our revenue base that we may be swapping out some rented equipment. And so, I think that the margins can be even higher.

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Operator [15]

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(Operator Instructions) Our next question comes from the line of John Daniel with Simmons Energy.

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John Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [16]

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Good job on the rig side. I think you're one of the only guys that shared rig hour growth, so I wanted to just dig in there. Did you have any notable customer wins this quarter?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [17]

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Nothing significant. We've got, as I said, 15 "contracted rigs" out there that are all on dedicated multiyear agreements. Those obviously generate quite a bit of utilization and added hours, our 24-hour packages average 21. That's still a strong number even though down 1 from Q4. That's -- there's a lot of utilization there. I would say, as the weather cleared toward the end of the quarter, John, we saw a big pickup in just maintenance and workover work. Just pump changes, rod parts, basic blocking and tackling of the overall production business. A lot of customers kicked the can on that early in the first quarter and then got after it in the -- at the end of the first quarter and have maintained that activity level in the second quarter. So, I wouldn't call it a sense of urgency on their part, but they're definitely paying more -- much more attention to -- and putting a higher priority on these -- on regular maintenance projects.

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John Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [18]

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Okay. One on the year-end cash balance. I know you've mentioned potentially selling some old assets. Is there a dollar number in the model that you guys have for asset sales to arrive at the cash balance? Or is that all upside?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [19]

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It's $10 million to $12 million, and it's already baked in.

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John Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [20]

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Okay. Got it. And then, Roe, appreciate your comments on the need for consolidation, I guess, would you mind giving us your views on the likelihood of something happening, whether you're involved or not, just within your core segments workover and trucking this year?

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [21]

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Well, I feel like a broken record when it comes to this because I've been saying this for so long. But I feel like we're probably closer than we've ever been. The talk is certainly good. The amount of activity when it comes to different folks willing to entertain different types of deal structures, et cetera, all look positive. I think everyone understands that trying to reduce our cost structure is not going to be how we improve and fix the OFS space. We've got to see a shrinking number of bidders and competitors out there. That's the only way we're going to improve margins. There's just frankly too many players. So if you can maintain your G&A levels flat or very consistent and you can add revenue and EBITDA, whether it's right down the fairway of businesses that you already run that will -- that should generate some meaningful synergies or whether it's businesses that are new to your company or different, but you still have that de-levered and added scale of revenue and EBITDA, then it doesn't matter. So I would say the shift has been away from trying to find things that are mirror images of your current company -- or current business lines and the shift is, let's just put these businesses together with the same cost structure and build that scale and margin around that. So, it's changed a little bit in that. I have also seen a change with respect to shareholder sentiment around premiums and willingness to transact. That seems to be moderating in the right direction. So, everyone seems to be a lot friendlier about these combinations and not having to do a face-ripping deal or nothing. An okay deal is still a really good deal. So, all of that seems to be moving in the right direction. The talk is much better. So, fingers crossed, maybe we won't be the broken record here when it comes to this for very much longer.

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John Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [22]

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Fair enough. What's needed. Just one last housekeeping for me. David, I know you guys mentioned the long-term debt, it's in the release, what's total debt in cap leases as of the quarter end?

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David Schorlemer, Basic Energy Services, Inc. - Senior VP, Treasurer, Secretary & CFO [23]

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So we have, I believe, $56 million of cap leases at the end of the quarter and $300 million of our notes.

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Operator [24]

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We have no further questions at this time, I would now like to turn the floor back over to management for closing comments.

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Roe Patterson, Basic Energy Services, Inc. - CEO, President & Director [25]

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Okay. Thanks, everyone. We'll talk to you next quarter.

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Operator [26]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.