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Edited Transcript of CELP earnings conference call or presentation 13-Nov-18 3:00pm GMT

Q3 2018 Cypress Energy Partners LP Earnings Call

Tulsa Dec 5, 2018 (Thomson StreetEvents) -- Edited Transcript of Cypress Energy Partners LP earnings conference call or presentation Tuesday, November 13, 2018 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey A. Herbers

Cypress Energy Partners, L.P. - VP, CAO & Interim Principal Financial Officer of Cypress Energy Partners GP LLC

* Peter C. Boylan

Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC

* Richard M. Carson

Cypress Energy Partners, L.P. - Senior VP & General Counsel of Cypress Energy Partners GP LLC

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Conference Call Participants

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* Ethan Heyward Bellamy

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Michael Christopher Gyure

Janney Montgomery Scott LLC, Research Division - Former MD of Forensic Accounting & MLPs

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Presentation

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Operator [1]

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Good day, and welcome to the Cypress Energy Partners third quarter earnings release conference call. My name is Celine, your event manager. (Operator Instructions)

I would like to advise all parties, this conference is being recorded. And now, I'd like to hand over to your host, Richard Carson. Please go ahead.

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Richard M. Carson, Cypress Energy Partners, L.P. - Senior VP & General Counsel of Cypress Energy Partners GP LLC [2]

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Thank you. Hello, and welcome to the Cypress Energy Partners Third Quarter 2018 Investor Conference Call. I am Richard Carson, the Senior Vice President and General Counsel. With us today are Pete Boylan, our Chairman and CEO; and Jeff Herbers, our Vice President and newly appointed Chief Financial Officer.

We released our third quarter 2018 financial results and posted the press release on our website, cypressenergy.com, yesterday.

In the press release, you will find an important disclaimer regarding forward-looking statements. This disclaimer is an essential component of our remarks, and it is important that you review it.

Also included in the press release are various non-GAAP measures that we have reconciled to financial measures under generally accepted accounting principles. Those reconciliations appear toward the end of the press release.

With that, I will turn the call over to Pete.

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [3]

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Thank you, Richard, and good morning. I appreciate your joining us today, and thank you for your continued interest in our company.

Unfortunately, our strong results are overshadowed by a tough equity market. We are very pleased with our strong third quarter results driven by organic growth and the hard work of our talented employees. Our quarterly results in all 3 of our business segments improved over the third quarter of '17 and sequentially over the second quarter of this year. We experienced a seasonal business cycle with our third quarter typically yielding the best financial results of the year. Generally, we would expect lower activity in the fourth and first quarters due to colder weather, holidays and customary annual budget cycles. We generally expect this trend to continue, although we have recently secured some additional significant contracts that may mitigate this typical seasonal trend through the winter of '18 and '19.

Commodity prices ultimately impact everybody in the oil and gas industry. We continue to benefit from the stronger crude oil prices that have risen significantly from a year ago despite the recent pullback. The strength of our recovery can be clearly seen in our significant improvements in gross margin, EBITDA and distributable cash flow compared with prior periods. We provide essential midstream services with 96% of our revenue and 78% of our EBITDA in the third quarter being generated from our essential mission-critical pipeline inspection and integrity services. This is a great business that continues to grow, and we've only scratched the surface on penetrating the available market of over 2,000 potential customers in the U.S. and Canada. We will continue to focus on growing and diversifying our Inspection and Integrity Services, increasing our customer base and pursuing additional pipeline water midstream projects in our Water Services segment.

During the third quarter, we continued to make progress with new service lines begun in 2017 in our Inspection business, and we plan further expansions in our inspection and integrity services businesses.

Our Pipeline Inspection segment revenues were appreciably higher during the third quarter of '18 compared with the same period in '17. Our revenues increased 7%, our gross margin improved 25%, and importantly, our gross margin percentage increased 17% over the prior year as we continue to focus our attention on higher-margin Integrity Services. Improvements in revenues and gross margin have also improved our working capital efficiency. We will remain focused on expanding our customer base, increasing maintenance and integrity projects, margin improvement, working capital efficiency and managing and increasing our distributable cash flow.

As previously discussed, we continue to be more focused on our mix of customers, lines of business, return on capital and margins rather than merely inspector headcounts, as can see in our results. We continue to believe that our Pipeline Inspection and our PPS, Pipeline and Process Service, segments will have many additional opportunities over the foreseeable future due to midstream infrastructure growth and spending, the continued aging of the North America's existing pipeline infrastructure, increasing regulatory requirements and the continued energy sector economic rebound from the downturn. We continue to invest in organic growth, and we'll continue to evaluate potential acquisition opportunities that may prove beneficial to us and our unitholders.

Our 51%-owned Pipeline and Process Service segment, otherwise known as PPS, which we previously referred to as Integrity Services, provides hydrostatic testing services and has continued to show significant improvements compared with the corresponding period in '17. Revenues increased 37%, gross margin increased 84% and our gross margin percent increased 34% from the third quarter compared to -- for the third quarter compared to last year.

We have strengthened our management team with a number of talented additions, built our backlog, opened a new location in the Permian Basin and continued to bid on a substantial number of upcoming opportunities. We continue to have high expectations for this business segment given its reputation, the team and the opportunity for projects, including increased midstream infrastructure growth and spending.

With respect to our Water Services segment, activity in North Dakota has materially improved from the same period a year ago, and we currently benefit from a combination of higher oil prices and rig counts, drilling and completion efficiency gains by our customers, the completion of the DAPL pipeline and substantial new investment by private equity-backed E&P companies who have plans to invest in drilling and completing new wells. The rig count has more than doubled from the bottom of the downturn and permit growth has been strong. We continue to benefit from the January 2018 completion of 2 new pipelines into one of our facilities as demonstrated by the increased volumes and average saltwater disposal rates per barrel. We recently added another pipeline connection and have another pipeline connection being completed in the fourth quarter into another facility. We will continue to explore additional opportunities that would expand the volumes we process with limited additional cost since our saltwater disposal facilities are currently operating at only approximately 45% of their capacity. This unused capacity provides significant operating leverage as demonstrated in our results.

Our third quarter '18 volumes in our North Dakota SWD facilities were up 63% from the same quarter last year, and our North Dakota revenues have increased 87% compared to the same period. Despite the sale of our 2 Permian Basin SWDs earlier this year, our disposal volumes still increased 38%, revenue increased 58% and our gross margin 86% while our gross margin percentage increased 18% to over 71% during the quarter. We now have 10 pipelines in the 9 saltwater disposal facilities that we own and operate, 8 of these facilities are wholly owned. This is a very attractive business that generates strong free cash flow with nominal maintenance capital expenditures. This segment also generates our highest revenue gross margin, EBITDA and DCF per employee.

As previously reported, we refinanced our credit facility in Q2, and we reduced our interest expense from $1.9 million in '17 to $1.3 million for the 3 months ended in '18, a reduction of 32% despite significant increases in interest rates.

In the second quarter, we also significantly deleveraged our balance sheet by entering into a $43.5 million convertible preferred private investment in public equity, or PIPE, from an affiliate of our sponsor in connection with refinancing our credit facility. This PIPE carries an interest rate of 9.5% and requires at least 2.5% to be paid quarterly in cash, with the remainder to be paid in cash or in kind at our election. We will pay the first quarterly installment of this obligation of $1.4 million in November in cash. Looking forward, our business should continue to benefit from the substantially lower -- lowering of our leverage.

Over the last few years, we have evaluated dozens of acquisition opportunities to expand and enhance the breadth and depth of our essential pipeline inspection and integrity services we offer our clients. I am pleased to announce that our sponsor, Cypress Energy Holdings, recently completed 2 acquisitions that we believe will allow us to accomplish that goal. Both transactions were asset purchases that require some repositioning before bringing them into the partnership. Our sponsor intends to offer them to the partnership once it has completed certain developmental goals. These acquisitions would move us into several new lines of work, including water treatment; in-line inspection for oil and gas and other customers; equipment rental, which could be converted into service business before offering this line of business to the partnership; offshore pipeline and process services, including, but not limited to, hydrostatic testing. These 2 acquisitions will offer us considerably -- a considerably broader platform to expand into other pipeline and process services, both onshore and offshore. We also plan to bring our various onshore inspection, integrity services to our new offshore customers.

For some time, we've aspired to enter the attractive in-line inspection, otherwise known as ILI industry, with next-generation technology capable of helping pipeline owners and operators better manage the integrity of their pipelines in both the energy industry and the municipal water industry.

We have completed the previously announced process of evaluating strategic alternatives and concluded that remaining independent at this time and building out these exciting acquisition opportunities represents the most attractive opportunity to build long-term value for the partnership. The long-term increasing demand for pipeline inspection, integrity and water solutions remains solid due to our nation's aging pipeline infrastructure and growing production. And we believe we are well positioned to capitalize on the opportunities that these improving market conditions continue to create.

The future drop-down of the recent acquisitions should also position us to eventually resume increasing our distributions. The recently announced acquisition of Strike by Sentinel Energy Services Inc. by industry veteran Andrew Gould speaks to their view of this attractive industry.

At this time, I would like to take a moment to congratulate and thank Jeff Herbers for his leadership, teamwork and contributions to the partnerships since we hired him as VP and Chief Accounting Officer 2 years ago. Jeff has effectively been serving as our Interim CFO, and we have made substantial progress on many fronts this year. We conducted a national search for our new CFO and had over 65 candidates apply for this opportunity. In recognition of Jeff's strong efforts, I'm pleased that our Board of Directors has recently approved the appointment of Jeff as our Chief Financial Officer.

Jeff will now walk you through some additional financial highlights.

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Jeffrey A. Herbers, Cypress Energy Partners, L.P. - VP, CAO & Interim Principal Financial Officer of Cypress Energy Partners GP LLC [4]

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Thank you, Pete. As Richard mentioned, these remarks will include non-GAAP financial information that we believe will enhance our investors' understanding of our performance. This non-GAAP financial information is reconciled to GAAP financial information in our press release.

Adjusted EBITDA for the third quarter of 2018 was $7.6 million compared to $4.5 million in the same period of 2017, an increase of $3.1 million or 70%. Adjusted EBITDA attributable to our limited partners for the third quarter of 2018 was $7.2 million compared to $5.3 million in the same period of 2017, an increase of 35%, although the 2017 amount included $1 million of sponsor support. Exclusive of this sponsor support, adjusted EBITDA increased by 67% in the third quarter of 2018 compared to the third quarter of 2017. Adjusted EBITDA attributable to the noncontrolling interest owners that own 49% of our hydrostatic testing subsidiary was $0.4 million for the third quarter of 2018.

Distributable cash flow for the third quarter of 2018 was $5.7 million compared to distributable cash flow of $3.4 million for the same period in 2017, an increase of 68%. Distributable cash flow in the third quarter of 2017 benefited from $1 million in sponsor support. Exclusive of the support, distributable cash flow increased by 138% in the third quarter of 2018 compared to the third quarter of 2017.

During the current quarter, we paid $1.1 million of cash for interest compared to $1.7 million in the prior year. The decrease in cash paid for interest is directly related to our May 2018 refinancing, in which we significantly reduced the balance outstanding on our credit facility. In future quarters, distributable cash flow will be reduced by cash distributions on preferred equity, which we issued and sold in May. The first distribution on preferred equity will be paid in November in cash in the amount of $1.4 million.

We continue to operate a very attractive CapEx-light business, as evidenced by a total of only $0.3 million of maintenance capital expenditures in the third quarter.

Our net income in the third quarter of 2018 was $5 million. Of this net income, $3.6 million was attributable to our common unitholders, $1 million was attributable to our preferred unitholder and the remainder was attributable to noncontrolling interest. The net income attributable to our common unitholders of $3.6 million increased 133% over the third quarter of 2017.

In addition to these highlights, I would also note that our leverage ratio, as calculated under our credit facility, was 3.3x and our interest coverage ratio was 5.2x. Both of these ratios improved during the third quarter as our EBITDA in the third quarter of 2018 was greater than that of the third quarter of 2017 despite the existence of sponsor support in 2017.

We have $11.2 million of cash on our balance sheet at September 30, 2018. We have $76.1 million of borrowings outstanding on our credit facility at September 30, 2018, which represents the same amount that was initially borrowed when we refinanced our credit facility in May.

In our Pipeline Inspection segment, the headcount of our U.S. operations was 6% higher in the third quarter 2018 than in the third quarter of 2017. Overall, we sent an average of 1,263 inspectors per week to the field for the third quarter of 2018 compared to 1,211 in the third quarter of 2017, an increase of 4%.

I'm especially pleased with our improvements in working capital efficiency in that we achieved a gross margin in this segment of 11.9% for the quarter, an increase of 25% over the prior year.

In our Water Services segment, we disposed 4.3 million barrels of saltwater during the third quarter of 2018 at an average revenue of $0.78 per barrel compared to 3.1 million barrels during the third quarter of 2017 at an average revenue of $0.68 per barrel. The 38% increase in volume is partially attributable to the 2 new pipelines that we constructed and connected to one of our saltwater facilities in January of 2018, and the increase in volumes occurred despite the sales in 2018 of our 2 Texas saltwater disposal facilities.

Our North Dakota revenue increased over 87% from a year ago. The increase in revenue per barrel is primarily due to new pipelines, price increases and higher oil prices.

Confirming the attractiveness of the saltwater disposal business, the Water Services segment generated a gross margin percentage of 71% and an EBITDA margin of 51% in the third quarter of 2018 with nominal maintenance capital expenditures.

During the third quarter, 95% of our total water volume came from produced water, and pipeline water represented 41% of our total water volume.

As commodity prices improve and stabilize and drilling and completion activities increase, we expect to have significant operating leverage with our current cost structure and we anticipate minimal maintenance capital expenditures as volumes increase. We estimate that each incremental barrel of water we dispose has an average incremental contribution margin in excess of 80%. Our saltwater disposal facilities were utilize at approximately 45% of their capacity in the third quarter of 2018. As activity continues to pick up in the Williston Basin, we should see some additional activity and financial benefits.

Our Pipeline and Process Services segment, which we formally referred to as our Integrity Services segment, generated revenues of $3.9 million during the third quarter of 2018 compared to $2.8 million during the third quarter of 2017, an increase of 37%. Gross margin was $1.3 million during the third quarter of 2018 compared to $0.7 million during the third quarter of 2017, an increase of 84%. Our gross margin percentage increased from 24.8% in the third quarter of 2017 to 33.2% in the third quarter of 2018 as a result of our increased activity and the resultant increase in utilization of our personnel.

On a consolidated basis, maintenance capital expenditures for the third quarter were less than $0.3 million, reflecting the attractive business model we have in our portfolio of businesses that have limited maintenance capital expenditure requirements. This remains a key differentiator for us versus virtually all other MLPs.

Our cash growth capital expenditures were primarily related to our pipeline expansion; the rebuilding of the surface equipment at 2 of our water facilities, one of which we subsequently sold; and equipment purchases to support our growing non-destructive examination business.

And with that, I will turn the call back over to Pete.

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [5]

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Thanks, Jeff. After several difficult years during the industry downturn, I'm very proud of our team for their dedication, hard work and perseverance. We are very pleased to report significant improvements in our operations relative to last year and sequentially relative to the second quarter, continuing a steady improvement on our business and operating results while, importantly, continuing our solid safety record as our staff and employees continue to focus on safety processes and results.

We remain very optimistic as we look to our future.

Stronger commodity prices and activity should continue to benefit the oil and gas industry, our customers, and ultimately, our partnership. After 3 years of patiently evaluating dozens of acquisition opportunities, I am excited that we finally completed 2 complementary acquisitions in the third quarter at our general partner-sponsored level that we anticipate will be offered to and acquired by the partnership once we have accomplished several developmental goals. These acquisitions will move us into several new lines of work and will give us a platform to expand into other PPS, Pipeline and Process Services.

Our management team will continue to focus on our organic growth opportunities, pursuing the hundreds of other potential clients in need of our essential midstream services.

We appreciate the investment of your valuable time in joining this call and your continued interest in our partnership. Although I am pleased with our third quarter results and the trends in our business, our board, management team and employees will continue to strive for excellence and to effectively and efficiently grow the partnership while continuing to maintain a disciplined focus on long-term unitholder value.

Operator, we may now begin taking some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And you have a question straightaway, and that question comes from the line of Ethan Bellamy of Baird.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [2]

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Could you, Pete, narrow any of the potential drop-down variable for us in terms of timing, multiples, EBITDA size, associated maintenance CapEx, anything we can plug in our model?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [3]

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Yes. At this time, Ethan, I'm not in a position to do that. The 2 different acquisitions have a number of variables. The larger of the 2 being an asset transaction, we have to renegotiate new MSAs with every single customer because we don't effectively assume. Normally, you can go seek an assignment. And we've got to move from 2 facilities into a new facility, which we're in the process of doing, and we're adding some talent to the management team. So it's just a little bit early. And as I mentioned in my prepared remarks, 1 of the 4 or 5 different lines of business in that particular opportunity has over 10,000 rental items that are used in the PPS industry, the pipeline and process services industry, and many of those items have the opportunity to be paired with services, thereby making them MLP-eligible where pure rental income wouldn't. So we just got a bunch of work in positioning. I want to do another line of business. There is water treatment. I think you're aware that we have long been interested in getting further vertically integrated into the vast amounts of water that are utilized in pipeline maintenance and integrity and we haven't been in that before. But now we have a robust platform for water treatment, both onshore and offshore, that then can be moved into traditional upstream water treatment opportunities with our Water and Environmental Services segment. So we have some positioning we'd like to do there. And then the other acquisition that gets us into the ILI business is something that we're, again, quite excited about. It, too, is an asset purchase agreement, and they have some really cool technology and tools that we believe are leading edge. But we need to build out a number of tools for the oil and gas segment in different diameters to deal with the market opportunities and that's going to take a little bit of time. So unfortunately, at this point in time, I think it's premature for us to be answering any of those important questions you're rightfully asking.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [4]

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Okay, that's fair. You mentioned potential return to distribution growth. Would the drop-downs be the trigger for that? Or is there a certain set of financial metrics you would like to achieve before you consider distribution increases again?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [5]

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Yes, another important question. If we can continue to block and tackle the way we have been doing -- you've seen a dramatic improvement in our fundamental operating results, especially when you strip away the financial support that we provided during the downturn. If we can continue to penetrate the market, winning new business and making a headway or making independent of a drop-down, we might be in a position to resume increasing the distribution. Obviously, the macro environment remains unsettled. Investor sentiment toward MLPs remains mixed at the moment. But we still believe that there is an insatiable need for yield in the marketplace and that we have a very attractive, repeatable business model with low CapEx, and that when investor sentiment does return to a more positive framework, that we should be well positioned. But we want to make sure our leverage profile and our coverage ratio were attractive than -- so that's kind of how we're thinking about it, and we will continue to revisit it each quarter. But clearly, the drop-downs could accelerate that.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [6]

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Okay, maybe asking about the drop-downs in a roundabout fashion. If we thought about the business, say, 3 years from now, having executed the available drop-down inventory and assuming the cycle hasn't turned down again, what composition of top line revenue or EBITDA would you anticipate from the various business lines? I mean, could you weigh those for us and give us a sense for where the company will -- where the partnership will be in a few years?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [7]

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Yes. I'll try to give some high-level comments. Obviously, for all the reasons I mentioned earlier, it's hard to predict the future. But the businesses have gross margin profiles that are 20%-plus. The historical revenues of one of the business were primarily limited to offshore, and as I mentioned, we plan to take a lot of that equipment and experience and know-how onshore. And so I think that 3, 4, 5 years down the road, it's easy to see $5 million-plus of EBITDA contribution, but a lot just depends upon how aggressively we build out the ILI tools, how successful we are in repositioning a lot of the equipment. I can tell you that prior to the downturn, just one of these businesses was able to generate substantially more EBITDA than that. But time will tell, and again, we just don't want to get ahead of our skis and forecast something given all the wood we've got to chop.

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Ethan Heyward Bellamy, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [8]

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Got it. And then -- I guess, specifically what I meant was pro forma for the drop-down. How would you think about the business in terms of Integrity and Inspection, saltwater disposal, et cetera?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [9]

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Oh, I think Integrity and Inspection will continue to represent well over 90% of our revenues and EBITDA and cash flow.

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Operator [10]

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And your next question comes from the line of Mike Gyure of Janney.

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Michael Christopher Gyure, Janney Montgomery Scott LLC, Research Division - Former MD of Forensic Accounting & MLPs [11]

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Yes, it sounds like a lot of interesting stuff going on, Pete. So appreciate all the color on that. Can you talk a little bit about, I guess, the large inspection contract that you guys just got awarded. I think you mentioned in the commentary that it potential could smooth out some of the typical slow seasonality in the fourth Q and fourth -- first quarter. Can you maybe talk about that a little bit?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [12]

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Sure. I can't obviously name the client specifically given the confidentiality requirements and the MSA, and what we agree to keep confidential for all of our clients. But it's a large project, a significant project, involving debottlenecking the Permian Basin. It's a great client. We plan to bring more services to this client. And we think we're going to be very busy for the next 6 to 9 months on that project that would otherwise be, as you know, a typical slowdown occurs as client budgets are exhausted toward the end of the year, the Thanksgiving holidays set in and the Christmas holidays set in, and then you come into the new year. But we have a lot of activity with this one particular project, but it's not just this one. We won another major project that will be kicking off rapidly. And with one of our marquee PUC clients, we have been awarded a substantial amount of additional work that will help us power through. So we don't have our budgets done yet, as you might imagine. But we feel like we're very well positioned, probably better positioned than we've been in 4 or 5 years for Q4 and Q1.

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Michael Christopher Gyure, Janney Montgomery Scott LLC, Research Division - Former MD of Forensic Accounting & MLPs [13]

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Great. That's very helpful. And then, maybe, if I can ask another on the water side of the business. Some of the new pipelines come into your existing facilities. Can you talk about, I guess, where you see capacity going to as a result of, sort of, these pipeline expansion projects and probably some more that you have planned for next year? I think you've that capacity up and I guess, ultimately, how high do you think that can go into the next year or so?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [14]

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Sure. It's really hard to say. Each and every facility is a different child, if you will, with a different competitive landscape, a different customer base and so forth. And some of our customers have not yet completed their 2019 budgets. They're in the process of doing so. We work closely with them all the time, and there generally seems to be a really upbeat, optimistic view with our customers about their completion and drilling plans. But we're just not in a position, and as you know, we don't provide forward guidance on what we would anticipate volumes to be. But the backdrop's as good as it's been since 2015 or '14 in terms of the things we got going on. And to reset the clock back in 2015 or '14, we, I think, only had 2 pipelines into our facilities and now we've got 10, and we're going to continue pursuing not only additional pipes into our existing facilities but organic opportunities, whereby we might be able to work with a customer to comment, build and pipe water into a new SWD facility. But that's a competitive market and there's no certainty we can complete any of those. But Jeff English, who runs this business, has done a really good job for us in 2018, and we set a lot of those wheels in motion in 2017.

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Michael Christopher Gyure, Janney Montgomery Scott LLC, Research Division - Former MD of Forensic Accounting & MLPs [15]

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Great. And then, maybe, the last one for me on the Pipeline Inspection businesses, the number of inspectors and the revenue. Obviously, there's great trends there. Can you talk about, I guess, the availability of the inspector pool? And I guess what you're seeing out there as far as the availability to get the folks that you need to?

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [16]

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Yes. We have over 22,000 inspectors in our IDB, IDB stands for inspector database, whereby when we have a client with a particular need, and I think I saw something the other day, we may have in excess of 500 different job descriptions. And in fairness, 5 different clients might call a similar job 5 different things. But there is a substantial breadth and depth of different types of skills that our clients look for. And to date, we have not had any difficulty recruiting and hiring inspectors that have the skills our clients are seeking for in whatever geography or whatever particular skill. It's not uncommon, there's a little nag in this business but when you have the reputation we enjoy in the business, the safety statistics, the clients and customer MSAs that we've got, inspectors want to come work for you. And we may, in any given week, see anywhere from 25 to 100 inspectors apply with TIR to have an opportunity to be considered for hire. There is a movement that we've been talking about for a number of years on API 1169, which is a more stringent certification training set, and we are seeing a little more competition for inspectors that have those skills. But we're also, we think, a leader in that and have been conducting training classes for several years, getting ahead of what will eventually be a marketplace that requires the substantial majority of the inspectors to have that certification.

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Operator [17]

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Thank you for questions. I'd now like to hand the call back to Pete Boylan for closing remarks.

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Peter C. Boylan, Cypress Energy Partners, L.P. - Chairman, CEO & President of Cypress Energy Partners GP LLC [18]

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Well, thank you, everybody, and we'll talk to you the next quarter. Have a great afternoon. Thank you.

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Operator [19]

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Thank you all for joining. That concludes your call, and you may now disconnect. Have a very good day.