U.S. Markets closed

Edited Transcript of EXTN earnings conference call or presentation 5-Nov-19 2:00pm GMT

Q3 2019 Exterran Corp Earnings Call

Houston Nov 5, 2019 (Thomson StreetEvents) -- Edited Transcript of Exterran Corp earnings conference call or presentation Tuesday, November 5, 2019 at 2:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Andrew James Way

Exterran Corporation - President, CEO & Director

* David A. Barta

Exterran Corporation - Senior VP, CFO & Principal Accounting Officer

* Girish K. Saligram

Exterran Corporation - Senior VP & COO

* Kenneth Blake Hancock

Exterran Corporation - VP of IR

================================================================================

Conference Call Participants

================================================================================

* Kyle May

Capital One Securities, Inc., Research Division - Associate

* Tim Monachello

AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Greetings and welcome to Exterran Third Quarter 2019 Earnings Conference Call. (Operator Instructions) Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Blake Hancock. You may begin.

--------------------------------------------------------------------------------

Kenneth Blake Hancock, Exterran Corporation - VP of IR [2]

--------------------------------------------------------------------------------

Good morning, and welcome to Exterran Corporation's Third Quarter 2019 Conference Call. With me today are Exterran's President and Chief Executive Officer, Andrew Way; Dave Barta, Exterran's Chief Financial Officer; and Girish Saligram, Exterran's Chief Operating Officer.

During this conference call, we may make statements regarding future expectations about the company's business, management's plans for future operations or similar matters. These statements are considered forward-looking statements within the meaning of the U.S. securities laws and speak only as of the date of this call. The company's actual results could differ materially due to several important factors, including the risk factors and other trends and uncertainties described in the company's filings with the Securities and Exchange Commission. Management may refer to non-GAAP financial measures during this call. In accordance with Regulation G, the company provides a reconciliation of these measures in its earnings press release issued yesterday and a presentation located in the Investor Relations portion of the company's website.

With that, I will now turn the call over to Andrew.

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [3]

--------------------------------------------------------------------------------

Thanks, Blake, and good morning, everyone, and thanks for joining the call. I'll start by covering a few of the key announcements included in our earnings release. As we shared in the release, we are announcing the appointment of Roger George to lead our Global Water Solutions business. Roger has been with the company approximately 3 years and has had various responsibilities, including technology and engineering, new product development and product line management. His commercial experience, technical expertise will serve us well as he focuses on this significant opportunity we see ahead. This Water business is a growing segment for us, in what we believe is a $4 billion addressable global market.

We continue to expand the pipeline of immediate opportunities and now we have a pipeline that is well over 2x what it was at the beginning of the year, and it's still growing. Our technology and expertise allows us to provide solutions in greenfield or brownfield situations that requires better performance, lower cost and more environmentally sound solutions. We have shared for some time now, our goal to shift from primarily fabricating oil and gas equipment to providing complete systems and process solutions in energy and industrial applications and ultimately become a higher margin, higher return, less cyclical business. We believe that the Water business, along with our ECO AMS and processing product lines provide a great platform to build and launch from.

The longer-term contract nature of the ECO business and portions of the AMS business provide stability that is not present in the profile of most energy-oriented companies. Coupled with the solid margins and return characteristics, we believe we're on a journey to create a very unique company that can exceed the expectation of our employees, investors and customers. Imagine a company with a multi-billion contracted backlog, EBITDA margins greater than 20%, that although requires capital investments realizes significant returns on those investments, well above its cost of capital, all while providing resiliency, more aligned with an industrial business. This is a summary of the company that we're working to build. So along with investing in the businesses within our portfolio that are accretive to this vision, we've also taken definitive action with parts of the portfolio which did not support the overall objective.

Since the spin in 2015, we've exited the Belleli EPC business and sold the Belleli CPE in the North America PEQ business. Building on the actions we've taken to date and in line with our goal that centers on providing complete systems and process solutions, we are now considering options for our U.S. compression fabrication business. This is a business that exacerbates our cyclicality, both in terms of revenue and margins. Our goal is to pursue a strategy that will meaningfully reduce the dilution this product has on the remainder of our business. We started this process by consolidating our 2 facilities in Houston, a project that is nearing completion and ahead of schedule. We are now reviewing further options to consider for the business. As we move through this process, we look forward to provide you with updates.

When you look at the business beyond compression, the remaining business is supported by our significant ECO backlog at high margins on projects that target mid-teen IRRs on the initial terms, and AMS business that's been steadily growing and provides cash flow given its limited capital requirements. Our processing and treating and integrated plant products, which are mission-critical to the natural gas value chain has significantly better margins than total product margins you've seen and allows us to differentiate versus peers.

Our Water business, which has a unique environmentally sustainable technology, strong margins and accretive returns with fundamentals that suggest ample growth over the coming years. And lastly, our Power business, which is just in its early innings. The last 2 also provide us an industrial application diversification over the longer term. This journey is designed to create value to all of our stakeholders, and I'm excited about how far the company has come and even more excited about what the future holds. I'll now turn the call over to Girish.

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [4]

--------------------------------------------------------------------------------

Thanks, Andrew. I wanted to start today with our Water business, which had a strong commercial quarter, as Andrew alluded to. We received an order from a global E&P for brownfield facility in the Middle East. This brings our orders in this business to over $50 million for the year already, well in excess of prior year levels. This specific project leverages our patented water technologies to retrofit an existing facility, giving customers better throughput and recovery efficiencies than their existing traditional flotation solutions and providing cleaner water for possible reuse. The retrofit allows for a volume of flow rate of up to 1.2 million barrels a day. This project highlights the global opportunity set to utilize our technology to upgrade existing tanks with older and less efficient technology beyond the natural greenfield opportunities. This is especially attractive for customers with marginal wells, where the use of steam for enhanced oil recovery drives the need to efficiently and thoroughly treat produced water.

In another exciting development, we announced that we have signed an MOU with Antelope Water Management in the United States, where they will be looking to build a 100,000 barrel per day water treatment facility. We believe this is a very attractive fit for our technology and can provide significant benefits under a long-term contract. Our technology is gaining traction as a differentiator in the industry with the ability to recycle and reuse produced water economically. We have now proven out our environmentally sustainable technology with producers, midstreamers and disposal facilities and are looking at other players in the space to broaden our reach. The opportunity set continues to grow on a quarterly basis, and our global footprint is allowing for greater adoption.

Moving on to contract operations. We successfully commenced operations of a large compressor station in Latin America this quarter, adding to our working asset base. In Latin America, political and economic events are dominating the new cycle over the past few months, but we remain focused on the safe and stable operations of our multiple facilities. Currency volatility, especially in Argentina has created challenges and a bit of a headwind; but given our relationships and contract structure, we remain confident in our business in the country and in the region. We continue to monitor the region carefully, but believe that new developments, especially the Vaca Muerta should continue to progress; and while there will be ebbs and flows, we remain committed to the region and our customers.

Dave will provide you guidance for Q4 in a bit, but I want to note that we are having a couple of commercial negotiations with customers on ongoing ECO projects that could result in a transfer of asset ownership to the customer by the end of the year. This could potentially lead to a positive impact in the fourth quarter, with change of ownership and then a normalization in revenue on a go-forward basis. There is also the potential that if one or more of these contracts were to have a change of ownership, that our AMS business would benefit as we would likely get the O&M contract for the facilities, which would partially offset the ECO revenue drop.

As an illustration, I'd like to give you a bit of insight on one of these contracts and the most impactful one to 2020, if there is an ownership change. This is a facility we have operated for the customer for 10 years. And during that time, have had 2 expansions and multiple renewals. The returns on our capital investment have exceeded 20%, and it has also been very rewarding for our customers. Sometimes, after a long period, such as this, customers choose to own the asset directly as the current book value has been significantly depreciated and/or their ownership philosophy has evolved. While it does represent a potential drop in revenue, it is a natural conclusion for a capital asset investment of this nature, which has thrown off cash for a decade. This demonstrates the power of our ECO model, along with the cash and returns power of renewals. On this contract, we would likely get an AMS contract going forward, and this project truly exemplifies the interconnected nature and power of our go-to-market strategy.

The Middle East continues to provide the greatest opportunity set for new contracts in the immediate future. Geopolitical tensions are high but projects that we are bidding on and expecting to come to market remain on track. As we discussed last quarter, we continue to have promising conversations on additional trains and equipment for projects which we had previously won and commenced operations on. Regarding AMS, it continues to provide stability and the core organic growth continues. We received additional O&M contracts during the quarter across the globe and our transactional service model continues to gain traction. We also saw an increase in AMS revenue in Q3, driven by pull-through from an ECO contract, further demonstrating the symbiotic nature of our reported segments.

Moving to product sales. We had an uptick in orders in the quarter as expected, driven by our water business and international markets. Andrew talked to you about the success we have had in water, and we are seeing green shoots in power that are providing additional opportunities in the coming year. For processing and treating orders in the U.S remains slow, driven by overall market caution and restraint on capital spend. We continue to see good bid activity, but feel that conversion will remain at a low point for the immediate future. Orders in the fourth quarter are likely to remain at levels we have witnessed throughout the course of this year, driven by typical Q4 seasonality. At this point, most customers are assessing 2020 budgets, and many in the space are working through recent acquisitions. Early indications suggest 2020 capital spend will remain depressed, but we believe there are a few critical projects that will likely get the green light.

At the same time, we believe our global footprint will prove to be a differentiator to provide us additional avenues for product sales as the U.S. finds its footing under the current environment. Our commercial, engineering and operational teams will continue to be a differentiator for us as we continue to work closely with our customers to find solutions for their problems rather than just being an equipment provider, which, over the longer term, should drive opportunities for greater value-added partnerships, leading to improved returns. I will now pass it over to Dave to discuss our third quarter financial results.

--------------------------------------------------------------------------------

David A. Barta, Exterran Corporation - Senior VP, CFO & Principal Accounting Officer [5]

--------------------------------------------------------------------------------

Thanks, Girish. The third quarter reflects another solid performance with EBITDA, as adjusted, of $50 million on revenue of $302 million and was in line with our expectations. As Andrew mentioned, operating cash flow from continuing operations was $37 million. From a segment perspective, contract operations posted revenue of $96 million, while gross margin was $62 million resulting in a gross margin rate of 64%. Revenue increased as we commenced operations for a facility in Latin America during the quarter. For AMS, revenue was $35 million, and gross margin was $9 million. This resulted in a gross margin of 25%. The sequential revenue increase was a result of positive contract adjustments in Latin America as we had incremental pull-through from an ECO project, again, highlighting the power of our business model. Revenue in the products segment was $171 million and gross margin was $18 million, resulting in a gross margin rate of 11%. Bookings for the quarter were $118 million. Our product sales backlog was $308 million at the end of the third quarter compared to $759 million at the end of the third quarter of 2018.

SG&A expenses were $38 million, down 17% sequentially as we continue to focus on driving efficiencies across our organization. Moving to the balance sheet. Total debt at the end of the third quarter was $496 million with available credit of $473 million. We deployed about $20 million in the quarter to repurchase about 1.8 million shares, bringing the year-to-date repurchases to $39 million. Our leverage ratio is in great shape at 2.3x and compares to 2x at the end of the second quarter of 2019. We would expect total debt at the year-end to be below the third quarter levels.

Now turning to the fourth quarter. Contract operations revenue should be in the mid-$90 million range, with gross margin rate in the mid-60% range. For AMS, revenue should be in the low $30 million range. Margins for the segment should remain relatively flat. In our product sales segment, revenue should be in the low $130 million range, and this is only converting revenue from current backlog and not assuming any sales of spec equipment during the quarter. Gross margin in the segment should be between 7% and 8%, as we preserve critical mass in our core operations. SG&A should be similar to the third quarter level. EBITDA as adjusted for the fourth quarter should be in the low to mid-$40 million range, as product revenue declines will be partially offset by some of the cost actions we have taken. CapEx for 2019 is expected to be around $190 million to $200 million on a gross basis. Advanced payments should be roughly $100 million, putting net CapEx for 2019 around $90 million to $100 million. The potential ownership changes on the ECO projects that Girish discussed that could occur in this quarter are not included in any of these projections. While we're still in the planning phase for 2020, as of right now, our committed net growth CapEx for next year is pegged at around $40 million. Given our strong ECO and water opportunity set, we hope to add to this number next year with projects that generate returns at or above our historical targets.

And with that, I'll now turn the call back over to Andrew for closing remarks.

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [6]

--------------------------------------------------------------------------------

Thanks, Dave. The first 3 quarters of the year was supported by our backlog entering in 2019, along with exceptional execution. While we were optimistic orders would respond meaningfully by this point in time, especially in the U.S., that has not been the case. We believe in controlling the factors that are within our control and have focused on reducing costs and driving cash through working capital and CapEx management. We took quick action this year and are seeing the benefits in Q4 and especially as we think about 2020. Next year, maybe a bit of a transition year as our products backlog at this point in the year is roughly down 60% compared to where we were in 2018. And the ECO contracts we are currently working through that Girish spoke to may weigh on the segment.

I'm excited about where the organization is heading, given our differentiated product offerings in water and power, along with our substantial ECO backlog and a substantial pipeline of ECO opportunities across the market. Our goal and focus is to demonstrate the differentiation on our business by improving return on invested capital, cash flow generation, along with leveraging the power of our global footprint. Our products and services lead ourselves to being a true long-term solutions provider that is more representative of an industrial business rather than a traditional energy company, driving improved EBITDA margins, cash flow and ultimately, leading to a multiple we rate in higher. And with that, I will now turn the call back to the operator.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) Our first question comes from Kyle May from Capital One Securities.

--------------------------------------------------------------------------------

Kyle May, Capital One Securities, Inc., Research Division - Associate [2]

--------------------------------------------------------------------------------

I was wondering if you could perhaps talk a little bit more about the options you're considering for the U.S. compression fabrication business?

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [3]

--------------------------------------------------------------------------------

Yes, sure. So Kyle, I think over the last few years, we've continued to demonstrate raising the bar on our products and making sure that the technology or the market suits sort of the longer-term goal vision that we have as an organization, and we feel that this is just a natural step in that direction. Clearly, the market this year have been challenging. It's clearly an area that highlights the most cyclicality that we have within the portfolio and compression will continue to be an integral part of our global business. This announcement that we've announced today really doesn't impact our ability to support AMS or ECO, nor does it impact the ability for us to add compression to, say, integrated plants for the U.S. market where necessary.

I've also said before that compression as a stand-alone product in North America is dilutive to our product margins and, hence, our overall reported EBITDA rate. So there are a wide range of options that we are working through. I will say that we hope to be completed with this review in the fourth quarter and give you all a better update at year-end.

--------------------------------------------------------------------------------

Kyle May, Capital One Securities, Inc., Research Division - Associate [4]

--------------------------------------------------------------------------------

Got it. That's helpful. And also appreciate the preliminary look at 2020. Just wondering if you could talk a little bit more about the different fundamental factors that you're seeing and how that could affect the business next year?

--------------------------------------------------------------------------------

David A. Barta, Exterran Corporation - Senior VP, CFO & Principal Accounting Officer [5]

--------------------------------------------------------------------------------

Yes, I think, Kyle, for next year and some of the points to keep in mind, really, 2 main or maybe 3 main things. Number one, obviously, products backlog that although margin rate in line with where we've been but backlog is down considerably from where it was a year ago. It's probably the biggest single impact on next year. There's still the open question that both Girish and I mentioned regarding a couple of these ECO contracts that the customer may exercise the buying option, and if that happens, that would have an impact, obviously, on the ECO.

And then on the flip side, I think we've got the full year impact of the 2 ECO contracts that started up this year. And then on top of that, as Girish mentioned, really healthy orders this year on the water business, which will be a positive for next year as well as the order rate this year is basically double what our annual revenue is. So we're seeing a nice uptick there. So products on the negative side, we've got an open question on these plants. And then certainly, with the full year impact of the ECO contracts and the water business, those will be a help for next year. And then on top of that, as noted in our slide pack that SG&A costs with the reductions we've made, we're at a much lower run rate for SG&A going into next year. So that also will be a help when it comes to EBITDA rate.

--------------------------------------------------------------------------------

Kyle May, Capital One Securities, Inc., Research Division - Associate [6]

--------------------------------------------------------------------------------

Okay, got it. That's helpful. And one more, if I can. It's nice to see more focus on the water business and the new order. And I know this is something that you guys have been working on for quite a while. Just wondering if you can give us any details about maybe the broader opportunity set that you see in the water business for your particular products?

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [7]

--------------------------------------------------------------------------------

So we're excited about the water spaces, as you can see. And so by making the decision this past few weeks on the implication of Roger now full-time in our water business, it supports and underpins the capabilities of what we see in the market and what we hope to be an acceleration of that space. Over the past 12 months, we've continued to develop the technology, add new patents. We've been learning a lot about the water space in terms of how to commercialize the product. And what we're seeing right now are a number of factors. One, in the U.S., there's a lot more focus around regulation. We've got technology that allows our customers to reuse the water. And so in the example of Antelope that we just described, it's almost a similar product model as you think about a municipality where people bring water. They clean the water and then are able to use the water go back into their facilities as opposed to using freshwater. We're seeing a significant interest in that space in a number of states and a number of counties, both at a commercial level and also at a state level.

And so we continue to see the technology that we have applied across those platforms, be it the smaller barrel of water capability up to sort of 25,000, 50,000 barrels and ultimately up to the larger tanks that we're seeing some potential capabilities. So I'd say the technology plays into the customers and the industry that really are focusing on ESG and sustainability and being able to provide reuse technology and water applications in markets where there's either scarcity or there's a big concern. So we're seeing a lot of traction there both with customers individually and also aggregation of customers through this technology with the model like an Antelope.

Internationally, we see a similar trend. It's been something we've seen for a while, where we're continuing to develop better relationships in the Middle East and starting to in Latin America and also starting to work through some ideas offshore of how we can bring the similar technology but in a bigger scale. The announcement that we made this quarter was actually replicating what the customer had, but through a different technology that brings them better savings, better cost efficiency, cleaner environmental. And so this is actually a retrofit. This is a customer that's been operating for some time, over 1 million barrels of water a day, utilizing a certain technology that they found wasn't something that they wanted to continue with, and we came in and provided some trials, show them our technology and we're actually retrofitting a facility that's already been up and running now. And we feel that this technology has the capabilities to do both just that, both brownfield, where we can retrofit technology that's already out there and also greenfield to help our customers be more efficient and ultimately provide them better savings.

And so we feel that we're right at a place where this technology is being embraced. It takes a while to get this technology accepted into the industry, but we feel with the progress we've made and the focus that we're going to bring now with additional leadership, we're excited about where it can go. And so hopefully, that gives you a little bit of a sense of what we're working on.

--------------------------------------------------------------------------------

Operator [8]

--------------------------------------------------------------------------------

(Operator Instructions) Your next question comes from Tim Monachello from AltaCorp Capital.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [9]

--------------------------------------------------------------------------------

Just a few questions from me here. You guys alluded to the fact that product sales bookings have continued to be a little bit sluggish in the fourth quarter. Just wondering if you could give some context around that and what conversations with your customers are like? Or do you expect product sales to be flat, up, down from the third quarter?

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [10]

--------------------------------------------------------------------------------

Tim, this is Girish. We're having a lot of good robust conversations with customers. I'll start with saying, this year, we have seen a very positive lift from our international side of the business and that continues to be a factor, and we expect that to continue in the fourth quarter as well. State side, the discussions are really driven by this whole notion of capital restraint that's been driving the conversations from a customer standpoint. So really what customers are doing is using the excess capacity that's in the system right now to absorb that incremental demand.

We are also seeing producers really limit their capital spending to maintain production if you will, which is also causing a little bit of a damper on, especially new plant additions. Having said that, as we pointed out, we believe, at some point in time, as takeaway capacities increase and more incremental production does come on because we do see that production growing, there will be a few projects that will get greenlighted next year, but it's not going to be to the level that we saw back in '17 and '18 for sure. So it'll still be a bit muted. Having said that, look, we continue to work very closely with all of our customers and have good visibility into their pipelines as well as into what their expected time frames are. And as those opportunities develop, we'll continue to provide them the support they need.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [11]

--------------------------------------------------------------------------------

Okay. In terms of the stateside aspect, have you seen a material change in inquiry levels? You'd mentioned at the time of the second quarter that inquiry levels had actually grown, but conversions are still weak but has that...

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [12]

--------------------------------------------------------------------------------

Yes. So yes. So I think a good question. Look, we did see that uptick, as we mentioned in the second quarter. It's remained relatively stable or flat. A lot of it is also, to a certain extent, customers revalidating and understanding different options. So looking, for example, on processing plants, different sizing options, different methodologies, what they want to do with the ethane, et cetera. So there's more of an optionality set that customers are discussing, but we haven't seen a fundamental shift in the overall demand profile.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [13]

--------------------------------------------------------------------------------

Okay. Next one for me, just around the water business. As the business shifts away from U.S. compression fabrication and towards power generation, water, things of this nature. What do you expect the margin differential between those businesses would be on a product sales basis?

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [14]

--------------------------------------------------------------------------------

Yes. So Tim, in my prepared remarks, I talked about a company that has EBITDA margins over 20%, and so you can kind of back into that. We don't have today, explicit guidelines on product margins on a component by level. But needless to say, compression was dilutive and still is dilutive to the overall business and water is accretive to the overall business. And so I think it's a good thing, as you'll see, as we continue to build out the water business and power that, that will have a strong positive impact on the overall company. And so hopefully, that will help.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [15]

--------------------------------------------------------------------------------

Okay. Yes. No, that's helpful. And then are you able to provide any context or quantify what you expect the range of outcomes could be if these ECO contracts are converted to product sales in the fourth quarter in terms of upside in the fourth quarter to product sales and downside to ECO going forward?

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [16]

--------------------------------------------------------------------------------

Yes. So Tim, it's Girish, again. At an overall level, sort of looking at the blending of all of this, it's a fairly wide range, given that we're in the discussions right now. But it's about -- restricted to that 5% to 10% is kind of the boundary limits of that in totality.

--------------------------------------------------------------------------------

David A. Barta, Exterran Corporation - Senior VP, CFO & Principal Accounting Officer [17]

--------------------------------------------------------------------------------

You're talking about of annual.

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [18]

--------------------------------------------------------------------------------

Correct. On an annual basis, on ECO segment alone.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [19]

--------------------------------------------------------------------------------

Right. Okay. And then as a onetime in the fourth quarter, what do you expect that range would be if they were converted for product sales?

--------------------------------------------------------------------------------

Girish K. Saligram, Exterran Corporation - Senior VP & COO [20]

--------------------------------------------------------------------------------

We're not going to talk about that at this point. That's still a discussion that's ongoing with customers, Tim.

--------------------------------------------------------------------------------

Tim Monachello, AltaCorp Capital Inc., Research Division - Analyst of Institutional Equity Research for Energy Services [21]

--------------------------------------------------------------------------------

Okay, fair enough. Do you expect that if these are converted that you would press released those before the fourth quarter, that would just come out of the fourth quarter.

--------------------------------------------------------------------------------

Kenneth Blake Hancock, Exterran Corporation - VP of IR [22]

--------------------------------------------------------------------------------

Tim, this is Blake. That would probably just come out in the fourth quarter earnings release.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call over to Mr. Andrew Way for closing remarks.

--------------------------------------------------------------------------------

Andrew James Way, Exterran Corporation - President, CEO & Director [24]

--------------------------------------------------------------------------------

Thanks, everyone, for dialing and listening in today. We look forward to updating you at the end of the fourth quarter, and have a good day. Thanks a lot.