Daniel E. Jenkins - Director-Investor Relations, C&J Energy Services Ltd.

Randy McMullen, Jr. - Chief Executive Officer, President, Chief Financial Officer & Director Donald Jeffrey Gawick - Chief Operating Officer

Byron K. Pope - Tudor, Pickering, Holt & Co.

Securities, Inc. James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Sean C.

Meakim - JPMorgan Securities LLC John M. Daniel - Simmons & Company International Ken Sill - Seaport Global Securities LLC Robin E.

Shoemaker - KeyBanc Capital Markets, Inc.

Thank you, Jamie, and good morning, everyone, and welcome to the C&J Energy Services' earnings conference call to discuss our results for the first quarter of 2016. We appreciate your participation.

Before we get started, I'd like to direct your attention to the forward-looking statements disclaimer contained in the news release that we issued yesterday afternoon and is currently posted in the Investor Relations section of the company's website. In summary, the cautionary note states that information provided in the news release and on this conference that speaks to the company's expectations or predictions of the future are considered forward-looking statements intended to be covered by the Safe Harbor provision under the Federal Securities laws.

Such forward-looking statements are subject to risk and uncertainties, some of which are beyond the company's control which could cause our actual results to differ materially from those expressed in or implied by these statements. We refer you to C&J's disclosures regarding risk factors and forward-looking statements in our filings with the SEC for a discussion of the known material factors that could cause our actual results to differ materially from those indicated or implied by such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements for any reason and these statements speak only as of today, this date, when they were made. Our comments today include non-GAAP financial measures.

Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter earnings press release. As a reminder, today's call is being webcast live and a replay will be available in Investor Relations section of our website.

Please note that information relayed on this call speaks only as of today, May 11, 2016. So any time-sensitive information may no longer be accurate at the time of the replay.

With that said, I'd like to turn the call over to Randy McMullen, Chief Executive Officer, President and Chief Financial Officer of C&J Energy Services.

Thanks, Daniel. Good morning, everyone.

Thank you for joining us to discuss our first quarter 2016 results. Joining me on the call today is Don Gawick, our Chief Operating Officer.

First, I will make a few opening comments about the significant events that occurred during the first quarter, then Don will discuss our operational results in more detail. I will conclude today's call with a more detailed discussion concerning our financial results.

First, I would like to say a few words about our Founder and former Chairman and Chief Executive Officer, Josh Comstock, who unexpectedly passed away in early March. Josh had a tremendous amount of pride and passion for C&J and the oilfield service industry in general.

And he was extremely proud of everyone's tireless efforts to make C&J one of the largest premier oilfield service companies in North America. Many people view Josh as being larger than life due to his energetic and engaging personality, and he is deeply missed.

I'm proud to now lead our exceptionally talented executive management team with decades of oilfield service and leadership experience. We are fully capable of and committed to leading this organization forward and managing the business to advance Josh's purpose of providing operational excellence with differentiated value to all of our stakeholders, both now and in the future market recovery.

Moving to the other significant event from the quarter, as you'd have probably seen in our earnings release and quarterly report on Form 10-Q filed with the SEC yesterday afternoon, as a result of our first quarter performance, we were not able to meet the Minimum Cumulative Consolidated Bank EBITDA covenant tested at March 31 under the credit agreement governing our credit facilities. We have received a limited waiver for this violation from March 31 through May 31, 2016 such that it will not be considered an event of default through May 31.

We are in collaborative discussions with our credit facility lender group to fully resolve this matter in a manner that benefits our capital structure. With the assistance of special legal counsel and financial advisors, we are actively exploring strategic alternatives to improve our liquidity position and ensure financing is available to better fund our capital needs.

We are confident that we will find a beneficial solution that will not only delever our balance sheet, but strengthen our ability to weather this downturn and better position the company to capitalize on the eventual market recovery. Because a specific path forward has not yet been decided on, please note that we will not be addressing questions regarding our ongoing evaluation of strategic alternatives at this time.

With that, I will the call over to Don to discuss our operational results.

Thank you, Randy, and good morning to everyone joining us on today's call. I would also like to add my condolences to Josh's family, friends and all of the C&J employees who knew him and respected him so much.

We will strive to continue his vision of operational excellence to make C&J one of the largest and best oilfield service providers in the industry as the basis for our strategy and actions going forward. I think it's fair to say that the first quarter of 2016 was the most difficult quarter in the history of our company.

Coming out of a relatively strong fourth quarter, notwithstanding the expected seasonal slowdown, we experienced a significant decline in activity. The continued volatility and further declines in oil prices entering the new year caused many of our customers to either announce substantial cuts to their estimated 2016 capital budgets, or return to the drawing board to reassess future capital spending.

Extremely challenging market conditions driving low activity levels across our service lines and operating areas once again forced us to make difficult cost control decisions. In order to maintain utilization and aggressively manage costs, we have to implement additional rounds of stacking lower utilized equipment, closing unprofitable facilities, exiting certain business lines in specific basins, and further reducing head count.

Many of these cost control actions were taken later in the first quarter, which should improve our margins and profitability in the second quarter and beyond, barring further market weakness. Also, as we mentioned in our press release, we are exploring opportunities to divest some of our non-core business lines to enhance our liquidity position and further reduce our overall cost structure.

Turning to our core service lines, in our Completion Services segment, we experienced a significant decline in utilization as commodity prices continued to fall and customers released additional drilling rigs and frac spreads. In our hydraulic fracturing division, January initially benefited from rollover activity due to our full frac calendar in December, as we simply were not able to start previously scheduled jobs until after the first of the year.

By the time we entered February, the situation had quickly changed in line with falling commodity prices and even some of our more stable customers began to cancel or delay previously scheduled activity, all of which caused our utilization to fall and forced us to stack an additional five horizontal frac fleets during the first quarter. We also witnessed several of our largest competitors take advantage of the industry downturn and significantly reduce pricing to below breakeven levels to potentially grow market share.

Utilization began to stabilize as we exited the first quarter, but we have already experienced some additional declines as this quarter progresses. At this time, it is difficult to say if there will be any improvement relative to the first quarter, because visibility continues to be extremely limited.

Our customer base continues to be highly reactive to the volatile commodity price environment and intensely focused on receiving the lowest service cost pricing possible. We will continue with our plan of focusing on specific customers in core basins with strong development programs to increase utilization and eventually put more equipment back into service as the market improves.

In both our coiled tubing and wireline divisions, we experienced falling utilization and aggressive pricing pressure from most of our competitors during the first quarter. In response, we implemented another round of aggressive cost-cutting and made the decision to exit certain business lines in specific basins with minimal chance of generating acceptable levels of profitability without significant market improvement.

As we exited the first quarter, activity levels continued to weaken in both of these businesses as customers continued to delay or cancel activity. With that said, we are confident we have one of the largest, most active and dependable coiled tubing fleets in North America and we will continue to work with existing customers and target new customers in core basins to grow market share.

If we see lower oil prices for longer, that should increase activity levels over time in both our coiled tubing and workover rig businesses due to the growing inventory of maintenance and workover projects that continue to build, as customers have clearly reduced spending on these projects at this point. Throughout the first quarter, our wireline division decreased activity levels and continued pricing pressure that has continued into the second quarter as the rig count continues to fall and frac fleets continue to be released.

We are focused on improving our operational performance by making changes to our sales force practices and we're aggressively bundling wireline with other core services. We continue to rightsize our wireline business by consolidating facilities and exiting certain basins with thin profit margins.

In our Well Support Services segment, even though we prepared for a slow start to the first quarter, we experienced an unprecedented amount of customer pullback towards spending any money for even the most basic maintenance and workover projects. The precipitous fall in oil pricing at the beginning of the quarter even for some of our largest, most stable clients to delay or cancel previously scheduled work.

Operating basins where we have the most exposure, California, the Rockies/Bakken, Canada and West Texas, all experienced substantial reductions in activity levels due to persistently low oil prices. In response to the challenged market conditions, we had no choice but to further rightsize these businesses and focus on substantial cost cuts, which primarily included closing unprofitable facilities, reducing head count and making strategically difficult decisions about exiting certain business lines in select basins.

Looking forward, we do not see substantial improvement in the second quarter, but we do believe it is inevitable that most of our E&P customers will eventually spend more capital on maintenance and workover projects to more aggressively manage their production profiles. We also believe that many of our competitors, large and small, that continue with irrational pricing are nearing the end of the line.

With that said, we have one of the largest diversified well support services franchises in North America and our plan is to continue working closely with our customers in order to sustain utilization and protect market share. Also, we continue to focus our sales efforts to more aggressively target customers operating in core basins by bundling our core service lines together to take market share.

Despite the current market challenges, we believe that our Well Support Services segment is well positioned to meet the demands of current and future customers as the market improves. As we discussed in great detail last quarter, we continue to make progress on several key R&T strategic initiatives that lower our cost structure, enhance our service offerings and make us more vertically integrated.

Our LateralScience completion technology continues to gain acceptance in the marketplace and we continue to be awarded additional work in all of our basins with roughly one-third of our frac jobs applying the analysis. As a reminder, our LateralScience completion technology has proven to be a robust approach to the engineered completion design, which allows our customers to further enhance their overall cost structure while optimizing their production.

We continue to see impressive performance from our proprietary downhole directional drilling motor as recent comparisons to wells drilled with conventional downhole motors have resulted in a 25% reduction in drilling time. We feel confident that we have created a product that not only will save our customer's time and money, but will allow our company to penetrate a multi-billion dollar marketplace and substantially grow market share as the drilling environment improves.

Finally, we are now manufacturing and supplying the majority of our perforating guns and addressable switch technology needs to Casedhole Solutions, our internal wireline division. By combining our addressable switches with our perforating gun design, we're able to further lower our overall cost structure, gain market share and enhance the profitability of our wireline division, while creating an opportunity for future third-party sales growth as the market improves.

Going forward, we will continue to focus on projects that reduce our overall cost structure, provide greater value to our customers, and enable us to take market share by growing our core businesses. I will now turn the call back over to Randy.

Thanks, Don. Turning to our financial results, we reported an adjusted net loss of $71.1 million or a loss of $0.61 per diluted share after excluding certain one-time items detailed in the earnings release on total company revenue of $269.6 million for the first quarter of 2016.

This compares to prior quarter results of an adjusted net loss of $52.2 million or a loss of $0.45 per diluted share on revenue of $409 million. Adjusted EBITDA totaled negative $31.8 million for the first quarter, compared to $7.7 million in the fourth quarter of 2015.

As a result of the sustained weakness in demand for our services due to the prolonged downturn in the oil and gas industry, we determined that it was necessary to test goodwill for impairment and to test property, plant and equipment and other intangible assets for recoverability during the first quarter of 2016. As a result, we recorded a non-cash pre-tax charge of $314.8 million during the first quarter related to the impairment of all the remaining goodwill associated with our Well Support Services segment.

With respect to PP&E and other intangible assets, certain asset groups within each of our Completion Services segment and Other Services segment failed the recoverability testing. And as a result, we recorded a non-cash pre-tax charge of $66.9 million during the first quarter.

In our Completion Services segment, we generated revenue of $162.5 million, with adjusted EBITDA of negative $0.92 million for the first quarter, compared to revenue of $256.6 million and adjusted EBITDA of $10 million for the fourth quarter of 2015. As Don previously mentioned, utilization levels in our Completion Services segment rapidly declined as oil prices continued to fall and frac spreads were released.

As hydraulic fracturing activity began to decline, we strategically stacked additional equipment and focused on capturing higher overall utilization levels across our active fleets. We implemented another round of aggressive cost cuts and concentrated our efforts on retaining key customers in core basins, but certain competitors clearly began working at below breakeven pricing.

In both our coiled tubing and wireline divisions, we experienced decline in utilization and intense pricing pressure, as customers reduced activity levels and competitors reduced pricing to irrational levels in order to retain market share. We will continue with our strategy of managing our operations tightly.

We'll continue to eye on controlling cost primarily by stacking unproductive equipment, consolidating facilities and exiting certain operating regions with thin profit margins. In our Well Support Services segment, first quarter 2016 revenue was $95.5 million with adjusted EBITDA of $5 million, compared to fourth quarter revenue of $135.7 million, with adjusted EBITDA of $22.3 million.

Compared to fourth quarter results, U.S. rig hours decreased by 29% to approximately 89,000, while Canadian rig hours decreased by 28% to approximately 16,000.

U.S. truck hours declined by 20% to approximately 382,000.

During the first quarter, our Well Support Services segment was negatively impacted by our customers' desire to drastically reduce spending due to sustained weakness in commodity prices and continued pricing pressure driven by both large and small competitors throughout the quarter. We continue to support utilization and protect market shares through pricing concessions, while repositioning resources in line with shifting market conditions and customer demand.

Our Other Services segment contributed $11.6 million of revenue with negative adjusted EBITDA of $27.6 million compared to fourth quarter 2015 revenue of $16.7 million, with negative adjusted EBITDA of $24.6 million. As a reminder, this segment includes our smaller service lines and divisions including cementing, directional drilling services, Middle East operations and our research and technology division through which we run our artificial lift applications and data acquisition and control instruments businesses.

Our vertically-integrated businesses are also part of this segment, including equipment manufacturing and repair, and specialty chemical supply. Please keep in mind that corporate overhead and intersegment eliminations are also included in this segment's results.

With that said, none of our businesses were unaffected by the difficult market conditions during the first quarter, and that was certainly the case in our Other Services segment. As a result, we implemented another round of aggressive cost-cutting measures, including further scaling back or cancellation of projects and reductions in head count and facilities.

I also want to note that upon assuming the CEO role in mid-March, I immediately underscored the priority of maintaining strict capital discipline to enhance our liquidity position. As we further push this across the organization, we terminated certain non-essential initiatives and began exploring the potential sale of certain non-core businesses within our Other Services segment, among other measures implemented.

Our adjusted SG&A expense for the first quarter of 2016 was $46.2 million, comprising approximately 17% of revenue excluding transaction costs, severance charges, a non-recurring charge related to share-based compensation and other non-routine items. This compares to fourth quarter adjusted SG&A of $46.9 million that represented approximately 12% of revenue.

The more meaningful cost-cutting measures implemented during the first quarter took place in the back half of March, so it did not benefit our first quarter results. Since the fourth quarter of 2014, on a pro forma adjusted basis, SG&A expense is down approximately 40%.

And looking ahead at the second quarter of 2016, we expect adjusted SG&A expense to be below first quarter levels. We incurred $2.4 million in research and development expense for the first quarter of 2016, compared to $3.4 million in the fourth quarter of 2015.

The approximate 30% sequential decrease in R&D expense was driven by our continued cost control efforts and our decision to scale back or delay certain R&T initiatives. We currently expect R&D expense to further decrease in the second quarter of 2016.

Going forward, our customers' needs, along with market conditions will dictate whether we further scale back or delay certain projects or product lines within our R&T division. Depreciation and amortization expense totaled $59 million in the first quarter compared to $82.7 million in the fourth quarter of 2015.

The lower D&A expense in the first quarter was due to the reduced carrying value of PP&E from the impairment charge taken in the fourth quarter 2015. For the second quarter of 2016, we would expect D&A expense to be down slightly compared to first quarter levels.

Moving to liquidity and the balance sheet. At the end of the first quarter, we had approximately $1.1 billion outstanding under our two tranche Term Loan B facility, with an all-in blended book interest rate of approximately 8.25% and approximately $31 million in long-term capital lease obligations.

We had a cash balance at quarter end of approximately $143.5 million after drawing down the remaining availability on our revolving credit facility. As a condition to the effectiveness of the labor pertaining to this covenant violation that I discussed at the beginning of the call, the maximum borrowing capacity under the revolver was reduced to $300 million, which is equal to the availability previously determined by the collateral coverage covenant.

We currently do not have the ability to draw additional funds from the revolving credit facility and our current cash balance is approximately $137 million. We have engaged both legal and financial advisors to assist us and our board of directors regarding financing and restructuring alternatives to our current capital structure to ensure we are able to weather this downturn and capitalize on a future market recovery.

From a cash flow perspective, overall, we used $30 million to fund our operations during the quarter, but this was minimized, however, by significant cash contribution from working capital items largely due to improved DSO quarter-over-quarter. Capital expenditures totaled $18.7 million during the first quarter, which was primarily used for the maintenance of our existing equipment compared to $24.8 million spent in the fourth quarter of 2015.

We previously announced a planned 2016 capital budget of approximately $75 million to $100 million, but we currently expect to come in below the range based on market conditions and activity levels. Keep in mind that our 2016 capital expenditure estimate is based on future operational activity levels.

Our effective tax rate was a benefit of 18% for the quarter. The tax rate and resulting benefit is less than the expected statutory rate primarily due to the discussed impairment charges in the current quarter that were not tax deductable.

We currently anticipate no cash tax exposure in 2016 and we currently expect our effective tax rate to be approximately 25% for the full year. In closing, I want to reiterate my confidence in our ability to craft a solution that allows us to move beyond our covenant issues with an improved capital structure that provides the financial strength and flexibility to ensure we successfully manage through this downturn and are poised to excel as the market begins to recover.

As I mentioned earlier, we will not be taking questions regarding this process as part of today's call, but we look forward to updating the market in due course. Even as we evaluate the best path forward, we will continue to focus on properly managing our business with the same unwavering commitment, hard work and disciplined execution that we have always demonstrated.

Despite the challenging headwinds we have battled over the past several quarters, we have reinforced our position as one of North America's largest oilfield service providers, strategically maintaining a substantial best-in-class asset base with equipment, facilities and technical expertise across the U.S. Importantly, we have retained a high-quality, experienced employee base, which, I believe, is a testament to our culture.

I firmly believe that our most important asset is our employees. Without them, we would not have made it this far.

And I would like to take a brief moment to thank each of them for their continued focus on delivering operational excellence in a safe and reliable manner during this difficult time. I also want to assure our customers that we remain fully able and committed to working with them to meet their needs both in this environment and as the industry begins to recover.

Operator, we are now ready to open the call to questions.

Morning, guys. Randy, with regard to the cost-cutting measures that you and Don spoke to that were taken relatively late in Q1, could you frame for us the order of magnitude of those cost savings once they take effect?

I'm just trying to think about Q2 and make whatever assumptions I want to with regard to the top line. But, again, I'm just trying to get a feel for the order of magnitude of the cost-cutting actions that should show up in Q2?

Sure, Byron. The largest reduction is obviously going to be on the labor front.

We exited the quarter with about 22% less employees than we had when we started the quarter. In addition, we've done compensation reductions all the way through myself that we'll benefit from in the second quarter.

We've obviously been working with our top vendors on cost reductions, whether that's through sand, on the fluid side, coiled-tubing streams and other areas that we'll benefit fully from in the second quarter that were very minimal impacts during the first.

But anyway, to frame the order of magnitude just in dollar terms, I mean, is it – I don't want to put a number out there but is there just a way to frame or quantify the order of magnitude of those collective cuts as we think about Q2 versus Q1?

Well, obviously, those were all – that are not all, but the majority of those costs are variable and dependent upon activity levels. So, depending on how activity is Q2 over Q1, it's difficult to give you an exact dollar because it would really be tied to the revenue side of it.

But, I mean, again, I mean, I can – the significance around the labor cost is a big decrease and that's well over quarter-over-quarter $20 million per quarter. So, that's the biggest impact as we cumulatively look at our labor both on direct side and the labor side.

Okay. And then I want to ask you to identify the specific regions, but as I think about your historical strength in West Texas and South Texas, as you've returned from some of these areas where – that have very thin margins, is it reasonable to think that you still got the majority of your presence in the collective West/South Texas market for, let's say, for frac and coil?

Yeah. This is Don.

That's a correct statement. West Texas is certainly our largest operating basin when you look at our Completions group.

We're still operating a number of frac spreads there, very strong presence there with respect to both coil and wireline. South Texas has certainly shrunk considerably in terms of activity.

As you know, the Eagle Ford rig count is down very dramatically. We've still got our presence there that's significant but it has shrunk in line with what the market has seen.

Most of the retrenchment and departures, quite frankly, have taken place in the northern part of the Lower 48. Also, California has been hit very significantly on the Well Services side as it has on the wireline side, just in terms of overall activity levels.

We're still present there with our major product lines but certainly in a much reduced capacity.

Thanks, guys. I'll turn it back.

Good morning, guys.

Morning, James.

Looking at the business, you're talking about how things are getting worse. We've had several of the larger service companies come out and say that they think that the second quarter could represent the bottom in U.S.

activity. But they seem to be the ones who were doing the aggressor predatory pricing.

Do you see Q2 as probably the bottom for the U.S. onshore market?

Yeah. I'd say, if commodity prices can hang in there somewhere around the current range, the indication we're getting from a number of our clients is that if that is the case, they expect to see a little bit of an uptick in the summer.

And so, I think, it's going to completely be driven, obviously, by commodity. But at this point, the outlook for most of our customers is Q2 is somewhere around the bottom and, hopefully, is the bottom.

Okay. I appreciate that.

My follow-up, if I could. It seems to me that the thinking is that the drilled but uncompleted wells will be completed before a great deal of wholesale increase in drilling takes place.

Can you guys talk about what you see in the drilled but uncompleted market? And is that – are those wells, however many there are, going to be drilled over the next several quarters or several years?

Interested in your opinion from talking to your customers and based on their historical behavior.

Yeah. The indication we're getting from our clients at this point is that the initial return to completion activity will be through the DUCs.

They're not going to stand up rigs until they worked off a good bit of that inventory that's out there. So I don't think we'll see anything very dramatic in terms of rig counts, although we have got a few customers talking about standing up a rig here and there.

I think it's going to take some time to work off that inventory. It's quite significant at this point.

And, again, it's going to depend very much on our commodity price. But certainly, the initial uptick in completions will be with the existing inventory of DUCs.

Okay. Randy, thank you very much.

Best of luck.

Thanks, Jim.

Hey. Good morning.

I was hoping just to get a little bit more detail in term of how much of the fleet is still working on pressure pumping? Just trying to get a sense of the type of utilization for your fleets that are working.

So meaning, when they're able to secure some work, is it 24/7 or is it more spottier, 12-hour work, three to five days a week? Just trying to get a sense of what those active crews are looking like on the ground today?

Yes. So, as we mentioned, we laid down a number of crews in the first quarter.

We're currently working with 11 full-time horizontal fleets, and the market – again, the drilling rig count has continued to fall. So we are seeing patchiness in the second quarter in terms of some of the overall activity levels.

We'll probably utilize somewhere in the 50% range currently. And again, we will have changes to the calendar occur on a pretty frequent basis as various operators either delay what they have planned or they've, in some cases, just cancelled what they have planned.

And another phenomenon we're seeing right now is unsolicited pricing coming in from competitors that's well below what the existing rates were. And occasionally, we'll lose some work in some of those cases and then have to look for areas to keep the – to get that frac spread back to work.

So it's a very limited visibility at this point is I think the best way to characterize it.

Right. Understood.

And then, I guess, just thinking about – considering the cash flow constraints that you have at this point, just tell me about how you're trying to manage the R&M on both the active fleet as well as relative to some of the consumables you have on the stacked horsepower. So just kind of how you're managing through that R&M process at this stage.

Being managed in normal course. We're not managing any differently.

Obviously, the equipment that we've got active is being properly maintained and invested in.

Okay. And then just last question for me would be on the Other Services segment.

You gave some detail in the prepared comments, but just any more detail you can offer on the moving pieces from 1Q to 2Q thinking about the operating component? I know there's not a lot of activity today, but also the corporate side as well.

Well, obviously, in the smaller business lines, we're continuing to shrink as well. But as mentioned, there's a couple of those that we're looking at monetizing.

So, obviously, that will help the profitability part of the Other Services because currently those are an EBITDA drag on the company. And then in addition on the corporate side, obviously, as I mentioned, the labor component is coming down quite significantly Q2 over Q1.

A combination of a couple of things, and that's head count reduction, but also some compensation decreases that we've implemented at the end of Q1.

Okay. Understood.

Thanks. I appreciate it.

Thanks.

Hey, guys. Randy, the first question is there's been lots of talk about just the larger competitors being pretty aggressive on price.

Is it your sense that these price cuts are job-specific where they're trying to win a few wells, or is this the case where they're going in, undercutting and locking that in under some sort of six to 12-month price arrangement?

John, this is Randy. I'm going to let Don go into more detail, but I would just say that it does appear to be more of a targeted approach.

How long term those commitments are, I guess we don't really have the benefit of knowing that specifically. But I would say from what we do see, it's more of a well-by-well basis as opposed to some sort of longer-term entrenchment with that customer.

Okay. Thank you.

And then, just a last one for me. Can you just perhaps speak to what your April rig and trucking hours were?

John, we'll have to get back to you on the April numbers.

Okay. Thanks, guys.

Yeah. Good morning.

Randy, obviously, one of the big drivers here is cash flow and EBITDA. And I don't know if you can give us an answer on this or not, but looking at where your cost structure is now, what level of activity or revenue do you think you need to see to be kind of EBITDA breakeven in pressure pumping completion services?

Well, I mean, I think a good look back is to look at the fourth quarter and see where we were from a revenue perspective and what EBITDA we were generating. And for pressure pumping specifically, that level of revenue did generate, obviously, positive EBITDA and, obviously, had to sort of encounter the seasonal slowdown.

So, by no means do we need to get back to those level of revenue but, clearly, above where we are now is the answer. We're managing that through obviously idling of equipment and focusing the assets and the operations where we are EBITDA positive.

And honestly, outside of the pressure pumping business, we are EBITDA positive in all the other service lines on a segment basis. So, it's just really combating the competitive nature of the pressure pumping business.

And as mentioned, you're having to battle competition that's working at negative gross margins. So, obviously, it's a challenge, but we continue to sort of focus in on where we can find that profitability and try to maximize those opportunities.

Okay. And then a follow-up.

You talked about larger competitors are irrationally – pricing irrationally to gain share. I don't know if you'd want to name names or not, but looking at the big three, right, Schlumberger, Halliburton clearly is big and has been talking about maintaining share.

Schlumberger doesn't talk about it much. And then, BJ Services within Baker has retrenched.

But have you seen any change in their behavior over the last quarter?

All I'll say is that with respect to Baker, they have shrunk very, very dramatically in the Lower 48 to the extent that they're not a significant player in the pressure pumping business at this point.

And you don't want to comment on which of the big guys is being the biggest bully?

No.

Okay. Thank you.

Yes. Good morning.

So, in terms of the measures that you're taking to enhance liquidity, you mentioned non-core asset sales. I was wondering if there's a dollar figure that you could give us that's associated with that?

And do you expect to get any further funds from working capital in the current quarter? Just kind of wondering what are the kind of most immediate steps that could affect your – positively affect your liquidity?

Sure, Robin. This is Randy.

Working capital and our ability to drive source of cash through that is going to be limited on a go-forward basis. We, obviously, did that quite well during Q1.

But we're not expecting, on a go-forward basis, to see really anything significant like we did in Q1. On other sources of cash, as we've mentioned before, we're going to receive approximately $23 million in tax refunds over the next two quarters.

We're continuing to look at real estate sales, which will still be, although small, a source of cash. And commenting specifically on the sales of the business, I would say that the dollar amounts are fairly material.

We're not going to quote exactly what they are until we get to a point that that's fairly certain. But they are, by no means, an immaterial amount.

So, kind of how we're thinking about it is not only is it a nice source of cash that, obviously, helps liquidity on a go-forward basis, but it also improves EBITDA as this is currently a drag on our earnings.

I see. So, if activity does start to accelerate a bit and you are able to put equipment back to work, will you be able to access any working – I mean, you will have, I guess, potentially a use of working capital in that case, and so how are you planning around that possibility, which I realize isn't on the horizon, but might be?

Well, you're right. With an improvement in activity, we would have a use of cash in working capital.

But obviously, how we're planning around that is just what I just described, which is the monetization of some of these business lines coupled with the significant tax refunds that we're expecting to get for the next three quarters, will help tremendously if we have an improvement in activity and then working capital becomes a use of cash.

Okay. Fine.

And then just in terms of your purchasing sand and so forth on behalf of your customers, is there anything that's changed there that would have – in terms of a use of working capital?

No. Nothing's changed there.

I think we have a customer here or there that provides its own sand. But for the most part, we provide sand for the majority of the jobs that we're on.

Right. Okay.

Thank you, Randy.