Solaris Energy Infrastructure, Inc. Class A

Good day and welcome to the Solaris Fourth Quarter 2020 Earnings Conference Call and Webcast. All participants will be in listen-only mode. Since you need assistance today, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President, Finance and Investor Relations. Please go ahead, ma'am.

Thanks, Rocco. Good morning and welcome to the Solaris Fourth Quarter 2020 Earnings Conference Call. I am joined today by our Chairman and CEO, Bill Zartler, and our President and CFO, Kyle Ramachandran. Before we begin, I'd like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. Please refer to our press release issued yesterday along with other recent public filings with the Securities and Exchange Commission that outline those risks. I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release, which is posted on our website at solarisoilfield.com under the News section. I'll now turn the call over to our Chairman and CEO, Bill Zartler.

Thank you, Yvonne, and good morning, and thanks everyone for joining us today. 2020 was, without a doubt, the most challenging year in our company's history, and I'm proud of how the Solaris team managed through it. 2021 appears to start off with an interesting twist and want to make sure that all of your families and friends are safe following last week's unprecedented cold weather resulting in loss of power and water for many members of our community. While much infrastructure is operational again, the full impacts of this weather event are still not completely known. As many people wait to repair damage to homes and property, and many still do not have access to clean running water. We have overcome so much over the last several years, and we will work with our employees, customers, and communities to ensure a quick return to normal. Our team reacted swiftly in 2020 to the U.S. completion activity. It came close to a halt earlier in the year and then quickly ramped back up during the back half of the year. We got leaner, adapted to evolving work environments, continued to innovate, and most importantly, we continued to provide the highest level of service quality to our customers and did so safely. As a result, we produced another year of positive free cash flow, maintained a debt-free balance sheet, and continued to pay our shareholders a steady dividend. Completions activity in the lower 48 during the fourth quarter benefited from improved commodity prices. We saw WTI recover from the mid-30s per barrel to close to $50. and a subdued frack holiday that we typically experience between Thanksgiving and the end of the year. Solaris deployed 42 systems on a fully utilized basis during the fourth quarter, a 24% sequential increase. We generated a 23% sequential increase in revenue to over $25 million. Adjusted EVA dot increased 55% sequentially to approximately $5 million. We generated our eighth consecutive quarterly positive free cash flow and we paid our ninth consecutive quarterly dividend. We ended the year with $60 million of cash and no debt. So far in the first quarter of 2021, commodity prices have continued to climb, supporting continued completion activity and increases in the rig count. As we look at the remainder of the year, activity levels will be driven by multiple factors, including the ultimate pace of economic recovery, potential regulatory changes, and the resulting supply-demand balance in oil and gas. We expect continued financial discipline from most public company operators despite fluctuation in commodity prices as they continue prioritizing balance sheets and dividends as well as digest recent M&A activity. The U.S. shale industry continues to mature. From consolidation to the continual pursuit of operational excellence, our industry is focused on continuing to safely produce reliable and economical energy for our country and many areas of the world. With this maturation, we see increases in efficiency as a way for Solaris to bring value to its customers. From data optimization to lowering carbon footprint to optimizing operational efficiency, we are excited about many of the technologies being utilized by our customers today. Lean manufacturing is at the core of any mature industry. In U.S. shale development, it began with transitioning from single-well drilling and completions to multi-well pads. Then came the transition from plug-and-perf completions done in sequence to zipper fracks. In zipper fracks, we perform operations on two wellbores in parallel, perforating one wellbore while fracturing the other wellbore, and then alternating stage by stage. Now we're seeing the next step change, simulfracks. During simulfrack operations, we are fracturing two separate wellbores at the same time. The net result of this evolution is more stages completed per day, more sand pumped per day, and significantly reduced non-pumping or idle time. We have been on a number of these jobs recently and have helped our customers achieve record levels of sand throughput per day. While Sinofrax most likely won't work on every pad and for every operator, we are seeing an increasing number of operators try them. We believe our technology is well positioned to benefit should this trend continue as having a large, reliable buffer of sand, chemical, and water supply and the delivery capabilities become even more important when two wells are at stake. As operators look to reduce their overall carbon footprint, we have seen an increase in electric frac fleets. As a reminder, our equipment has always been 100% electric, and for several years we have integrated directly with electric frac fleets, tying into the same power used by the pump trucks, eliminating the need for generators and diesel fuel, reducing emissions, noise, and further improving overall reliability and cost. The industry's push for increased reliability, efficiency, and lower cost has a direct tie to our sustainability goals. Sustainability to Solaris means being equally committed to all facets of ESG. This includes not just lower cost and carbon footprint on the environmental side, but also continuing to improve Solaris social aspects such as improving affordable energy and access and giving back to the community. As last week's extreme weather event has shown, access to reliable and affordable energy is a basic requirement for society to flourish, and only a balance of multiple energy types can ensure that. Governance is equally important to us, as over 18% of our company is held by insiders, which creates a strong alignment with our fellow shareholders. I hope we've shown good capital stewardship to our investors through our capital discipline and strong support of shareholder returns, including through our dividend throughout this past cycle. I look forward to continued engagement with all of our stakeholders on our sustainability progress. I'll turn it over to Kyle next, who will expand further on what we are working on to help further these goals.