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spk03: Good day and welcome to the Solaris third quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, 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 your touchtone phone. To withdraw your question, please press star, then two. Please note this 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.
spk00: Good morning and welcome to the Solaris Third Quarter 2021 Earnings Conference Call. I am joined today by our Chairman and CEO, Bill Hartler, and our President and CFO, Kyle Ramachandran. Before we begin, I would 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 the 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 Dartler.
spk07: Thank you, Yvonne, and thank you, everyone, for joining us today. I'm pleased to share another quarter of strong Solaris results. We generated a 40% sequential quarterly increase in revenue to over $49 million, adjusted EBITDA increased 18% sequentially to $7.7 million, and we paid our 12th consecutive quarterly dividend. We ended the quarter with $43 million of cash and no debt on the balance sheet. Industry fundamentals continue to shape up strongly during the third quarter. Oil prices increased to the $80 range and gas prices climbed over $5 as global supply and demand dynamics continued to tighten. During the third quarter, U.S. horizontal rig count grew 10% from the second quarter average, while completions activity grew at a slower rate as operators increased drilling activity and inventories of drilled and uncompleted wells reached multi-year lows. Since the end of the third quarter, the horizontal rig count is up another 7%. Many operators have taken advantage of higher commodity prices and attractive wellhead economics, albeit not at the same rate as the increase in commodity prices. We expect operators to continue to increase drilling activity, including many private operators that haven't been active in many years. Meanwhile, we continue to see public operators stick to capital discipline. Many are indicating modest increases in drilling and completions activity and spending next year as they plan to maintain or slightly grow production. We believe this combination of robust commodity prices, capital discipline from public operators in 2021, and growing backlog from both public and private operators all set the stage for another year of activity improvement in the U.S. completions and for Solaris in 2022. Beyond increases in overall activity levels, we also believe recent supply chain tightness in the market will play well into Solaris' strength in the coming year. The industry is currently facing constraints in many critical areas, such as labor and trucking, and both new and existing Solaris offerings help reduce the impact of these bottlenecks by providing highly efficient, large storage buffers with multiple unloading spots and built-in automation. We're continually improving our system automation that is core to Solaris. We believe continued automation can help further reduce labor requirements, improve performance, and reduce costs. We demonstrated this with our auto hopper technology we introduced a couple years ago, which resulted in increased operational efficiencies, reduced labor, increased reliability, and reduced spillage and dust when traditional frac blenders are in use. Our new auto blend technology advances those automation gains by completely replacing traditional blender technology with a streamlined, integrated, all-electric blender. During the third and fourth quarters, we continue to run customer trials with auto blend. Several of our customers have now seen firsthand the significant improvement in reliability and performance of the AutoBlend versus traditional blenders. We continue to demonstrate that our AutoBlend solution can further reduce headcount requirements while also improving uptime performance and sand throughput. Additionally, because AutoBlend is all-electric, it can be integrated with the same cleaner power sources that are used by a growing number of electric frack fleets. We believe that the continued industry focus on capital efficiency and and discipline will drive demand for technologies that can both improve operational efficiencies and meet sustainability initiatives. Alaris is the only integrated provider of all electric solutions for the low-pressure side of well completions operations, and we believe this strongly positions us to address many of the challenges of today's market, as well as support our customers' key ESG targets. We expect our next two auto blend units to enter service no later than the first quarter of 2022, and we're looking forward to full commercialization of the system. We continue to have discussions with several customers about longer-term contracts in order to secure spots in the supply chain queue. The performance of our system and the commercial structure under discussions appear compelling for our customers that have trialed our system. Supply chain lead times on some of the components of the auto blend have continued to tighten, and we have ordered long lead items for a few additional blenders as we finalize commercial negotiations. Trucking is another area of tightness in the industry that is receiving a lot of attention right now. When we manage the last mile for our customers, it means we manage the trucking logistics in conjunction with our silo-based sand storage services on well sites. Much of Solaris' ability to achieve record-managed last-mile activity in the third quarter is a direct testament to our equipment and the associated supply chain and operational technology, the team we've built to management, and our balance sheet. Our last mile logistics team has grown in both size and sophistication and has worked hard to strengthen our deep relationships with trucking providers. Our strong balance sheet has also helped us secure trucking access as our debt-free balance sheet and liquidity allows trucking carriers both certainty and speed of payment. We are also expanding our next generation belly dump unloading offerings that work in conjunction with our silos. Today, we have two new top fill-based systems, of different designs currently running in full-scale trials and are very pleased with the results of both so far. Both solutions allow for flexible placement on well sites up to 400 tons per hour offload rates and preserve the option to unload from pneumatic trucks to maximize truck procurement flexibility. This flexibility should allow operators to optimize their payloads for trucking availability, lead to lower overall costs, and increase surety of meeting production time schedules at a time when trucking resources are tight. While the Solaris silo system already offers many efficiency benefits today, we believe this enhanced belly dump loading technology could ultimately result in new customers for Solaris. Our customers will continue pushing for solutions that ensure wells can be completed as fast and efficiently as possible, and at current commodity price levels, the timeline to reach production is crucial to driving value. We believe our people, relationships, and technologies are well positioned to ensure our customers can meet these timelines while also offering all-electric, automated, and safe solutions that enhance sustainability benefits for the entire oil and gas industry. With that, I will now turn it over to Kyle for a more detailed financial review.
spk08: Thanks, Bill, and good morning, everyone. I'll begin by recapping some of the numbers. During the third quarter, we generated $49 million of revenue and adjusted EBITDA of $7.7 million. We averaged 59 fully utilized systems, which represents an 11% sequential increase from the second quarter. total revenue increased 40% sequentially, driven both by an increase in system utilization as well as an increase in the amount of sand delivered in our last mile business. Over the course of the quarter, we deployed a total of 88 profit systems, which worked with varying degrees of utilization. This was an increase of one deployed system from second quarter levels. Our calculation of 59 fully utilized systems reflects the number of equivalent systems that generated revenue every day in the quarter. The tightening in the gap between our fully utilized and deployed systems during the quarter reflects a modest compression in white space on the calendar. The 11% increase in our fully utilized system count was achieved against a backdrop of relatively flat industry completion activity and was positively impacted by a hilarious record of both tons delivered and managed last mile systems operated in the quarter. We also benefited modestly from an increase in activity with the customer that we signed a three-year agreement with during the second quarter. Operating cash flow was approximately $7.7 million and included a release in accounts receivable as we caught up with a late collection from a customer which was previously disclosed in our second quarter earnings call. Consistent with prior quarters, we have continued paying for trucking services at an accelerated pace, ensure availability for higher activity levels in our last mile service offering. We also realize a $1 million cash benefit from the employee retention credit as part of the CARES Act of 2021. We have filed for an initial $2 million of benefit related to the first two quarters of 2021 and expect to realize that remaining cash benefit in 2022. After total capital expenditures of approximately $6 million in the quarter, we were free cash flow positive at $1.7 million. We returned a total of approximately $5 million to shareholders in the third quarter in dividends, which was flat with the prior quarter. Since initiating our dividend in 2018, we have returned approximately $87 million in cash to shareholders in the form of dividends and share repurchases. We ended the third quarter with approximately $43 million in cash and $50 million available under our undrawn credit facility for a total of $93 million in liquidity. We're currently in the process of negotiating an extension of our credit agreement with our lenders and expect to complete those negotiations well before the expiration of our current agreement in the second quarter of 2022. Turning to our fourth quarter outlook. During October, our fully utilized system count was flat with the Q3 average. There are a number of puts and takes that will likely play out for the remainder of the fourth quarter, including some level of holiday shutdown and budget exhaustion. These could be balanced or offset by certain operators getting their 2022 programs started in late December. We expect that our managed last-mile service-related activity will come off of the record level we experienced during the third quarter, as this is a throughput-based business which will be subject to lower volumes during holiday shutdowns and will likely be challenged with additional tightness in trucking during the holiday season. This should result in overall activity levels for Solaris that are flat to potentially down slightly in the fourth quarter, but points to a positive outlook for 2022 where activity should be up from 2021 levels. SG&A expenses for the third quarter were approximately $5 million inclusive of non-cash stock-based compensation For the fourth quarter of 2021, we expect total SG&A to be roughly in line with third quarter levels, inclusive of the normal quarterly expensing of non-cash stock compensation. Our previous expectation was for full year 2021 CapEx spending to be in the range of $15 to $20 million. Given the strong interest from our customers and in anticipation for full commercialization of our new technologies, we have begun to order initial long lead items for additional auto blend units beyond the two we expect to receive by the end of the year. As a result, we anticipate our CapEx spending for the year to be approximately $20 million. We expect maintenance CapEx for 2022 to be flat with 2021 in the $10 million range and growth CapEx related to commercializing our auto blend and our belly dump solutions as the primary driver of capital expenditures in 2022. In summary, we are excited about how industry fundamentals are taking shape for the coming year, and we are excited to see the progress in the new technology we've been working on for the past couple of years. We also believe our technology, service differentiation, and focus on core competencies can help drive value for our customers and help to alleviate many of the supply constraints currently facing the industry. The timing of our new technology introductions with an industry upcycle offers exciting prospects for Solaris. We remain committed to capital discipline by focusing on new technology that can drive incremental returns for shareholders, maintaining our dividend, and maintaining our debt-free balance sheet and strong liquidity position. With that, we'd now be happy to take your questions.
spk03: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Our first question today comes from Stephen Gingaro with Stifel.
spk05: Thanks. Good morning, everybody. Good morning, Stephen. Two things for me. The first, just thinking about some of the technologies and the capital spend that you talked about, when we think about 2022, how should we calibrate your growth potential versus, you know, an underlying expectation of growth? Let's say, I mean, people seem to be sitting around 20% plus upstream spending growth. But, I mean, if you make an assumption that, you know, completion activity is up 20%, give or take, how should we think about your growth in that kind of environment?
spk08: Yeah, I think as we evaluate the new technologies, we see those as ways to grow market share. So it does require incremental capital, but we do think it potentially provides an opportunity to grow beyond what, say, market growth is in terms of our activity. I think both the blender technologies as well as the top-fill technology address specific pinch points in the industry that potentially allow us to perform better at a higher level than market.
spk07: Yeah, and I'd add that the blender really does pull through potentially new customers with the silos that might not be there before. So the complementary nature of the products allow additional pull-through business that may not be there today.
spk05: And is there a pricing component we should be thinking about next year, or is that too soon to tell?
spk08: We're in those discussions today. I think you've heard from a lot of other public companies around pricing for next year, and certainly there are inflation considerations, investment considerations in the new technologies that we continue to talk about and enhancing our systems that allow us to have those conversations with customers in a very constructive manner. Too early to kind of come up with any firm numbers, but those are certainly discussions we're having.
spk05: thank you. And then the other, the other topic I wanted to ask you about was, you know, and realizing it's containerized solution versus your systems, but you know, obviously the prop X deal was, was interesting, uh, with Liberty. I'm just curious, a, how you think that impacts the landscape and, and, and B sort of what you think of those type of, of marriages with, with directly with pressure pumpers, uh, as an industry direction?
spk07: We think the last mile business and the well site storage business is really a bit independent from pressure pumping. Liberty was a large customer of PropX, and, you know, they helped start that business up. So there was a very strong relationship between the two parties that made sense for them. Maybe they're consolidated. From our perspective, though, it's an independent business. We treat it differently. We manage our equipment differently. It's just a very focused organization around managing what we call the low-pressure side of the business or the logistics and supply chain from chemicals to the sand side to the ultimately, when it all gets blended, upside of the pumps. And so our focus is there, and we think that, you know, we have and continue to do business with probably every single pressure pumper in some form or fashion, and we think there's value in that diversity.
spk05: Okay, great. Thank you for the call, gentlemen.
spk03: Our next question comes from John Hunter with Cowen.
spk01: Hey, good morning, everyone. So my first question is just on activity in the third quarter where you outperformed your original guidance quite a bit. I'm curious, you know, are these new customer wins, are they expanded agreements with existing customers? And is it fair to say that the 3Q exit rate was kind of the high point for the quarter?
spk08: Yeah, I think it's always a mix of additional growth with current customers, new customers. You know, we mentioned we signed a three-year contract with a customer in the second quarter, and that drove additional growth as well that maybe wasn't in our prior guidance. So it's always kind of a mix there. As far as the second point, Sorry, John, can you just restate the second question?
spk01: Yeah, so we touched on, I guess, the new customer wins and the expanded agreements. Yeah, the exit rate.
spk08: Yeah. We tried not to get too much into month-over-month variance. We did mention in the prepared remarks that October is coming in pretty close to the average of the third quarter, still finalizing some of those numbers. But As we look into the fourth quarter, we talked about some puts and takes. Certainly, there are potentially operators shutting down for budget completion, but where commodity prices are today, there's also potential for operators to say, well, I'm going to ignore that exhaustion. I'm going to keep going. I don't want to lose the crews that are working really well and risk starting up in January. Our guidance is flattish based on those sort of puts and takes. And, you know, obviously there's seasonality as well. And when I refer to that, I'm speaking to holiday shutdowns specifically. Our last mile business is a throughput business where we get paid every time a ton is delivered to location. Thanksgiving and over Christmas, there will no doubt be days where tons aren't delivered. And so that will have an impact on the fourth quarter. But all of that is shaping up, in our opinion, very well for 2022, where we see spending up and activities continue to fill in the white space, that we did see an improvement in white space sort of utilization in their quarter.
spk01: Thanks for that, Kyle. Sorry, go ahead.
spk07: Yeah, one other thing to add to that, John, is I think if you play back time, we weren't at 80% We weren't north of $5 on gas and north of $80 on oil when we looked at the third quarter. So that does play. It frankly is muted relative to what one would expect at these price levels, but there have been increases.
spk01: Thanks, Bill. And I guess along that same line of questioning, your utilization improved sequentially. That was nice to see. Can you talk about the sustainability of maybe that higher utilization on your deployed systems? You know, is this a function of your customer mix and partnering with mainly large EMPs that are more predictable? And how do you weigh that against, you know, maybe being, you know, opportunistic with some of the smaller players that are reacting to the improvement in commodity prices?
spk07: Yeah, well, I mean, clearly I don't think being reliable and steady is necessarily a big versus small phenomenon. I think there are smaller operators that are very reliable that keep a program going and maybe adding to that program. I think it's really a dynamic that as things were ramping back up through this year, you've just seen a random ramping of various customers, and now all that white space begins to fill up. We'll see more and more higher and higher customers. of actually fully utilized to systems that were actually deployed. So that gap should continue to close as folks fully develop their capital budgets and their programs and may add a rig and fill in the completions programs to match either the duct drawdown or the additional wells that have been drilled.
spk08: And you're certainly seeing on the pressure pumping side where operators that don't necessarily have a consistent program are having to really schedule ahead because more and more folks that haven't been around for a while are popping up and completing wells. So not only are we seeing higher utilization, but I think on the pumping cleats we're also seeing higher utilization. Part of that is driven by equipment but also by people. So it's obviously more efficient for the industry to be running fewer crews at higher utilization than lots of crews with lots of people that aren't necessarily working all the time.
spk01: Yep. That makes sense. And then I guess just last one for me is, you know, if your activity is, call it flat in the fourth quarter, I know you said it's flat to maybe down, but let's just assume it's flat. You know, would you assume that your margin would be flat with where it was in the third quarter? Or is there anything in 3Q that kind of weighed on results that goes away in the fourth quarter?
spk08: I think it's probably consistent. You know, the last mile business tends to have a bit of a mixed impact. You know, if there are certain jobs where, you know, they're really firing on all cylinders and we're pumping a lot of tons every day, and then there's jobs that have, you know, wireline issues and we're down for a couple of days. And so that's sort of some of the volatility we're seeing from a quarter-over-quarter profitability mix as the last mile portion of our business continues to grow. And, you know, that may be a negative in one quarter, it may be a positive in
spk01: Yep, appreciate that. Thanks. I'll turn it back.
spk03: Thanks. And again, if you have a question, please press star, then one. Our next question comes from Ian McPherson with Piper Sandler.
spk04: Good morning. Hey, Bill, Kyle, Yvonne.
spk03: Good morning.
spk04: Which way do you think we're headed next year with overall completions, efficiencies, not just speaking to your purview, but – you know, it's been a secular trend of getting better, faster, cheaper. But we're obviously hitting a lot of, you know, just short-term supply chain snags, but also just running out of the best cruise equipment and et cetera. And as an enabler of efficiency gains, do you think that companies like Solaris can help the industry stay on that track, or do you think that 2022 is teed up to be a year of reversal for efficiency gains for E&P?
spk08: Well, yes, certainly the rate of change does appear to be slowing a bit, but the actual changes are incredible if you just look at it from sort of a pounds pump per day or hours pump per day, basin by basin. All the measures are going up. There's certainly – certain basins that are trailing from an efficiency standpoint that have room to catch up. You know, one of the – you make a great point. When we find, you know, some high efficiency and, say, multi-watt silo fracks, well, it creates a challenge elsewhere. And so we're seeing a challenge in some peer trucking logistics, getting enough capacity to deliver the amount of sand that the industry needs on location. So there's always a bottleneck that gets created somewhere either upstream or downstream of some of these efficiencies. And from our purview, the blender continues to be an incredibly high point of contention on traditional well sites with lots of NPT. We've heard lots of anecdotes that we're happy to talk about, but the point is there continues to be problems around blenders, and that is a point where we're really focused on helping the industry get more efficient there. And, again, the trials are driving a lot of interest on that product.
spk07: Yeah, completion of activity really today, because we're trying to manufacture, is a constraint management goal. And so as you look to goal-seek around optimizing the efficient frack, you hit one bottleneck at a time. So it was sand logistics and sand storage, and then it becomes water, and then it becomes chemicals. it's removal of the blenders and beginning to automate things because labor becomes a challenge and people making just, you know, simple mistakes. And so our blender, in addition to the silos and other things, believes what we think is one of the most unreliable pieces of the actual low-pressure side of completions, which is what we're focused on. So our goal is to continue to make it efficient. You know, the step changes are always big, and they slow down, but our goal is to continue to keep a bit of a ramp on that. I don't think any of this reverses. So I think the trend may moderate, but does continue somewhat in terms of the industry's ability to, you know, complete a well in a certain amount of time.
spk04: That's really helpful. Thank you both. Bill, in response to Stephen's earlier question on the Prop X deal, it sounds like you view that as and sort of neutral to your market wallet opportunity. So you're not necessarily reading any specific positive or negative takeaways from share, you know, nibbling up or down on market share around the edges as a result of that transaction. Is that correct?
spk07: I think it will be around the edges. I mean, we do some business with Liberty, and, you know, the boxes have a great place in the role on the wealth side, a lot of that groundwork is established. And as we look at completions efficiency and the amount of storage needed in a well site, you know, we're a much more capital-efficient solution over time than having to, you know, load more boxes and swing small boxes around, you know, on a well site. Yeah, and they've done a good job with it, and I think they'll continue to do a good job with it. And there's plenty of room for both of us.
spk04: Got it. Thanks very much. Yeah.
spk03: Our next question comes from Samantha Ho with Evercore ISI.
spk02: Hey, good morning, guys. I was wondering if you could update us on your chem and water initiatives. I believe there were some trials with the blender using, you know, a combination of both the blenders and the water chem systems, and I was just wondering if you could help us think about, you know, whether or not those initiatives can contribute to, you know, 2022 results.
spk08: Yeah, all of the blenders will have water systems connected to them. So that's a part of that kit. We've got, I don't know, maybe roughly half a dozen to maybe eight water systems running at any time with customers, even on an independent basis. And then on the chem system, I think we've had a couple running various points as well. So not a ton of growth on the chem systems at this point, but we do think it does tie in well into the blenders. And same on the water side.
spk02: Okay, great. And then, you know, I was just wondering, you know, if you think about the white space that you have for your rental system, Are you seeing a point where you might need to deploy extra systems in the first half of next year? I'm just kind of wondering, like, how much sort of light space do you want to maintain just in case there is, like, you know, last-minute demand from customers, you know, anyone that's, like, really been buying to add incremental work into your calendar? Sure.
spk08: Yeah, I mean, if we look at, let's just call it 90 systems having run in the third quarter to use round figures, and if we think about our unutilized capacity, it's still quite significant. So we've got plenty of room to capture whatever share is out there. So from an optimizing white space, you always want to have some reserve to make sure you're capturing all the revenue opportunities. But at this point, we've got plenty of capacity on the sand silo side of things. to capture market share that may be available.
spk07: And then there's some level of that white space that is intentional because it's logistics driven. Like we may have a system down, maybe going to the same customer, but they may be moving locations that are further away. We want to take that system down for a week and put another one in service. So there's some, you know, mobe-de-mobe. reasons to actually keep some of that white space. It's higher than usual because of the dynamic as the industry is ramping back up. But we do have plenty of extra capacity to take advantage of additional spot work, which does sort of in itself create a little more white space.
spk02: You guys used to give us like a breakout of where all your systems were spread out geographically. Can you give maybe just like a loose update of where you're most concentrated these days?
spk08: The Permian continues to be our biggest center of focus. I mean, quite frankly, it's pretty closely aligned to the rig count and just overall completion activity. I wouldn't say it's all that different. We're probably a little bit higher in South Texas relative to rig count and maybe a little bit higher in the Permian relative to rig count.
spk02: Okay. And can you kind of characterize maybe any sort of, like, operating preference between, like, the large EMPs and privates? I mean... kind of curious if you could say, like, you know, I mean, everyone expects the large EMTs to be more efficient operators and just kind of run these systems longer, but are you seeing any sort of, like, notable trends in terms of how one operator might, you know, work in, like, certain basins versus another?
spk07: No, they all have their unique characteristics. There are some small guys that are extremely efficient with what they do, and there are some big guys that are extremely inefficient with what they do. So I think it's It's a mixed bag, and we love them all the same.
spk08: Even on the new technology, we've got, you know, privates that love the new technology, are very focused on driving efficiencies. We have privates that are less focused on that and vice versa on the publics.
spk02: Can you share a mix of your, you know, how much the privates were in terms of your system usage this past quarter? Are they like 40%, 50% or more?
spk08: Well, I think, you know, from a rig count standpoint, the privates have, it moved up to close to 60-plus percent of overall read count. And I don't know if it's quite there on completions, but it will get there if it's not. So, again, given our size as far as overall market share, we tend to look like the market. So a lot of the pressure pumping work we do directly ends up being for private operators.
spk02: Okay, interesting. Okay, thank you so much. Have a great rest of the year.
spk08: Thanks, Matt.
spk03: Our next question comes from Sean Mitchell with Daniel Energy Partners.
spk06: Good morning, guys, and thanks for taking the question. So one thing that caught my attention, obviously a three-year agreement in oilfield services today is a big win. Is that an anomaly, do you think, or do you expect that you'll see more of that continue in the current environment?
spk07: We think it is, you know, unusual, but I think it's very strategic for the counterparty and for us. I think the blender and the notion of adding that kit into somebody's pressure pumping is vital as it is. I do think that that tends to lead toward longer-term contracts than generally spot work. So I do think that as a general trend, because of the new equipment and new technologies and how integrated it becomes, we will start seeing longer-term contracts. that are good for both us and our customers.
spk06: And then just as you think about the trends, I do think that you're seeing a lot more folks do the simulfrac wells, both on the public and private side. We've talked to a lot of operators. The biggest issue, it seems like, when we sit down and talk to operators on the simulfracs is water and sand. And can you just maybe talk about, you know, how much of the – are you seeing, I guess, where your business is today – Do you think that's a benefit to you as the industry moves to more simulfracs?
spk07: We do. We think that, you know, we can buffer sand. We can add, you know, a nine-pack. We can add another six-pack. We can put a lot of storage depending on the logistics nature of that particular location. You know, some are clearly closer to mines and places to pick sand up than others. And so that drives the challenge for how much you want to store at the well. Once we're at the well site, you know, our connectivity to the high-pressure pumps is as good as anything, and it's very reliable from that point on. We're not relying on other kind of equipment from there. So I do think that, as I mentioned earlier, it's all about constraint management. I think that sand has impacted some places more driven by trucking, and I do think there's been some tightness in the sand industry as, you know, mines shut down last year and are coming back on or needing to have some sort of contract or some sort of term deal to begin to want to put the capital and hire the people back you need to get the mines back restarted. So there's bottlenecks through the system, and I think they're being hit one at a time and very location-specific.
spk08: We've heard anecdotally jobs shutting down to 12-hour operations due to trucking constraints on the sand side. One of our last mile jobs, we had planned for X number of stages per day, agreed to it with the customer. Turns out they're doing 1.5x on the stage count, but the problem is there's not enough truck capacity to meet that demand. So there's no doubt about it. When we put, say, a 12-pack on location, doubling the inventory, you may be providing, say, 12 bonus hours of inventory, and at $3,500 an hour in NPT charges, the return on that incremental insurance, if you will, of an additional six-pack, is quite compelling. So we haven't really seen it yet in the numbers materially, but we do think there's an opportunity to capture more calories, if you will, per spread by providing that added level of insurance.
spk06: Thank you. And then maybe one more, just as you – I think in the prepared comments you talked about potentially two more blenders going out in 2022. Just a higher-level question on the blender. Is the adoption rate greater or in line or worse than maybe you expected in terms of how people are adopting that technology?
spk07: The interest level is about as high as we expected. We have quite a bit of interest in it, and we're in the process of negotiating. We've been maybe a little careful with putting the capital to work and waiting on some contracts, which we're working through right now and And, you know, we'll be prepared. As we mentioned, we are spending a little bit on some long lead items in anticipation of that, but haven't fully said go yet on a bunch. But it does feel like it solves numerous problems and bottlenecks in the industry, and we're fairly hopeful about it.
spk08: Yeah, the evolution of the interest is interesting to watch. You know, two years ago when we initially talked to people about it, it was, I don't have any issues with blenders. They're all brand new and they work really well. And over time, those blenders have worn out, and they've been faced with lots of challenges. And so time is sort of our ally here. And particularly as people get more and more focused on efficiencies, this particular piece of equipment on traditional locations continues to be a bullseye for those trying to track efficiencies.
spk07: Right. And it's all electric, and it integrates, you know, right in with the power sources for the electric frack fleets, be it, you know, a turbine or a gas generation or line power. Yeah, that's great. Thanks, guys. Thanks, Sean.
spk03: Thanks. This concludes our question and answer session. I'd like to turn the call back over to Mr. Bill Zartler for some closing remarks.
spk07: Thanks, Eileen, and thank you all for participating on our call. I want to thank all our employees, customers, and stakeholders for another strong quarter. We're very proud of all the efforts that have gone into the continued enhancement of our core offerings and the new product development activities. We look forward to providing further positive updates in the beginning of 2022. Thank you all. Have a great day.
spk03: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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