Trican Well Service’s (TOLWF) CEO Dale Dusterhoft on Q4 2019 Results – Earnings Call Transcript

Trican Well Service Ltd. (OTCPK:TOLWF) Q4 2019 Earnings Conference Call February 27, 2020 11:00 AM ET

Company Participants

Dale Dusterhoft – President and Chief Executive Officer

Robert Skilnick – Chief Financial Officer

Conference Call Participants

Taylor Zurcher – Tudor, Pickering and Holt

Ian Gillies – Stifel

Waqar Syed – AltaCorp Capital

Anthony Linton – National Bank Financial

Jeff Fetterly – Peters & Company

Operator

Good morning, ladies and gentlemen. Welcome to the Trican Well Service Fourth Quarter and Year End 2019 Earnings Results Conference Call and Webcast. As a reminder, this conference is being recorded.

I would now like to turn the meeting over to Mr. Dale Dusterhoft, President and Chief Executive Officer of Trican Well Service. Please go ahead, Mr. Dusterhoft.

Dale Dusterhoft

Thank you very much. Good morning, ladies and gentlemen. I’d like to thank you for attending the Trican Well Service annual and fourth quarter 2019 conference call. Here is a brief outline of how we intend to conduct the call. First, Robert Skilnick, our CFO, will give an overview of the annual and quarterly results. I will then address issues pertaining to current operating conditions and near-term outlook.

We will then open the call for questions. Mike Baldwin, our Executive Vice President, is also available to answer questions. I’d now like to turn the call over to Rob to provide an overview of the financial results.

Robert Skilnick

Thanks, Dale. Before we begin, I’d like to point out that this conference call may contain forward-looking statements and other information based on current expectations or results for the company. Certain material factors or assumptions were applied in drawing a conclusion or making a projection as reflected in the forward-looking information section of our 2019 MD&A.

A number of business risks and uncertainties could cause the actual results to differ materially from these forward-looking statements and financial outlook. Please refer to our 2018 AIF and the Business Risks section of our MD&A for the year ended December 31, 2019, for a more complete description of business risks and uncertainties facing Trican. This conference call makes reference to a number of common industry terms and certain non-GAAP measures, which are more fully described in our 2019 MD&A.

The following discussion focuses primarily on the financial results of Trican’s continuing operations. Further details related to Trican’s discontinued operations is described in our annual financial statements and MD&A. Our annual and fourth quarter results were released this morning and are available on SEDAR. As we have discussed at our last conference call, fourth quarter activity saw sequential improvements, mostly due to customers’ deferred work from Q3.

Improved gas prices and deferred work from Q3 resulted in customers being more active in Q4 relative to Q3. We had anticipated seeing an uptick in activity, but the increase in activity was slightly more than anticipated. In addition, improved activity, combined with our prior quarter’s reduction of active equipment resulted in improved sequential margins.

For our hydraulic fracturing business, proppant volumes increased from the third quarter by 58%, and our average active horsepower increased by nearly 50%. We exited Q4 2019 with eight fracturing crews operating, which was consistent with the prior quarter’s exit levels.

Overall, the improved activity resulted in stronger sequential gross profit and adjusted EBITDA levels. Loss per share was down modestly sequentially due to the lower average share count and the effect of $10 million of specific asset legacy write-downs. Evidence of our aggressive cost-reduction efforts was reflected in our margins. Although our revenue levels were only $2 million higher than Q4 of 2018, we were able to generate adjusted EBITDA of approximately $14.6 million compared to negative adjusted EBITDA in Q4 2018.

The improved adjusted EBITDA level occurred despite lower average pricing levels in Q4 2019 compared to the prior year. Over the past 12 months, we have adjusted our active fracturing crew count to better align with industry activity levels, which has resulted in more stable utilization levels. In Q4 2018, we averaged 44% utilization on our 10.5 crews compared to 71% utilization on our eight crews in Q4 2019.

By adjusting our crew count, we’ve been able to adjust our support cost structure. The net result of the better business structure is the primary contributor to our improved gross profit and adjusted EBITDA margins. Operating cash flow has also benefited from our ongoing cost-reduction efforts. Before considering changes in working capital, operating cash flow generation was approximately $18 million in the fourth quarter. Despite significant industry headwinds, positive operating cash flow allowed us to fully fund our 2019 capital expenditures from that operating cash flow.

Our 2019 capital expenditure program of approximately $33 million was comprised of sustaining capital and infrastructure expenditures with modest growth capital focused on items that offered a quick payback and improved our operational efficiency. In addition, we incurred approximately $4 million of expenditures related to the replacement of equipment that was damaged in the 2018 insured fire event.

Our approach to capital expenditures in 2020 will be similar to our approach in 2019. We will adjust capital spending levels to activity and cash flow levels and our overall expectation is for similar spending levels in 2020 relative to 2019. During the past 24 months, we have monetized $50 million of stranded capital from our ongoing asset disposition program.

Asset sales represent permanently idled equipment that is no longer competitive in Western Canada with sales of any specialized oil and gas equipment occurring outside of Canada. The $32 million of monetized asset sales in 2019 allowed us to continue to repurchase shares of our company.

Since we initiated our NCIB program, the company has canceled more than 22% of the company’s outstanding common shares. For the year ended December 31, 2019, the company repurchased and canceled 30.1 million common shares at a weighted average price per share of $1.50. The company continues to view our ability to repurchase shares at below book value through our modest positive cash flow and proceeds from selling nonrevenue-generating equipment and noncore assets at prices approximating book value as reasonable uses of these cash flows.

As of the current date, we have repurchased approximately 60% of our allotment under our current NCIB program in less than 40% of the time expired in that same NCIB program. For this reason, the pace of our share repurchases under our NCIB program will slow relative to the prior few months. Our approach to share repurchases will be measured given the lack of clarity regarding current operating conditions. And as always, we will weigh share repurchases against other investment opportunities.

As discussed on previous calls, we maintain our belief in the importance of having a robust balance sheet during the current uncertain market, and we will only utilize the balance sheet if the appropriate opportunity is presented. Despite the downward activity and pricing pressures on our operations, Trican maintained its commitment to financial discipline. The company exited 2019 with a credit facility debt balance net of cash of $39 million, which is approximately equal to our exit 2018 debt balance. Continuing operations noncash working capital remained strong at $97.5 million for 2019 relative to $105 million in 2018.

In addition to our working capital, we had assets net of liabilities for sale of $35 million. Approximately half of this balance is represented by our fluid management service line with the balance related to real estate that is now redundant to our previously – due to our previously noted cost-reduction efforts. As described in our January news release, sale of our fluid management service line was completed. Although we anticipate we will monetize the remainder of these assets held for sale, our financial strength affords us the flexibility to ensure we realize strong values on these asset sales.

I’ll now turn the call over to Dale, who will be providing comments on operating conditions and strategic outlook.

Dale Dusterhoft

Thanks, Rob. Q1 2020 activity started strong and largely aligned with the expectations we discussed at the time of our last call. We have already seen fracturing utilizations levels in the high 80s to the 90% range in January and to this point in February. Our eight fracturing crews, 22 cementing units and nine coiled tubing unit spreads are fully booked through January, February and half of March, and we expect to see seasonal declines in the latter half of March heading into spring breakup.

We are operating less equipment relative to the first quarter of last year. And we believe that all competitors have similarly reduced their equipment and personnel complements. For example, our view is that there are eight to 10 fewer fracturing crews running this year in Canada compared to last year. There have also been reductions in the number of cement crews running as Halliburton new taxes into cement market in Canada.

Similarly, coiled capacity has also been reduced. These equipment reductions, combined with a higher year-over-year rig count, have resulted in very little spare capacity in the basin as actively crude equipment in all service lines only modestly exceeds demand and the case of cementing is undersupply for demand. We believe that the Canadian market overall is very close to being balanced on an annualized basis and a small amount of additional well count growth or active equipment reductions will create an environment in which there will not be enough equivalent to service our customers’ needs.

Although, there remains equipment that is parked and unstaffed, we believe that we and our competitors will not be adding equipment to the basin until acceptable returns are achieved. Pricing remains competitive, but stable since the third quarter of 2019, with pricing for contracted services in Q1 2020 remaining flat against Q4 2019.

Given that the equipment supply and demand balance – is in balance, we do not anticipate further pricing erosion throughout the remainder of 2020, providing – provided industry activity remains similar to last year. We are not anticipating a price increase at this time. However, we will monitor the market for opportunities. We have maintained our strong group of customers in 2020 and continue to work with them to improve daily pumping efficiencies, which lowers their cost and improves our margins.

Our best clients are pumping at 20 to 22 hours per day, and we have a group within the company that is working to move all of our clients through higher pumping efficiencies. This effort will generate more profit from our existing asset base. The North American pressure pumping business remains competitive, and companies that are able to improve efficiencies and offer low cost, high efficiency, safe service, will maintain the best customers and generate the best returns for shareholders. Despite our high utilization in the first quarter of this year, we anticipate that operating conditions for the full year of 2020 will present many of the same challenges as last year, as we project a similar yearly well count and similar customer spending figures year-over-year.

Customers have maintained tight capital discipline in the face of challenging market dynamics. They have spent less on their cash flow, preferring to focus on debt payment and returning funds to shareholders, and we believe this trend will persist in 2020. The oil directed activity continues to be impacted by the lack of pipeline takeaway capacity, which creates a little incentive for producers to invest capital that is needed to maintain current production.

Saying that, there is additional oil takeaway capacity coming later in 2020 that should improve the situation going into 2021, there has been an improvement in AECO natural gas prices this winter as a result of enhancements to certain natural gas transmission lines and supply agreements, combined with reduced natural gas storage levels. Canadian natural gas storage levels are at their lowest level of five years, and we are – and are a contributing factor to the steady improvement seen in the AECO gas prices at the summer lows of 2019.

Changes made to the pipeline of regulatory system in Alberta over the last year should provide a better floor pricing for natural gas this summer. In the second quarter, April bookings are currently higher than last year in our fracturing service line. And the quarter will benefit from the cost reductions we implemented in the second half of last year. We are still awaiting confirmation from our customers regarding activity for May and June and the second half of the year. But if May and June is similar to last year, we will see an improved second quarter year-over-year.

At the present time, we have, as usual, low visibility of our clients’ second half programs, but expect to have them confirmed in the next few months. At the moment, we expect our customers to continue to adopt a cautious view for the next 12 months, and we are not anticipating significant changes to their capital plans for 2020. Our company’s cost structure is better aligned to current industry activity levels than it was a year ago, and we continue to make cost reduction strides throughout our operations.

We have a number of Lean Six Sigma projects underway that will lower our costs through automation, better efficiency in our operations, and as previously discussed, better pumping efficiency on location. The cost-reduction initiatives undertaken to-date and the ones we are currently working on will ensure that even with flat activity, we should be able to generate modestly improved adjusted EBITDA in 2020 over 2019.

In 2019, we converted approximately 27,000 horsepower from diesel-only to natural gas bi-fuel capability, bringing our bi-fuel capacity in Trican to about 125,000 horsepower, which is almost half of the working fleet.

We continue to see strong demand for natural gas-powered equipment, which lowers cost and has – and we have the balance sheet to continue to recondition our existing fleet if economics can be justified. We have also reconfigured one crew with idle reduction technology that reduces emissions and improves fuel and repair and maintenance costs.

Our primary goals for 2020 remain consistent with those we presented last year. First, we will focus on having top quartile returns in our sector by increasing the returns in our core business lines through greater utilization and a prominently lowering cost structure. This will improve the ROIC we generate from our active equipment.

We will continue to pursue opportunities to generate funds from parked equipment or idle assets that no longer can be used in Canada. Maintaining a healthy balance sheet is still our top priority. We will continue to evaluate returning capital to our shareholders through our NCIB program, while monitoring cash flow from operations and not compromising our financial strength.

Our strong financial position affords us the flexibility to fund cost-reducing technologies, programs and training. It ensures we can stay disciplined in a highly competitive market, and at the same time, let us explore investments in our existing business and potentially new service lines that yield short-term financial returns, combined with long-term improved return on invested capital for the company. On behalf of the Board and Trican Executive, I want to thank all of our staff as we continue to pursue excellence by working safely, providing great customer service, managing costs and improving efficiencies through our Lean Six Sigma program.

Our employees in all business lines have improved their safety performance and service quality in this ultra-competitive market, which is why our core customer retention rate and loyalty remained very high in 2019. I’ve long-stated that the oilfield service business is at its core, a people business. And I’m consistently impressed by the dedication and commitment demonstrated by our people in the face of all the industry volatility to the field personnel location, the operational focus at our numerous basis and those working in our Calgary offices, know that your efforts are appreciated and valued.

I thank you for your attention today and your interest in Trican, and I’d like to turn the call back to the operator for any questions. Thank you.

Question-and-Answer Session

Operator

We’ll now begin the question-and-answer session. [Operator Instructions] The first question comes from Taylor Zurcher with Tudor, Pickering and Holt. Please go ahead.

Taylor Zurcher

Hi, good morning. Thank you. Dale, I realize you’ve got a pretty – probably have a pretty wide book of business in terms of some small pads and larger pads that you’re working on. But you talked about how some of your best clients are pumping 20 to 22 hours per day. So I’m curious what that looks like on an average basis across your active fleet today and on the back end of that? How much further room for efficiency improvement there is within the active fleet today and moving forward?

Dale Dusterhoft

Yes, within the active fleet, we’re targeting another two hours per day across our average customers, so moving that up. And we got to qualify that we still do some 12 hour work in there. And so that influences the numbers. But we – if you looked at our overall company, we’d be sitting a lot closer to that 12 hour pumping – average pumping for all of our clients. Now that includes some of the 12-hour clients in there as well. But the average is there, and we’re targeting moving that up to the 14 range.

Taylor Zurcher

Okay. As it relates to the 2020 CapEx budget, I mean you talked about similar spend levels versus 2019. In 2019, you did about, call it, $30 million of CapEx, about $17 million of sustaining CapEx. So the balance, the kind of the growth wedge in there. Could you talk about what further opportunities you see from a growth project perspective? In the prepared remarks, you talked about improving demand or continually improving demand for some of these dual-fuel fleets. So I’m curious if that’s an area of further investment you see in 2020? And what other kind of growth buckets you see in 2020 from a CapEx perspective?

Dale Dusterhoft

Yes, I guess first of all, the way we look at any additional growth CapEx is that if it has a relatively short payback, it has to improve efficiency, lower our cost structure and make us either improve our customer service allocation or make us a more efficient company and improve our EBITDA levels. And so we evaluate all those as we go. And the initiatives that we’ve undertaken, last year was the idle reduction technology, the bi-fuel capacity, electronics improvements in some of our equipment – automation of some of our equipment. And those are really very similar to what we’ll be looking at for 2020 with maybe an increased focus on automation as we have a number of projects underway to reduce our cost structure, make us a little more efficient through some automation initiatives.

Taylor Zurcher

Okay. Got it. And I’ll squeeze one last one in. You built some working capital here in the back half of the year, a piece of that’s probably seasonal. But as we think about your working capital levels exiting 2019 and how that should trend over the course of 2020, do you care to share any thoughts there just on a full year basis, 2020 versus 2019?

Robert Skilnick

I think we would just expect similar types of trends in that. We’ll start to see working capital unwind through Q2, rebuild it Q3 and Q4 of next year again. Probably, I would say, our presence expectations for a little stronger Q3 than we probably had last year. So maybe a little more even between Q3 and Q4 next year.

Taylor Zurcher

Got it. Okay, thank you.

Robert Skilnick

Thank you.

Operator

The next question comes from Ian Gillies with Stifel. Please go ahead.

Ian Gillies

Good morning, everyone.

Robert Skilnick

Good morning, Ian.

Ian Gillies

Acknowledging, I’m sure customer conversations are very fluid at this point in time, given the rapid changes in commodity prices. But could you maybe provide a bit of detail around how customer conversations have changed maybe over the last week or so versus a month ago? And how you’re thinking about that working through your business?

Dale Dusterhoft

They haven’t changed at all. The – kind of the recent coronavirus-type oil price drops are very recent. And so we have had no conversations with clients that would change anything. Not saying that they won’t. I think our clients are much like us. They’re evaluating to see how this all shakes out. And we’ll try to have conversations as they go into their third quarter plans, which we always do this time of year. But at the moment, zero.

Ian Gillies

Yes. Okay. That’s what I figured. Rob, going back to some of the comments in the assets held for sale. I don’t know if I missed it, but is it primarily real estate outside of the water management? Or is there other capital assets in there that we should be thinking about?

Robert Skilnick

Entirely real estate.

Ian Gillies

Okay. And then last one for me. I mean you realized $40 million of annualized cost savings through a variety of initiatives in 2019. Are there any quantitative goals around additional cost savings in 2020 at this point?

Robert Skilnick

Yes. I think – so the $40 million of annualized, we should get the benefit of those fully this year. And then I think this year, through a bunch of the lean projects, we’d like to see another $15 million of annualized savings, but those would be fully realized 2021, most likely. And that’s going to be a combination of a whole bunch of different items. But ultimately, that’s what we’re targeting at this point.

Ian Gillies

Perfect. I’ll turn the call back over. Thank you very much.

Robert Skilnick

Thank you.

Operator

The next question comes from Waqar Syed with AltaCorp Capital. Please go ahead.

Waqar Syed

Thank you for taking my call. There are a couple of questions here. First of all, as your pumping hours increase across the fleet, how does that change your maintenance CapEx numbers and fluid end costs?

Dale Dusterhoft

Yes. Well, basically, everything is done on a per hour basis. So you do see a correspondence with that. And it’s – we’ve always kind of looked at our maintenance capital on our fracturing as just a percentage of revenue. And so if the revenue increases, which it does, when you increase your hours per day, then you have a slight kind of corresponding maintenance capital increase as well. So it definitely has a small effect, yes. But the EBITDA benefits are even more.

Waqar Syed

Yes. So it’s still going to be free cash flow accretive?

Dale Dusterhoft

Yes.

Waqar Syed

Okay. So just in like in the U.S., typically, you see maintenance CapEx around $4 million to $6 million per crew, given the very high service intensity of the jobs. What’s the comparable number in Canada on annual basis?

Dale Dusterhoft

Yes, we’re a lot more in the $3 million to $3.5 million range, depending on the intensity of those crews. Part of that is because we’ve got slower second quarters as well.

Robert Skilnick

I think a good way to look at it, recognizing that the $17 million of sustaining capital isn’t all fracturing. But if you just take that number against our gross revenue levels as a percentage, that kind of gives you a flavor for the variability in it.

Waqar Syed

Right.

Robert Skilnick

So the $17 million we disclosed in our outlook section. And if you just take that, I guess that will give you sort of a flavor for the maintenance capital.

Waqar Syed

Okay. Good. And then in terms of your dual-fuel fleet, is that Tier 2? Or are there in Tier 4 engines as well, DGB new ones?

Dale Dusterhoft

Yes, there are two tires right now. We’re certainly evaluating the two floors. It’s kind of like what we’ve seen out of them, but haven’t converted and any of the conversions there we made today are being Tier 2. It’s quite a bit cheaper because you have to replace the homeowner if you do a Tier 2 – Tier 4, sorry, where you can just put a conversion kit on a Tier 2. We’re looking at it though as I think we have an interest in that technology.

Waqar Syed

Okay. So right now, on your Tier 2 fleet that you have, does it have more high utilization than your other active fleet?

Dale Dusterhoft

Yes, very much. So it’s the most utilized equipment in the company and strong demand for our active, demands that exceeds our capacity.

Waqar Syed

And the fuel savings that your customers are experiencing, are you sharing any portion of that?

Dale Dusterhoft

In some cases, we do, depends on the situation. We have a surcharge that we apply. So we share that way. I guess in all cases, we are, I should probably say that. In some cases, it’s a little bit more than others because we have a surcharge we apply to help cover – recover our costs of clipping our fleet with this technology. And then in other cases, we actually share the fuel savings.

Waqar Syed

Okay. And then some of your larger – maybe at least one of your very large competitors is considering closing down some bases. Do you have any updates on what’s going on within your competitive landscape if you’re hearing about additional supply leaving the market?

Dale Dusterhoft

Yes. That’s a high one. There are so many rumors out there all the time that competitors might be reducing or leaving the market, but it’s too hard to comment on rumors because that’s all they are. We have nothing substantiated.

Waqar Syed

Okay. And then just one final question. Could you maybe talk about the pumping supply demand, how many crews do you think are in the market today, how much supply and where the demand is today?

Dale Dusterhoft

Yes. If you kind of looked where we think it is, there’s about 35 crews working in the market. There’s about 1.3 million horsepower that’s actively created. The demand is right at that level. It’s – I don’t think if there’s any spare capacity at all in through Q1. I would say our view is potentially, and I’ll use a big – potentially at 1.8 million capacity, maybe as high as 2 million capacity that’s parked but that number has come down. And we can never track what’s parked. We know what we have parked, but our competitors – we never know what our competitors really all parked and can come back to the market. I believe the parked number or the unstaffed equipment number is probably less than 1.8 million in reality, but we just don’t know what that is.

Waqar Syed

Great. Thank you so much. I have some additional questions, but I can come back later, let others ask questions. Thank you.

Dale Dusterhoft

Sure. Feel free.

Operator

[Operator Instructions] The next question comes from Anthony Linton with National Bank Financial. Please go ahead.

Anthony Linton

Hey, good morning, guys.

Dale Dusterhoft

Good morning.

Anthony Linton

In the release, you guys talked about kind of that $40 million in annualized cost savings, how much of that was actually realized in 2019?

Robert Skilnick

Yes. I think if we look at it, probably, we talk about it, it was kind of throughout the year, some of these initiatives. So generally, call it about half, maybe thereabouts.

Anthony Linton

Okay. I know you already made some comments about looking towards another $15 million as we move into 2020. But just with where the commodity prices are at, could you see taking that $40 million any lower or – as we move through 2020?

Dale Dusterhoft

Well, I think how we’ve always run our business is we monitor activity levels. And if activity levels fall off, then we adjusted our cost structure and our equipment were running and everything accordingly. At the moment, we’re not anticipating that. But as we talked about, we really have poor visibility on second half right now other than kind of the normal customer commitments. And we’ll have those discussions over the next couple of months.

Anthony Linton

That makes sense. So you’ve been pretty active on the buybacks for the last two years. Do you have a target in mind for where you’d like that share count to end up? Or is it more just as long as the math is favorable, you’re going to keep buying back shares because that’s the best capital allocation option today.

Robert Skilnick

Yes, I think it’s as we described, we look at it every quarter. We talk with our Board of Directors, and we look at different opportunities. If we saw something that we felt would generate a higher return to our shareholders, we would allocate capital away from the buyback. But as we are able to monetize equipment at book value and then repurchase shares at a discount to book, we will continue down that path.

Anthony Linton

Okay. Makes sense. And then just maybe the last one for me. On the CapEx side, just the disposal of non-core assets. Do you see any CapEx savings there in 2020?

Robert Skilnick

No, because it was all surplus gear. So it really would not change. And I think as we noted to the last caller in questions, and you look at it more as the sustained capital as a percentage of revenue, that’s really your big driver.

Anthony Linton

Okay. That’s it for me. Thanks, guys.

Robert Skilnick

Thank you.

Operator

The next question comes from Jeff Fetterly with Peters & Company. Please go ahead.

Jeff Fetterly

Good morning, guys.

Dale Dusterhoft

Good morning.

Jeff Fetterly

Following on to the cost reduction side. So when you look at your personnel expenses and direct costs on a year-over-year basis, down a decent amount in absolute terms and obviously on a relative basis as well. The $40 million of cost saving reductions you talked about, would those be fully reflected in Q4?

Robert Skilnick

That largely reflected, Jeff, yes. I mean that’s how you can look at year-over-year 2019 versus 2018 at similar levels of…

Dale Dusterhoft

Similar levels of revenue and increased profitability in Q4.

Robert Skilnick

Yes.

Jeff Fetterly

So when we look at the change in personnel expenses and direct costs specifically, what would be the bigger lumpier items associated with the cost reduction program or just the change in those items?

Robert Skilnick

Well, the biggest lumpier items are obviously, there’s personnel items, but there’s a bunch of fixed costs as we close down bases and things of that nature, but a lot of personnel costs as well, Jeff.

Jeff Fetterly

And that’s a headcount thing? Or is that also changing the comp structure?

Robert Skilnick

No change to comp structure. I think there’s probably slightly less, things like overtime and things like that. But no change to comp structure at this point.

Jeff Fetterly

Okay. Clarification on the CapEx side. Do you expect that maintenance spending in 2020 will be similar at that $17 million level?

Robert Skilnick

Yes, I think so, Jeff, yes.

Jeff Fetterly

So if you’re – if it implies, call it, in the range of $15 million of growth capital or non-maintenance capital, what are – what type of things are you going to be spending money on? Or what are the lumpier things in that?

Robert Skilnick

We have no commitments to spend any of that at this point. I think that’s just a guidepost to let you guys think about cash flows and modeling for full year. But I think as Dale indicated, we will not spend a time if there’s not an immediate payback, just to be clear.

Jeff Fetterly

So how do you think about bi-fuel? And how do you think about idle reduction? Dale, you mentioned that you’ve now equipped one crew on the idle reduction side. Do you intend on equipping more equipment in 2020 with idle reduction? And then similar question on the bi-fuel side.

Dale Dusterhoft

Yes, for both of those, kind of what I said in the prepared – in that it has to be exotically justified. So if you looked at, I will say, bi-fuel, for example, there has to be an ability to justify that both with your pricing, your savings on fuel and customer commitments on the idle reduction technology that’s – we’re in the evaluation mode. We just started. But we just are in the process through Q1 of equipment a fleet with that, and we need to evaluate it. Now I see how that works, and we’re foreseeing the savings that we anticipated before we invest more there. So that I think not particular technology. We want to probably have some quarters of running it to make sure that repair and maintenance is down and fuel consumption is down to the level we thought before you pull the trigger on the next one.

Jeff Fetterly

Okay. And on the bi-fuel side, what’s the thought process in terms of equipping additional Tier 2 versus potentially looking at or demoing the Tier 4F?

Dale Dusterhoft

Yes, it depends on the life of the equipment. So if you’ve got a relatively new Tier 2 motor out there, converting that over, it’s fine. But if you’ve got an older Tier 4 motor, you better off looking at. If it’s got a year or two life left, I think you better off looking at potentially a Tier – capped or a Tier 4 bi-fuel system. So it’s all around that.

Jeff Fetterly

Okay. Okay. But if – as you said earlier, if demand is exceeding your capacity on the bi-fuel side. Do you see incentive not reasonably high right now to look at additional bi-fuel in the near-term?

Dale Dusterhoft

It is. But we also – as I mentioned, we need our customers cash commitment on that and to make sure that they’re willing to pay additional on it. If we get to go right into the cap or the Tier 4 bi-fuels are much more expensive. I think I mentioned that in that already. And so getting – we need to get payback on that. So the customers have to pay a little more and share the fuel savings with us. We can’t – we’re not taking this all on ourselves. And similarly with the Tier 2 conversion. So that’s always the issue. I’m not saying – by no reason why I say that, that doesn’t happen because I think the customers get a significant value from that. But it’s just kind of an ongoing negotiation in our context.

Jeff Fetterly

Okay. And just a last clarification. So from a visibility standpoint, you said your April bookings are tracking higher year-over-year. Did I hear that correctly?

Dale Dusterhoft

That’s correct, yes.

Jeff Fetterly

And how much confidence do you have in that book of business for April? Or how much of it is truly firm versus at this point penciled in?

Dale Dusterhoft

I’m comfortable about when the wells are drilled and/or being drilled right now. And so that’s usually a good sign. These aren’t future wells. So I’d say a high level of confidence in our April bookings, probably as we talked about. If you looked at our summer commitment, it’s not like we don’t have summer commitments. Right now, I’d say we’ve got commitments from our clients saying, hey, we’re going to need all of our frac crews committed, but that gets firmed up as they actually put wells in the schedule. And that’s the thing that happens next year, over the next couple of months.

Jeff Fetterly

I know it’s a little bit of an arm-waving thing. But if you think at this time last year your visibility going into the summer, how would you describe the feel of the market and your customer commitments?

Dale Dusterhoft

Right now, it would be the same as last year at this point in time that our visibility. We haven’t seen any change at all in customer actions or with all the commodity price volatility that we saw this week. So no real – no change at all in how they’re approaching it probably for the last three years. They will commit to us and say, hey, we want, whatever, two fracturing crews or you want half of our fracturing crews. They do that quite early, make sure they’re locked down, and then they give us exact programs over the next couple of months. And it’s really – this year so far there’s been no change at all in that from previous years.

Jeff Fetterly

Great to hear. Hopefully, it holds.

Dale Dusterhoft

Yes, let’s hope, it holds. Yes.

Jeff Fetterly

Thanks for the color.

Dale Dusterhoft

Yes, thanks.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Dusterhoft for any closing remarks.

Dale Dusterhoft

Yes, thank you very much for your interest in Trican today, and we certainly look forward to talking to you after our first quarter is released. Thank you.

Operator

This concludes today’s conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.

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