Trican Well Service reports Q3 revenue of $300.6 million, up 35% YoY, while maintaining positive outlook despite oil price volatility.

OPERATOR - (00:00:18)

Good morning ladies and gentlemen. Welcome to the Trican Well Service Third Quarter 2025 Earnings Conference Call and webcast. As a reminder, this conference call is being recorded. I would now like to turn the meeting over to Brad Fedora, President and CEO of Trican Well Service Limited. Please go ahead, Mr. Brad Fedora.

Brad Fedora - President and CEO - (00:00:38)

Thanks everyone for joining us as usual. First, Scott, our CFO, will give an overview of the quarterly results and then I'll provide some comments with respect to the quarter, the current operating conditions and our outlook for the rest of this year and early next year, and then we'll open the call for questions. Various members of the executive team are here in the room today and available to answer any questions that may come up. So I'll now turn this back to Scott.

Scott - Chief Financial Officer - (00:01:05)

Thanks Brad. So before we begin, I'd like to remind everyone 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 that were applied in drawing conclusions or making projections are reflected in the forward looking information such as of our MD&A for Q3 of 2025. A number of business risks and uncertainties could cause actual results to differ materially from these forward looking statements and our financial outlook. Please Refer to our 2024 Annual Information form for the year ended December 31, 2024 for a more complete description of business risks and uncertainties facing Trican. This document is available both on our website and on SEDAR. During this call we will refer to several common industry terms and use certain non GAAP measures which are more fully Described in our Q4 2024 MD&A and a quarterly results were released after close of market last night and are available both on SEDAR and our website. So with that a brief summary of our quarterly results, I'll draw some comparisons to the third quarter of last year and provide a bit of commentary about our activity levels and our expectations going forward. Trican's results for the quarter compared to last year's Q3 were generally stronger as overall operating activity came in a bit higher in spite of continued pressure on commodity pricing. Oil pricing in particular was hit hard as we moved through September which led several customers to either delay or shelve projects in oilier plays. Combined with some timing shifts on natural gas related activities, this took a bit of the wind out of our sales on what was shaping up to be a very strong quarter. Brad will comment a little bit about our outlook on Q4 later. Our revenues for the quarter at 300.6 million were compared to the 221.6 we generated in Q3 of 2024. Adjusted EBITDA for the quarter was 59.5 million or 20% of revenue compared to adjusted EBITDA of 50.2 million or 23% of revenues generated last year. As a reminder that our results include the contributions from Iron Horse from the date of acquisition through September 30, I would also note that our results include $2.5 million of transaction costs related to the acquisition that were expensed in the quarter. Adjusted EBITDA for the quarter came in at 66.9 million or 22% of revenue, up from the 53.1 million or 24% of revenues we generated in Q3 of last year. To arrive at EBITDAs, we add back the effects of cash settled share based compensation recognized in the quarter to more clearly show the results of our operations and remove some of the mark to market impact of movements in our share prices between the reporting dates and you'll note that this number was larger this quarter at 7.4 million compared to an average of about 2.3 million over the last four quarters, again due to the movement in our share prices versus June 30th. And this is a very good example of why we always focus on EBITDAs when we have conversations versus EBITDA as those numbers can vary pretty significantly period to period. On a consolidated basis we generated positive earnings of 28.9 million in the quarter. That's about $0.15 per share both on a basic and a fully diluted basis. TRICAN generated free cash flows 35.4 million during the quarter. Again, our definition of free cash flow is essentially ebitda, so less non discretionary cash expenditures, maintenance capital interest, current taxes and the cash settled stock based comp piece I talked about earlier. You can see more details on this in the non GAAP measures section of our mda. And again I would note this figure is impacted both by the transaction costs that I talked about and stock based comp I quoted earlier. CAPEX for the quarter totaled 18.9 million, again a split between maintenance capital of about 13.5, an upgrade capital of 5.4. Again, that upgrade capital was dedicated mainly to the electrification of our fourth set of ancillary FRAC support equipment and ongoing investments to maintain the productive capability of our active equipment. From a balance sheet perspective, we exited the quarter with positive non cash working capital of about 209 million. As of September 30th we had net debt of 1:30.6 million comprised of loans and borrowings of 139.1 offset by cash of 8.5. Our debt at September 30th was primarily related to the acquisition of Iron Horse and some normal working capital investing activities during the quarter. A couple of points to note that September 30th debt number translates into just over half a turn of leverage using our trailing twelve month EBITDAS figure, which does not make us uncomfortable given our outlook for the rest of this year and into early 2026 and also a portion of this is already unwound and we would expect our debt position to trend down as we move through the end of this year and certainly into next year. With respect to return of capital, we repurchased and canceled about 100,000 shares during the quarter and closed out our 2024-2025 NCIB program. We completed that program October 4th and under the program, in total we repurchased 13.2 million common shares at a weighted average price of about 427 per share. On September 30th we announced the renewal of our NCIB program which will allow us to purchase up to 18.4 million common shares representing 10% of our public float as at the time of renewal. This program is scheduled to run from October 5, 2025 through October 4, 2026. And finally, as noted in our press release, the Board of Directors approved a dividend of 55 cents per share, reflecting approximately 11.7 million in aggregate payments to shareholders. The distribution is scheduled to be made on December 31, 2025 to shareholders of record as of the close of business on December 12, 2025. I would note that the dividends are designated as eligible dividends for Canadian income tax purposes. So with that I'll turn things back to Brad.

Brad Fedora - President and CEO - (00:07:08)

Okay, thank you. And I'll just remind everybody that my comments will include Q3, 2025 and forward looking observations for Q4 and 2026. So please refer back to Scott's disclaimer. Overall the quarter it went well. You know we obviously we had a great September in Aug or July and August and then we had a bad September. It's actually one of the worst months of the year for us. But all that's just a reflection of work. Got pushed out of the month into the next month and you know that's our business. We don't focus too heavily on the exact timing of the work. I know you know we live in a quarterly world, but from a business perspective, you know, that doesn't get us too fussed. It just got moved. The work didn't go away. So it is not. It wasn't a concern of ours at all. And as I will talk later, it is going to boost our Q4. We're very fortunate to have our customer list. You know, they continue to level out throughout the year. We don't expect that this year is going to be any different. I know there's a lot of talk about, you know, budget exhaustion into Q4. You know, we typically don't experience that, and I don't think we are going to experience that this year either. There is a little bit of pricing pressure going on, just as some of our competitors don't have busy Q4s. There's a lot of jostling to fill the board, and that always reflects pricing down. And of course, the rig count is down slightly from last year. Again, those, I think, are temporary situations. You know, we still expect to have a good 20, 25 and certainly a good Q4. We remain gas focused. I'd say corporately, Overall, we are about 75% of our work is based on sort of natural gas plays. I know a lot of those plays are liquids rich, but, you know, we are very excited about what we think is going to be a great year in 2026 for gas prices. So, you know, it is one of the reasons why we continue to be so optimistic. In the context of a lot of sort of sort of moaning and complaining about current environment. You know, a lot of the cost inflation has slowed very significantly. We're actually seeing cost reductions on some of our inputs. You know, a lot of the. A lot of the tariffs that were proposed, you know, didn't happen or have been reversed. We've seen fuel surges, fuel surcharges come off. So that's helping sort of offset some of the pricing pressure we are getting. And, you know, we are still able to maintain pretty reasonable margins. You know, given a more negative price environment. We are experiencing lower Northeast BC work. I don't think that's any secret to anybody that follows the rig count. But it is getting made up for work in the Duvernay, which is very fracturing intensive. It's very similar to what's happening in Northeast bc. So all four divisions, when we think about market share and the customer list that we have, we've got the two frac divisions, the cement division and the coil division. All four of them are running really well and we are really happy with our business plan and how it is unfolding. You know, one thing I Did want to point out because just reading some of the analyst notes is we exited the quarter with about 135 million of debt, but we also had about 218 million of positive working capital. So it is a timing issue. I don't want anybody to focus on this debt number because it is already come down substantially since month end. And this, you know, this debt at this level does not concern us at all. I mean we'll likely pay it down, but that will depend frankly on what's available to us from an investment perspective. But certainly debt in the 100 range does not concern us one bit. In the frac division, in the Trican frac division, it is still going very well. We're viewed as a technical leader in the industry. Electric equipment, efficient operations, our engineering, our lab group are working towards or we continue to evaluate 100% natural gas solutions. We're evaluating all of the solutions and so I think we'll come up with the best one. We continue to add customers in the Montney and the duvernay in the quarter. Frac intensity continues to increase, you know, making the logistics, our logistics department, which is the largest in the industry, that much more valuable. You know, we are focusing on technology improvements. You know, we will be testing all of the available 100% natural gas pump technologies and I think we'll choose the one that we think provides the best service at the lowest cost. And we continue to expand our last mile logistics. I would expect that we will add 100% natural gas fleet mid-2026 on the iron horse frac division. We're very happy with the acquisition that we made. We still view this as a combination of two best in class businesses. The transaction closed August 27th. Yep. And so we only had one month of Iron Horse in our Q3. And it is, you know, as we talked about in our MDA and our Outlook section, obviously Q4 for Ironhorse is lower than we had hoped or expected or even modeled when we purchased the company. But that's just oil price related. We think it is temporary. You know, a lot of their oil projects were canceled or kicked down the road until next year. You know, we don't buy businesses for oil 1/4 performance, we buy it for the next sort of 10 years. So very happy with that business. They're still seeing sort of more pinpoint completion designs in all of their plays. The annular frac with fracking through coil or a round coil I should say is still going to be the main completion technique. And even in the older plays that they're things like the Viking stuff, like they're still seeing sand volumes and stages increasing and they have a very, very busy Q1. So you know that division's going well on cement again. We're very happy with the performance of this division. They've always been viewed as a technical leader in the industry. We have the best equipment, the lab, the blends, the operators. You know, we've actually added rigs to our portfolio despite an overall year over year rig count decline. You know, they continue to leverage operating efficiencies and initiat to reduce downtime which has enabled them to increase margins in what would be an overall sort of slightly down market. We've developed blends to target the heavier oil basins. We're aligned with all the right E&Ps, all the busy E&Ps. Our market share in plays like the Duvernay is as high as 80% in the Montney. It's over 50% in the overall basin. Our market share has grown year over year. So very, very excited about what's happening in that division. The Coil division as well is really starting to show its potential. Really pleased with how that has, how that has gone. I know we've talked about the Coil Division for the last several years about focusing on this and making, making sure that this division performs sort of in line with the rest of our company. And I think that's finally starting to happen now. Q3 was one of the best quarters in the Coil Division or was one of the. It was the Coil Division's best quarter. It had lots of operational excellence, delivered with less than 1% non productive time, which is a real achievement to the people running that division. Our portfolio of customers consists of the top operators in the basin. We set horizontal and total depth records this year in Canada and that sort of extended reach operations has allowed us to add customers in the Montney and the, and the duvernay. So we are very happy with what the next sort of 12 to 18 months looks like. And you know, they started to generate financial margins in line with the other divisions. So, you know, very happy with how that's worked out. I'll just talk about Q4 and touch very lightly on next year. You know, we still believe our premium service offering in all of our divisions continues to be valued by customers. And I think that shows in our financial results. You know, we are of course watching oil and natural gas prices. There's always, you know, potential for projects to get delayed or canceled or changed into Next year. But you know, we, and we expect that our customers like us are taking a fairly defensive stance in their fall budget season just based on the volatility we've had on, on oil prices especially. But you know, we still think 2026 will be better than 2025. Our customers are still talking to us about equipment availability in the next few years. Well, that's a very good sign. You know, the LNG Canada facility has continued to ramp up its export volumes. It's now exporting in the range of about 1 BCF a day. Natural gas prices have recovered significantly in the last month. We expect them to get better this, this winter and into next year. The duvernay as we've talked about, continues to, to be a busy play. Very, very fracturing intensive. You know, we were very thoughtful about the long term development of this play and actually designed a Tier 4 spread around the Duvernay that pumps at higher pressures, higher pump, longer pump times so our equipment is better able to withstand, you know, sort of the abuse that that play, you know, gives the average pumper. So it is reduced our RNM costs even though the pumping rates and pressures are so high. And the Q4 to date has been great. You know, we are still forecasting 2025 to be fairly level loaded between the quarters. And especially in a year like this where we had so much work bumped out of September into October and November, you know, we expect Q4 is going to be very good. Like when we, when I read some of the analyst notes, I think this might be being a little underestimated about, you know, how busy we are in this quarter. It's likely to be better than Q3 and possibly could be one of our best quarters of the year. So we are not seeing a sharp decline in activity in Q4 like maybe some of our competitors have seen or had planned for. And nothing's changed from our focus. It's very much Montney Duvernay. Obviously the iron Horse division focuses on the oiler plays and as oil prices stabilize and start to gain a little momentum, those plays will get very, very busy very quickly. So just on, I'll touch on a few other things. One being tariffs. I know we've talked a lot about tariffs in the past and actually as it is turned out, tariffs were put on sand and coil. Both of them have been removed. And actually the tariffs that were paid and sorry, I'm talking about the retaliatory tariffs put on by the Canadian government. In both cases, any tariffs that were pa they're telling us they're going to refund them, refund the money. So we are not really seeing retaliatory tariffs being a big issue in our life. A lot of the cement products are made locally, so that's not an issue. And we are not seeing any tariff pressure on things like chemicals yet. It will affect overall steel prices, of course, from the tariffs that were put on by both the Canadian and the U.S. governments. And that will affect the price of parts and pumps and things like that going forward. But it certainly isn't working out to be as big an issue issue as we had feared at one time. And you know, there's various industry groups that have done a really good job lobbying the Canadian government to make sure they're not sort of putting unfair retaliatory tariffs on our business when in places like where we don't have a Canadian alternative. So sort of happy, I would say we are very happy with how that's worked out. On the sand logistics side, you know, we focus on this every call and we are going to continue to focus on this because this is certainly becoming more and more of an issue every year. There's about 8.5 million tons of sand pumped in Canada this year and some analysts are estimating that this could get as high as sort of 12 to 15 million tons by 2030. And so when you think about all the sand that needs to move around the basin, whether it is on rail or on truck, this certainly has turned into a logistics challenge, which of course we see as an opportunity for profitability. And so we hope these predictions are correct and we are making moves in our last mile logistics to make sure that we are positioned as having the premier provider of sand from the transload facility to the well site. And there's a lot that goes into it. You think about some of these locations, they're pumping sort of 50 to 100 rail cars of sand over a period of 48 to 72 hours. And that means having a 40 ton beach rain truck show up every 10 minutes on location. So if you can schedule that correctly, you can run that efficiently. That's an efficiency that our customers certainly value and we expect to provide to them in the future as the sand volumes grow. So we view this as a real area of focus and actually, you know, maybe a focus of our M and A in the next few years as well. On the technology side, I would say things are sort of progressing as we had expected. We're reviewing, you know, the cornerstone of our technology strategy is 100% natural gas fueled operations in all of our divisions eventually. But right now we are mostly focusing on frack. We're evaluating all of the technologies available to us from 100% natural gas pump perspective which will allow us to pick what we think is the best, the most practical technology so that we can provide our customers with 100% natural gas solution. And like I had said earlier, I expect we'll be providing this by mid next year. So, you know, back to the long term outlook. Certainly nothing's changed from our view. You know, even though you go through little bumps like we are going through now with commodity prices, it doesn't change the long term outlook of the industry in Canada. We still think it is a great place to be. We're going to continue to invest in it. You know, we view the Canadian Western, the Western Canadian Centenary Basin as a very attractive place to develop and grow our business. You know, the Montney is increasingly becoming recognized as the premier play in North America. LNG Canada is going well. You know, we fully expect that that will go from 1bcf to 2bcf, eventually to 4bcf a day in the next few years. And there's other facilities as well that are coming in behind it. So you know, we think the LNG export off the west coast of Canada is great for the business. All of the plays that will fill that capacity are extremely pressure pumping intensive. So we think it is a great place to grow our business. And on the, on the, you know, what's our return of capital strategy? I think again, nothing's changed there. We continue to generate what we think is industry leading free cash flow and we maintain a conservative balance sheet. You know, I would say our views on debt have changed just given how stable this business has become compared to prior cycles. So we are, you know, we are not afraid to have a little bit of debt on the balance sheet and we do subscribe to a diversified return of capital strategy which is a combination of a sustainable and hopefully growing dividend with the combination of the ncib. You know, and since we put the NCIB in, in 2017, we are over 51% of the shares purchased, which is, you know, amazing to think about that in the, in the context of the industry. And we, you know, we flex the NCIB up and down in the context of other investment opportunities. And so we'll continue to do that. You know, we will very likely have a very low base level of ncib, but we are not afraid to really hit the gas or maybe even pull back for a while, depending on what else we are seeing and what's happening in the market. Again, we are not afraid to use our bank lines if we find attractive investment opportunities, just like we did with the Iron Horse deal. They wanted all shares, we wanted to pay them all cash. We sort of sawed it off somewhere in the middle. But, you know, hopefully we can use our bank lines in the future. You know, we are in. Our corporate priorities remain unchanged, build a resilient, sustainable and differentiated company. Invest in high quality growth opportunities. Hopefully they're organic. Focus on the logistics side of the business. Provide a consistent return of capital for our shareholders through the dividend and the ncib. So I think, Operator, I think we'll stop there and we'll go to questions.

OPERATOR - (00:24:37)

Thank you. We will now begin the question and answer session. To join the question queue, you May press star then 1. On your telephone keypad, you will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press Star then two. We will now pause for a moment as callers join the queue. And your first question today will come from Aaron McNeil with TD Cowan. Please go ahead.

Aaron McNeil - Equity Analyst - (00:25:10)

Hey, morning all. Thanks for taking my questions. Brad, you mentioned you expect 26 to be better than 2025. I know you also referenced this in your prepared remarks, but we started to see CapEx cuts this quarter, most notably with White Cap were just kicking off earnings, so presumably more producers could follow. I guess I just, I'm wondering at a high level what your assumptions are for year over year changes in Montney and Duvernay activity and how you think pricing will evolve over the next year.

Brad Fedora - President and CEO - (00:25:42)

Yeah, like I don't think we're going out on a limb. I mean, we just had 24 months of the worst gas prices this basin has ever seen on an inflation adjusted basis. Now we've got LNG, line maintenance is done. You know, we're talking about sort of a much more balanced or even a negatively balanced gas market in North America. As more LNG comes online in the US Our customers have very sophisticated marketing programs. You know, they're not just sitting around relying on AECO or Station Two gas. But now that sort of all of the pieces are in place, I just don't see how we don't have higher gas prices next year. And this is a gas basin, as everybody knows. So higher gas prices mean, you know, better economics. You know, when our, when our Customers have sort of three to nine month payback on wells. How do they not drill those? So I, you know, and of course everybody takes a defensive stance in their budgeting just like we do. You know, we take a very defensive stance at this point. But I think there's upside and I think it'll come next year. And you know, that's from an activity perspective. Who knows what's going to happen in the pricing environment. I mean, you know, we all know what I, what I think about how undisciplined this space is and irrational this space is. But you know, when we talk to our competitors, they're booked for Q1, so are we. I don't see how prices go anywhere but up from here. So. And even if they don't, I mean we'll, we'll figure out how to make a little bit more money with efficiencies. So I'm not expecting big year over year changes that we would see, you know, 15, 20 years ago. That's not what I'm saying. A sort of 3 to 5% increases in activity. You know, we can work with that. And I just don't see how that doesn't happen given that, you know, we've come out of the worst 24 months imaginable from a gas price perspective. We're going into a much more constructive gas market North American wide. I think that will just reflect in more activity going forward.

Aaron McNeil - Equity Analyst - (00:28:09)

Yeah, again, I wasn't trying to challenge your outlook. I was just more curious if you'd had any specific conversations with customers that would indicate that activity was going up year over year.

Brad Fedora - President and CEO - (00:28:20)

Yeah, we do. Like Aaron, and I'm sort of challenging myself on my assumptions because I seem to be the only one that seems to think like this right now, which is either a really good sign or a really bad sign. But yeah, we do have conversations with customers that I would say are more bullish than maybe what gets put in print.

Aaron McNeil - Equity Analyst - (00:28:44)

Gotcha. Okay. And then just as a follow up, I wanted to sort of better understand the, you know, new natural gas fired frac spread. It sounds like it's going ahead, but is there any scenario or you know, that you would maybe pump the brakes and then what sort of contract structure and duration should we expect? And maybe you know, as another follow on, how should we think about capital spending next year assuming that that investment goes ahead?

Brad Fedora - President and CEO - (00:29:13)

Yeah, I would think our capital spending will be in line with the past. You know, we are, we are very careful not to over capitalize the space. You know, even though we have, you know, by far the largest market share in Canada. We don't, we don't operate in a bubble. And so we are not just going to, you know, flood the market with equipment, even if it is from a technology perspective, you know, the best. But you know, we've been a leader in new technology development over the last or since COVID say, and I don't expect that's going to change. You know, we've had incredible success with our electric back side or you know, all of the ancillary equipment our customers continue to demand. Our electric blenders, very well designed, great performance, great from an RNM perspective. And so, you know, the last piece of that puzzle was the evaluation of all of the available 100% natural gas pumps. And it is all of the manufacturers. It's, you know, it is, you know, natural gas, conventional natural gas engines, turbines, it is electric. You know, we took, I would say maybe a frustratingly long time to evaluate everything, but I think we have a pretty good sort of understanding of what's available and the pros and cons of the various technologies. So I think we are in a really good position to sort of pick, sort of pick a horse at this point. And you know, we are always working on R and D projects in the background. We got to, I mean, one of the challenges with natural gas pump air engines is they want to run at constant speed, which of course is not great when you're trying to increase rates and pressures and stuff like that. So in conjunction with a partner, we've developed a variable speed transmission that we want to try that would go really well with natural gas engines and it would allow us to pump more efficiently and actually spin off energy into our electric back side. So there's little things like that that we are always working on that we may not always be able to talk about. But we want to provide our customers with 100% natural gas solution, but we want to make sure that it is a sustainable solution for us as well from a returns perspective. And I think all too often people jump headfirst into the latest, greatest equipment design without sort of thinking thoughtfully about, hey, how do you provide your shareholders with a return at the same time as you're providing your customers with a valued service.

Aaron McNeil - Equity Analyst - (00:31:51)

And so just not to needle you too much on this, but on the contract duration, do you think you can.

Brad Fedora - President and CEO - (00:31:56)

Oh, sorry, yeah, yeah. We don't talk in too much detail about contracts with our customers and we have various discussions with various customers, but you would expect that the we're very fortunate to have long term customers that have been with us for years. They will of course get first dibs on any technological developments we make.

Aaron McNeil - Equity Analyst - (00:32:23)

Okay, fair enough. Thanks. I'll turn it back.

OPERATOR - (00:32:28)

And your next question today will come from Keith Mackey with RBC Capital Markets. Please go ahead.

Keith Mackey - Equity Analyst - (00:32:35)

Hey, thanks and good morning. Just like to start out with Q4. If we could, can you maybe just work out some of the pieces here of how you think Q4 will unfold? You know, certainly you did kind of high 50s for EBITDAs in Q4 of 2024. Relative to that, how do you see Q4 of this year playing out? Recognizing that there's been some work moved from Q3 to Q4, but then also some of the iron horse or oil. Related work has gone away. So how do you see kind of. Those pieces playing together? And obviously there's always a holiday season. That. Makes things less busy as well.

Brad Fedora - President and CEO - (00:33:17)

Yeah, anything can happen. We didn't see September coming, frankly. We had a whole bunch of stuff on the board and then boom, you wake up one day and it's been moved. And that's our business. You have to be prepared to roll with the punches like that. So, you know, we actually didn't realize a month like September was going to turn out like it did until sort of mid September. So I'm a little hesitant to talk at absolutes here. But if we don't beat last year's Q4, I mean, that would be very, very surprising and I would think we would beat it by a fairly reasonable amount. And like I said in my prior comments, this could be one of the best quarter, this could be the best quarter of the year for us. And so again, you know, I think, I think we've gotten a little too focused on what happened in September as an indication of what's happening in the business that isn't sort of the case for us. You know, things get moved around, water availability issues, budget issues, etcetera. I mean, you know, we're, we're built to absorb those changes and what we gave up in Q3 we think we're going to gain in Q4. So I'm not going to give you any more color than this, but we expect Q4 to be good.

Keith Mackey - Equity Analyst - (00:34:39)

Okay. Appreciate the comments. Maybe we could just talk a little bit more about the sand logistics commentary. Certainly more sand per well and more wells over time means you need a lot more sand in total. Can you just talk about kind of where the sand is coming from these days? Are we Seeing more local sand versus imported sand. I know there was a trial on damp sand a little while ago with one of your competitors. Can you just talk about some of these trends and where you think the market ultimately goes and where the opportunity is for Trican?

Brad Fedora - President and CEO - (00:35:20)

Yeah, those are all good questions. So out of the 8.5 million, about 8 and a half million tons of sand that gets pumped In Canada, about 5 of it comes from the U.S. so northern white tier 1 sand, you know, the other, the other, the other 3 million, say, comes from the Canadian mines. It's hard to predict how this works out because, I mean, the issue with sand is everybody wants to pump more of it, but of course it's expensive. So everybody's always looking for the lowest price alternative from a sand perspective. And then you have to measure that against the crush strength of the sand that you're putting into your wells. So that has brought up this wet sand issue. The idea behind wet sand is you have lower quality, less sorted, less clean sand. And as a result it hasn't, you know, it hasn't been sorted, hasn't been washed, it hasn't been dried. And so, you know, you can, you can have it for less money. You can truck less of it due to the water content, of course, but the idea was that hopefully the reduction in sand quality is made up for in the reduction of price. And from what we understand, and we are not experts in what happened at either one of these two trials, but as what we understand, they didn't go that well. But I think people will continue to experiment with it. It's obviously a lot harder to deploy wet sand in Canada versus Texas when we have six months of winter. So you can't move wet sand around if it's frozen. And there's sort of operational issues on location as well with wet sand in the winter. So it's probably not ever going to be a massive substitute for what's happening today. But I think people are going to continue to experiment with lower cost alternatives and we hope to be there with our customers as they do that. But one thing that is certain is sand has to get moved from A to B. And we're really good at moving sand from A to B. And we have the largest trucking fleet. We will continue to grow that. You know, we'll continue to make investments in storage and transloads if we think they're strategic. But at the end of the day, moving sand from A to B can be a good business if you do it well. And we think we do it well, so that's something that we're going to continue to, to focus on.

Keith Mackey - Equity Analyst - (00:38:03)

Okay, I appreciate the comments, thanks a lot.

OPERATOR - (00:38:08)

And your next question today will come from Joseph Schachter with ser. Please go ahead.

Joseph Schachter - Equity Analyst - (00:38:13)

Good morning Brad and Scott. Two questions for me. The first on the, you know, the ERP platform and using AI, how do you see that integrating, Is it a multi year thing? You're Talking about spending $10 million this year, putting it through under the GNA, is it going to affect manpower? Is it going to affect the software side that upgrades? How does this affect and benefit you and how does it affect and benefit the customers?

Scott - Chief Financial Officer - (00:38:47)

Yeah, interesting question, Joseph. So I mean fundamentally we need to modernize all of our systems and get ourselves into the next level. That will then help us facilitate more aggressively moving into things like AI and machine learning, analyzing pump data, preventative maintenance schemes, all those kind of things, which is a great benefit to us as we move forward. But you're correct that that should translate into efficiencies from an operations perspective, potentially. Cost side as well. So it's a long term process. As you would know, there's lots of conversations about utilizing AI and use cases, but you've got to first have good, solid, quality, clean data for a period of time to be able to run any of those use cases. So before we start talking about AI efficiencies and improvements going forward, we've got to get the base level data clean scrubbed and into a reliable form and that's really what our platform is driving us towards. So yes, this is a bit of. A multi year exercise. As we move forward, there'll be internal efficiencies that we would hope to gain and that in turn should benefit our customers as well.

Joseph Schachter - Equity Analyst - (00:40:00)

So this will be an ongoing conversation issue.

Scott - Chief Financial Officer - (00:40:04)

I'm sorry, I missed that.

Joseph Schachter - Equity Analyst - (00:40:06)

This will probably be an ongoing conversation issue as you make headway there.

Scott - Chief Financial Officer - (00:40:11)

Yeah, it'll be something that we'll continue to talk about and keep forward in our discussion so that you get kind of a clear picture of where we're.

Brad Fedora - President and CEO - (00:40:19)

Going, you know, and Joseph, like it's Brad, like the AI, the potential of AI, you know, is limitless. Right. And it's even in a, in a business like ours, who knows what this could do for us,, you know, from a, you know, we collect millions and millions of data points on the pumps and the engines every day. And so what do you, you know, what can AI do with that data when we certainly hope it will help reduce our RNM costs, You know, does AI one day do we have, you know, do we have better programming to help our, you know, our San logistics get more efficient? You know, does that help us run the frac? And so, you know, we're currently sort of not running it manually, but we have people controlling the computer systems that run the. The. The frac. And so maybe, you know, AI or the software will run it a little bit more efficiently than we're running it. And so we're always looking for opportunities to get better with technology. We just got to pick our spots and make, you know, and be be aware of the fact that we're not that big of a company. Right. We, you know, we're big enough that we need to invest in this, but at the same time, we got to be. We've got to be careful that we don't waste money on it as well. And I can assure you we will be very thoughtful when we deploy capital on technology. We'll be looking to get an immediate return for the investment.

Joseph Schachter - Equity Analyst - (00:41:58)

Super. Another area to pursue, you mentioned on the last call that when you bought into Ironhorse that you had equipment in the legacy business that might fit, because if it's not up to the current standards needed for the big jobs, are you moving equipment there? Are they using it or upgrading it so that they'll be busy with it in Q1? As you mentioned, that you expect them to have a very busy quarter in Q1.

Brad Fedora - President and CEO - (00:42:28)

Yeah, yeah, exactly. We've got equipment going back and forth from them to us and us to them as we speak. One of the big advantages of a transaction like this is you get to spread the equipment around to where it's going to be most impactful and most efficient.

Joseph Schachter - Equity Analyst - (00:42:51)

Okay, and do you have much in the yard still from the legacy equipment, or is more of it going tire and horse?

Brad Fedora - President and CEO - (00:43:02)

Well, there's always stuff kicking around the yard, Joseph, don't get me started here. Yeah, there's still stuff there, but that's fine. We've actually done. Prior to Covid, the prior team had also done a really good job of cleaning up really old equipment, and we've continued on with that. And so I think we've done a really good job of making sure we don't turn our operating bases into these old boneyards of equipment that will never see the light of day. I think we've done a pretty good job of getting rid of a lot of the stuff that will never go back to work. And so anything that we have parked on fences today is something that we think could go to work at any time. And we work very hard. If we don't believe that this equipment can't go to work, we work very hard to get it sold.

Joseph Schachter - Equity Analyst - (00:44:05)

Well, thanks very much for that and I look forward to the good news as upcoming quarters happen. Thank you.

OPERATOR - (00:44:13)

Again. If you have a question, please press star and then one and your next question of the day will come from Tiny Tim Monticello with ATB Capital Markets. Please go ahead.

Tiny Tim Monticello - (00:44:25)

Hey, good morning. Most of my question has been answered but I have a few follow ups around the nat gas fleet that you're contemplating for 2026. What's the lead time on that and when do you think that might be entering the fleet?

Brad Fedora - President and CEO - (00:44:41)

I didn't quite catch all that. Tim, what is the.

Tiny Tim Monticello - (00:44:46)

Sorry, the lead time for Bill?

Brad Fedora - President and CEO - (00:44:49)

Yeah, all of this equipment has a 6 to 12 month lead time on it doesn't matter what you order these days. You know, companies like whether it's Cat Cummins, you know, et cetera, it's all long lead time. So we don't expect that this fleet would hit the field until next summer, probably at the earliest.

Tiny Tim Monticello - (00:45:16)

Okay, so that capital investment decision's already been made like you're going forward with it?

Brad Fedora - President and CEO - (00:45:23)

Not necessarily, no. Okay.

Tiny Tim Monticello - (00:45:28)

That'S helpful. And I assume that that would have to come with some customer commitment behind it or would you do that on specific.

Brad Fedora - President and CEO - (00:45:42)

It will likely come with a customer commitment, but we typically test our investment thesis on if the customer commitment went away, would you still want to own it? And so the answer to that is sort of yes to both. But yeah, it will likely have a customer commitment, but we wouldn't bring it on if we didn't think we could sell it if the customers get sold or change their mind or whatever.

Tiny Tim Monticello - (00:46:14)

Okay, that's helpful then. Follow up on Keith's question around proppant and market dynamics. Have you seen any changes in terms of customer insourcing behavior or willingness or desire to insource the logistics side of sand in Canada and if so, how do you move around that and what does it mean for margins and stuff?

Brad Fedora - President and CEO - (00:46:45)

Yeah, definitely we've seen the trend to more self sourced sand from our customer. Base. And that's why we're focusing on making sure that we can make some of that back on the logistics side. So, you know, it's one of the, you know, one of the reasons I was saying it's going to be a focal point for the business. There's not, you know, there's nothing we can do about the trend other than, you know, try to try to make sure that we're we're included along the value chain somewhere. I know there's corkage fees and things like that but, but as you mentioned. Earlier, I mean that logistical piece of moving, you know, X number of tons from A to B is no small task. Right. And so that's something that Trican's got expertise in and has developed over time and we continue to push forward on. So you know, keeping engaged on the transportation side of things, you know, is a bit of a hedge against that, that motion.

Tiny Tim Monticello - (00:47:44)

Yeah.

Brad Fedora - President and CEO - (00:47:46)

Does that come to pass in any of your customers programs currently or is that something that's more contemplated for in the coming quarters? It's going to have, it's continually happening. As we move forward. So there's a mixture today of customers that self source various items including whether it's sand or chemical or others. So it's just a continued trend as we move forward.

Tiny Tim Monticello - (00:48:12)

And have you had any pushback on corkage fees or trying to capture margin.

Brad Fedora - President and CEO - (00:48:17)

In logistics rather than we get pushback on everything.

Tiny Tim Monticello - (00:48:23)

Makes sense. Are you able to push it through ultimately?

Brad Fedora - President and CEO - (00:48:29)

Sometimes.

Tiny Tim Monticello - (00:48:32)

Okay.

Brad Fedora - President and CEO - (00:48:33)

I mean most of our customers like it's, you know, it's, everyone's different. We're very fortunate that you know, our customer base wants us to be sustainable and they, I would say they have a very good understanding of our company economics and what is required to make sure that we are going to be able to provide new technologies and top tier service. So we're very fortunate to have the customer. We've had them for 10, 20 years in some cases so the relationship is very good and lots of the elements of the business are well understood by them. So we'll get through this and we'll continue to make money. Okay, that's helpful.

Tiny Tim Monticello - (00:49:28)

Just looking at the acquisition allocations, it looked like Iron Horse didn't come over with much working capital, but the working capital investment in the quarter, I assume being fairly elevated, included funding working capital for Iron Horse. So I'm just curious like would that one time impact if you could help quantify what the working capital investment related to Ironhorse was in the quarter?

Scott - Chief Financial Officer - (00:49:49)

Yeah, I probably won't get into that much detail to be honest. Tim. Ironhorse did come with a chunk of working capital in it. I would say that funding requirement was not massive and so most of the. Working capital build was really a result. Of a strong July and August.

Tiny Tim Monticello - (00:50:06)

Right.

Scott - Chief Financial Officer - (00:50:06)

That then translates into an elevated balance as you come through September. So I'm not giving you as much detail as you'd like but you know, a portion of it sure, but the majority of it would be activity based.

Tiny Tim Monticello - (00:50:19)

And maybe I missed this in Joseph's question, but how long do you expect this ERP integration to last and what do you think the 2026 investment in that is going to be?

Scott - Chief Financial Officer - (00:50:31)

Yeah, we don't. We would have an ongoing spend as we move through 2026 and we'll be able to give you a bit more guidance on cadence as we get into the year. But we're scheduled to flip the switch midway through the year and then get to sustainable factors at the end of that year. And then we got to make another decision as to whether we continue forward on different parts of it. So there'll be a chunk of spend in 26 as well.

Tiny Tim Monticello - (00:50:58)

Okay, got it. That's all for me. Thanks so much.

OPERATOR - (00:51:05)

Concludes the question and answer session. I would like to turn the conference back over to Mr. Fedora for any closing remarks.

Brad Fedora - President and CEO - (00:51:12)

Thanks everyone. Thanks for your interest and joining. Taking time to join the call. The management team at TRICAM will be around for the rest of the day, so if there's any follow up questions, don't hesitate to reach out and we should be able to take your your call very quickly. Thanks.

OPERATOR - (00:51:31)

This brings to a close today's conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.