Gasfrac Energy Services (GSFVF.PK)
Q2 2012 Earnings Call
August 9, 2012 11:00 a.m. ET
Executives
Zeke Zeringue - President and Chief Executive Officer
Steve Batchelor - Executive Vice President and Chief Operating
Officer
James Hill - Chief Financial Officer
Analysts
Jason Sawatsky - AltaCorp Capital
Scott Treadwell - TD Securities
Andrew Bradford - Raymond James
Brett Reiss - Janney Montgomery Scott
Presentation
Operator
Good morning, ladies and gentlemen, welcome to the Gasfrac
Second Quarter Results Conference Call. I would now like to turn
the meeting over to Mr. James Hill. Please go ahead, Mr. Hill.
James Hill
Okay. Thank you, operator, and good morning, ladies and
gentlemen. I'm here with Zeke Zeringue and Steve Batchelor. I'll
provide a review of the financial results for the quarter and then
Zeke and Steve will discuss operations and then we will open it up
for questions.
In the quarter, revenue was $16.7 million as compared to $14.2
million in the same quarter of 2011. We had 40 revenue days at an
average $418,000 per day as compared to 32 at $443,000 per day.
Looking at that geographically, in Canada revenue was $12 million
for the quarter, similar to the $12.3 million achieved in the
second quarter of 2011. We had 28 revenue days at $429,000 per
average day, as compared to 24 revenue days at $513,000 in
2011.
In the US, revenues were $4.7 million as compared to $1.8
million in the same quarter of 2011. Twelve revenue days at
$393,000 per day as compared to 8 revenue days at $231,000.
Looking at costs. Our operating costs are comprised of two
pieces; direct cost of sales, which are directly variable with
sales volumes, and direct operating costs which are about 75% fixed
in nature.
Also, sales for the quarter were $10.4 million being 61.9% of
revenues as compared to $8.1 million, 57.3% of revenues in 2011.
Our direct operating costs were $11.3 million as compared to $7.3
million in the second quarter 2011. The increase is represented by
$2.4 million for additional crews, approximately $800,000 in
facility costs with added facilities and $800,000 in equipment
rental costs.
Looking at those operating costs again between Canada and the
US, costs of sales in Canada was $6.8 million or 56.7% of revenues
compared to $7.3 million or 61.1% in 2011. Our direct costs were
$7.2 million compared to $5.5 million. The increase is comprised of
$1.2 million for additional crews and $300,000 of added facility
costs. In the US, cost of sales were $3.5 million or 75.2% of
revenues versus $600,000 or 31.6% of revenues.
The larger percentage cost of sales is largely represented by a
one-time added cost for demurrage for propane in our Black Brush
project. We don't expect that to continue going forward. Direct
costs were $4.1 compared to $1.8 million. Again, the increase is
$1.2 million for crews, approximately $500,000 added facility costs
and $600,000 in equipment.
Looking to our balance sheet, we had a net draw on our credit
line of $4 million as at the end of the quarter represented by a
draw on the credit line of $7 million in the cash position of $3
million. Based on our trailing 12 months EBITDA as defined by the
bank, we have approximately $41 million available on the credit
line going forward, approximately $8 million capital commitments
remain for the remainder of the year.
That said, the summary of the financials, I'll now turn it over
to Zeke.
Zeke Zeringue
Yes, thank you, Jim. Good morning, everyone. I'd to begin the
overall review of the second quarter results with maybe a look back
when I had the opportunity to visit with everyone after about four
months on the job and the May 8 call concerning our focus for the
remainder for 2012 and that hasn't changed in terms of what the
fundamental strategy and that was to look opportunities in
particular basins that we could certainly gain critical mass
because of the concentration of other operations by operators in
those basins and those basins were the Permian, Niobrara, and
Uttica down south and, of course, a continued emphasis on the
Cardium with particular emphasis on doing the Montney and the
Viking. That foundation is still in place and we are actively
pursuing opportunities in those areas.
Now when we kind of go over to now come forward to the second
quarter '12 results as it pertains to activity there, the big
disappointment was as we set our leadership and our management team
into specific accomplishments and I think we've tried to cover this
adequately in the management discussion and analysis was the
cancellation and I was reporting or we were reporting at the time
an opportunity in the Uttica, which was one of our targeted basins,
and due to circumstances not in our control, that job was
cancelled, which was in the forecast a considerable portion of the
forecast revenue as articulated on May 9 of the conference
call.
The second disappointment, obviously, was the horizontal Eagle
Ford, which it hasn't been cancelled, but it has been delayed due
to operator decision based commodity prices, etc. The stream delay
in the start of our bellwether customers, Husky up in the north and
Black Brush really contributed to the disappointing results as it
pertains to the forecast we're trying to represent to our
investment people and people who are interested in our stock.
With that being said, the positives that have come out of that
and we will be able to talk more about this because normally when
we get into these opportunities, where (inaudible) hold or signed a
confidentiality agreement was the successful implementation of the
technology in the Niobrara which I mentioned earlier has been a
targeted area for us and by the nature of that contract, we'll be
able to share more information in the public domain about results.
And I am happy to say and I have checked with the operator and we
are authorized to report that we have performed our first recapture
job of the propane that we used on that job, which is a significant
milestone for this company as we continually that will be an
integral part of our offerings to customers in the use of this
technology as we go forward.
I'm also happy to report that we will be doing our first Montney
horizontals in the north division, which is very significant and it
meets a milestone that we set forth to us, which then, as we are
able to operate and gather data as we've kind of been consistent in
saying this data is so important for comparative analysis, but it
certainly gives us an opportunity to broach other areas where we
feel we will then be able to demonstrate the ability of this
technology or compare this technology to what's currently out
there.
With that, I will turn it over to Steve. If he has anything to
add to my analysis at this point and then, obviously, we'll get
into the specific questions the MD&A. Steve?
Steve Batchelor
Thank you, Zeke. Just to reemphasize Zeke's comments. We're
focusing a lot on the growth areas in the south. There are some
disappointment in the south with the well problems and getting
those resolved with our customers down there and then, of course,
we're dealing with unfortunate weather in the north with our
kick-off Husky contract and so that's pretty much what we've been
dealing with. We're manning our (inaudible). We've got seven
spreads active. Right now there's three still in the south and at
one time we were catching, I think at one point, we had three jobs
going and we were able to man all of those crews pretty effectively
using some of the personnel from the Canadian operation down
south.
We seem to be getting a whole lot better on our delivery part of
that and that's all very pleasing to us to see. So, with that I
guess we'll open it up for questions. Jim?
Question-and-Answer Session
Operator
Thank you. (Operator instructions) The first question is from
Jason Sawatsky from AltaCorp Capital. You may now proceed.
Jason Sawatsky - AltaCorp Capital
Hey, good morning, gentlemen.
Zeke Zeringue
Morning.
Jason Sawatsky - AltaCorp Capital
Just wondering with all of the marketing efforts that you guys
have doing over the past few months here, and I know, Jim, you've
talked about, in the past, wanting to potentially have six
contracts signed up by the end of the year. So, we look at the
current situation, you've got Black Brush, Husky. Do you think it's
still realistic kind of looking at the back half that you could get
to six contracts signed potentially by year end.
Zeke Zeringue
Yeah, Jason, this is Zeke. I don't think the six contracts are
attainable for the remainder of the year, but I don't think, based
on the situation we see, and I'm not wanting to compare us to what
happening contractually in North America, but because of the
ultimate glut of what's out there and pumping equipment, I doubt
very seriously anyone will lock in to any particular long-term
contract. But I don't think I mentioned, as we mentioned in the
press release, the opportunity that we have established in the
Niobrara. What I do see is a commitment to what would be more
project oriented type work where we, for this particular cycle of
activity, we see so many wells in the forecast and we like what you
guys have done and we'll contract you out do that, but I think, in
general, the majority of those long-term contracts that people are
hearing about and seeing about in the water world are 24/7 type
contracts and which is kind of considered a factory type
stimulation or fracturing methodology of which, from a delivery
standpoint, we just can't compete there.
The continuous improvement that we're putting into our equipment
that we're able to deliver more payload I think will ultimately get
us to that point, but I think when you define these contracts that
are available, most of them are kind of this factory type
application. But I do see very shortly the fact of us being able to
be committed as I mentioned in our strategy to one particular area,
such as the Niobrara.
Jason Sawatsky - AltaCorp Capital
Right. Okay. An then just circling back to some comments you'd
made on the Q1 conference call. You had noted you were in
discussions for a longer-term opportunity in the Permian or the
Wolfcamp there, potentially a full spread. Just wondering how those
discussions went or are they ongoing?
Zeke Zeringue
Well, we have worked with an operator in the Permian. We're
evaluating those results and actually I will be visiting with that
company upon my return to Houston and we'll give an update on
that.
Jason Sawatsky - AltaCorp Capital
Okay. Great. And then just finally just wanted to know if Jim
you could just tell what the utilization rates were in Canada and
in the US for the quarter?
James Hill
Well, they were 8% in Canada and 7% in US.
Jason Sawatsky - AltaCorp Capital
Okay, great. Thanks, guys.
Operator
Thank you. The following question is from Scott Treadwell from
TD Securities. You many now proceed.
Scott Treadwell - TD Securities
Thanks. Morning, gents. Obviously the press release had the good
level of detail in it and I was interested to see that it certainly
from my point of view, it looks like you're a little bit more
encouraged by what the back half looks like today than you were
three months ago. We're sort of six weeks maybe into the third
quarter. So far operations are in line with your expectations.
You're not seeing any incremental hiccups in terms of getting back
to work in the field? Or if you have you're going to be playing
catch up and you're still fairly confident in how things look for
the back half?
Steve Batchelor
Hey, Scott. This is Steve. Yeah, we're pretty optimistic of
where we are. We're getting a little-, we're still getting a little
slippage on our weather issues with [Husky] up North. We're not
getting that started as quickly as we want to. They're still
plagued by a tremendous amount of weather up there and locations
are in pretty bad shape. In the South, we're getting some traction
and looks like towards the latter half of this month, we'll be back
on track with this month. So I'm still encouraged that yeah, we're
pretty darn close to where we ought to be.
Zeke Zeringue
And Scott, with that being said, we still are optimistic in what
I think we had reported in terms of what that revenue, most of our
revenue will come in the back half of Q3 and Q4. Yes, we're on
track and if I have to give a range I would have to say it would
due to variability. I don't want to use that as an excuse,
obviously, but it has affected not only our operations, but just
about anybody involved in this so-called fracking world anywhere to
100 million to 150 million for the back half of the next two
quarters.
Scott Treadwell - TD Securities
Okay, great. That's good. And then you've talked about seven
spreads active today and that's what you've got staffed for a very
small amount left on the capital budget. Fair to assume that seven
spreads is the right number for GASFRAC today and the remaining
equipment will be idle until such time that demand requires it?
Zeke Zeringue
Yes. That's exactly right. Obviously when we look at our costs
and what we're able to support and what the what-if's of our types
of business and the variability in our business, we will conclude
the remainder of this year with the ability to accrue seven
spreads.
Scott Treadwell - TD Securities
Okay. Turning to the cost side. Obviously, you've pointed a lot
to the incremental cost of propane being a sticker shock for your
customer. Propane costs have come off pretty materially since
January. I'm just wondering do you have any visibility at this
point about how that's going to affect your revenue per day, your
margins as you go forward? I know you've got away from the big
logistics side, so maybe that opens the door for customers to
supply their own fluid. But just where you see that playing out if
propane price kind of stay roughly in the areas they're at?
Zeke Zeringue
Well, I think, as I mentioned, as the leadership team here, we
try to put in a base strategy obviously of what we've mentioned
before and then ultimately their strategies within that. And
obviously, one of the distinct strategies that involves the propane
has been our ability to look at this technology from A to Zed or A
to Z depending on what side of the boundary you're on. And that
still remains a cornerstone of that as it pertains to propane.
The announcement that I made just a few seconds ago about the
ability to recapture propane was on a propane job in the Niobrara
Wattenberg field where we were able to capture roughly 90% of the
propane that was used on the job supplied by the customer and that
particular customer was then able to sell that mix to a sales
company.
So what the strategy here is to look at the life cycle of this
technology as it applies to implementation for our customers.
Heretofore, we would say, yes. The sticker price of propane is
this. Let us continually articulate the value to you about the
enhanced production and/or the increased EUR and the mentality, and
I'm not saying this is a bad mentality, with the majority of these
companies are reservoir exploitation. So at the end of the day, we
need to get a return as quickly as we can. We've got infrastructure
in place to support that.
But now we feel even more confident that we're able to look at
this on a life cycle concept of the propane and be able to
articulate to the customer a net back to some extent, rather than
what we mentioned earlier, the sticker shock for the cost of
propane. So that's a strategy within a strategy. The most important
progress made to date was the recapture of propane in a propane
job, from that, we'll obviously look at what kind of business
opportunities that represent us. But right now we're basically
using that as an enabler to illustrate to customers that we do know
how to handle and represent this technology from A to Z.
Scott Treadwell - TD Securities
Okay. And in the news release as well you talked about hybrid
NGLs. From the minimal amount of research I've done so far it seems
like that kind of involves the ability to pump bigger stages in
terms of tonnage of profit. Has that been a competitive
disadvantage or a segment of the market where you'd really like to
operate but couldn't until the introduction of this hybrid system?
Obviously it's earlier days, but is that something that you think
is going to have obviously some positive impact on customer
interest?
Zeke Zeringue
There's two parts to that. And obviously, you are right. It's
very early on, but it is significant as it pertains to our ability
to offer options to our clients. Let's take the delivery
standpoint. We get a whole bunch of inquiry about what kind of
marketing do you have in place, what kind of analysis, how many
sales people. And I think we alluded to the fact of bringing those
types of resources on board. But again, it's always been the vision
of this leadership team to give our clients options.
So in one of the in depth marketing surveys that was concluded
both in North America, north and south within the divisions in
North America, everybody was telling us we really like your
technology. We do think you're technology has applicability in our
operations but we want you to do more. And as I've been able to
meet a lot of people, it's comes as somewhat of a surprise that
currently we're only doing daylight operations. And because of our
delivery system and that's still an applicable opportunity for us,
so we were just limited to I kind of think the situations you're
talking about, continuous pumping.
Well, the hybrid part of the delivery system will address that.
We'll be able to deliver more sand or more stages per day. It's not
so much a vision of ours to say that we have to use as much sand as
currently being used, or compare it to what water fracking is, it's
just that we're able to pump more stages per day which allows us to
lessen the cost to our clients as we stay on a 15 stage horizontal
for 15+ days. Whereas typically, those horizontals are completed if
you want to do a comparative analysis within seven days in the
water world. So, yes. We feel that ultimately we'll be able to
provide options for those clients that want that.
On the Fluid side, obviously we see a distinct advantage in
being able to, and this is what our IP is really all about, is our
fluid management system. And then as we look at (inaudible) under
our current our delivery system, how propane is handled, not only-,
I mean if you look at where this concept, obviously here in North,
a lot of the activity to be able to handle the propane is a direct
result of the processing facilities that are in place up here in
the North. And so therefore, propane is more readily handled here
because of the deep cut nature and the transmission system already
in place.
So I'm not saying we need to change that up here, but down
South, in a lot of situations, we have to deal with the content of
the propane as it pertains to gas transmission and the gas line.
And everybody knows the problems that exist in trying to put
something with the gas glut etc., etc. But this focus on NGLs
allows us, or different types of NGLs, allows us to offer and to
recapture in flow back situation, offers our clients a way to
handle this technology, either be it propane in the recapturing
bode, or in the NGL where our early tests indicate that it can be
put on the oil line. So, the whole basis for the strategy are
different options for our client to handle this technology.
Scott Treadwell - TD Securities
Okay, guys, thanks for the color. Appreciate it.
Operator
Thank you. the next question is from Andrew Bradford from
Raymond James. Please go ahead.
Andrew Bradford - Raymond James
Thank you very much. Zeke, you went through and outlined several
plays that you said that you were focusing on or that you
articulated that you're focusing on back in May. And notably absent
from that list was the Eagle Ford. Was that just a an error, an
omission? Or did you purposefully exclude that from the list.
Zeke Zeringue
Actually, that was one of the big disappointments since we had a
multi-stage horizontal lined up for an operator. The operator
looked at that opportunity in light of what happened with commodity
prices, and we're actually revisiting that client as we speak. So,
yeah. I am remiss in admitting. That's still an obviously a goal of
ours is to do a multi-stage horizontal in the Eagle Ford.
Steve Batchelor
Andrew, if I may, this is Steve. We're very active in the area
that the Eagle Ford is in. You kind of used the terminology Eagle
Ford. Well, that's geographically south Texas, okay? So, yeah.
We're active in south Texas. We're just not as active in the Eagle
Ford formation. We're more active in more of the San Miguel, the
Buda, and some of those.
Andrew Bradford - Raymond James
Buda, yeah. Okay. Fair enough. What did your customer there not
see in commodity prices given the Eagle Ford's one of the truly hot
plays?
Zeke Zeringue
I think it had to do with the pricing pressure in terms of
comparative analysis to what that customer could do the job for as
compared to a propane frac.
Andrew Bradford - Raymond James
So, you think they proceeded, but just with more conventional
approaches.
Steve Batchelor
Sorry, say that again, Andrew. I missed it.
Andrew Bradford - Raymond James
Do you think they proceeded with their program using
conventional fracturing?
Steve Batchelor
I think they're continuing to use conventional fracturing, but
they were willing to try this. Also, just to keep in mind this job
was scheduled to go at about that time oil prices began to drop
rapidly.
Andrew Bradford - Raymond James
Right.
Steve Batchelor
And that's when they pulled in. We're still in conversations
with them. They still want to do it. We're going back to them. Of
course, oil prices are kind of reviving themselves a little bit, so
we still intend to do something there.
Andrew Bradford - Raymond James
Okay. Just a broad question here. Because you are looking at a
lot of different plays, I'm kind of curious as to given you've been
I think its nine months now or so, Zeke and Steve, do you still
think that the approach of trying to tackle many different plays or
a fairly large selection of plays or regions at once, what do you
think of the merit of that versus an alternative, which would have
to be a bit more focused on a fewer number of plays?
Zeke Zeringue
It's kind of like, and, Andrew, don't take this response,
remember we only had three sets of equipment. We still only have
three sets of equipment and with Black Brush occupying one of
those, I don't think the perception, if the perception is tackling
many bases, but I think the strategy was, as I mentioned early in
the Niobrara, lets get in there. Everybody's going to watch what
everybody else is doing and then that ultimately can be a base of
operations for us in which we can deal with the critical mass
there.
It was no secret and we alluded to it that we were running all
over the United States. Fortunately, when you want to look at that
we mentioned that we did other formations also, but I think the
opportunity for us to get the perception of the utilization that we
want are going to be best served as we're able to build a foothold
in those types of basins where there is a large percentage of
activity going on.
So, yes, we're still going to stick with that because, I mean,
that's where we feel we can get the best opportunities for the
equipment and the technology.
Steve Batchelor
And, Andrew, I might say as well, as far as these different
basins, we're just now beginning to learn more about now the
formations respond to our technology the best. So we're focusing
in. I mean, like Zeke said, we keep a spread busy most of the time
in South Texas operating in several formations. We keep one tied up
most of the time in the Niobrara and then we have a third one that
floats around from Nebraska to Wyoming to wherever.
So what we're learning; how the formations are responding. So
are our customers learning the same. As we focus in on that
naturally we'll focus in on those formations.
Andrew Bradford - Raymond James
Okay. Okay. Also in your prefaced remarks, Zeke, you mentioned
Uttica was a particular disappointment. My understanding, back in
May, that that was just a couple of wells that you were looking at,
but you thought it was going to be program than that.
Steve Batchelor
This is Steve. It started off a couple of wells and that was
with the performance wells and we had really looked at this
formation and how we could effect that and which was all very
favorable. So if the two wells responded as we had predicted they
would, it was a long-term contract for many, many wells.
Andrew Bradford - Raymond James
But you didn't get the two wells going, so the door slammed
shut. Is that how it played out?
Steve Batchelor
That's correct.
Zeke Zeringue
That's it and we had went as far as safety, operational review,
MSAs in place and, again, I obviously can't mention that client,
but its an unfortunate situation, but it is what it is.
Steve Batchelor
But I will say, Andrew, those two wells are still there. They're
just changing ownership, if you will. So we're trying to shift with
that.
Andrew Bradford - Raymond James
Okay. Question for anyone who can provide it. What sort of,
okay, you were 7% utilization in the Lower 48 in the second
quarter. Where were you in July?
Zeke Zeringue
In July I think it was, waiting for (inaudible), I'd have to
look it up, Andrew. I don't have it right in front of me.
Andrew Bradford - Raymond James
Say roughly 20%?
Steve Batchelor
It began to pick up significantly in July.
Andrew Bradford - Raymond James
So your revenue run rate in July is roughly three times what it
was throughout the quarter. Is that about... does that sound about
right?
Zeke Zeringue
Andrew?
Andrew Bradford - Raymond James
Yes?
Zeke Zeringue
Okay. Yes, I said yes.
Andrew Bradford - Raymond James
Okay. Sorry, I didn't hear the answer.
Zeke Zeringue
Oh, I'm sorry. Yes, we're just sitting here, yes.
Andrew Bradford - Raymond James
It might have been that my headset died. The last question and I
promise and then I'll leave you alone. Okay so you've articulated
that the second half is going to be meaningfully different, but
from here it sort of sounds like it still pieces need to fall into
place that quite fallen yet. Not much different than say back in
May. So what is it today that has bolstered your confidence that
these adoption rates that you've been discussing are going to
materialize fairly quickly here? What has changed?
Steve Batchelor
Andrew, it's Steve. There's probably three things that I can
just say we've made some significant changes in some of our
personnel and leadership in the south. And we've also beefed up,
considerably, our sales force in the south. With that said, we
expect that things... we're beginning to see good things from that
effort. There's an awareness that Zeke mentioned that we're trying
to get more and more awareness out there. More and more sales calls
and we've also beefed up our technical confidence with the
engineering group that we're seeing some good results from both the
north and the south. So that's what we're seeing.
And what this does is it gives us an opportunity when we start
seeing this, I guess, drop in commodity prices, it's interesting
when you have a new technology that nobody wants to hear about,
when they're so busy they can't take the time to listen, but now
they've got some time and it's like who are those guys? So lets
see, we get calls on a daily basis about can you come talk to us
about it. So we're seeing more and more interest in the
technology.
Andrew Bradford - Raymond James
So, incoming calls.
Steve Batchelor
A lot of incoming calls, yes.
Andrew Bradford - Raymond James
Okay. Okay. I'm sorry, I lied. I have one more question. You
said you culminated a program with a customer in July in the
Niobrara. Jim, has the revenue run rate slowed since then?
James Hill
Marginally, but I think the expectation is that that customer is
going to pick up again.
Andrew Bradford - Raymond James
What sort of confidence level do you have in that?
James Hill
Good.
Andrew Bradford - Raymond James
Okay. Okay. I appreciate your indulging my questions. Thank you
very much.
Zeke Zeringue
Thank you, Andrew.
Operator
Thank you. The following question is from Brett Reiss from
Janney Montgomery Scott. Please go ahead.
Brett Reiss - Janney Montgomery Scott
Morning, gentlemen.
Steve Batchelor
Morning.
Brett Reiss - Janney Montgomery Scott
Could you walk us through the arithmetic on how you have
available on the bank line of credit, the $41 million?
James Hill
It's based on the trailing 12 months EBITDA, Brett.
Brett Reiss - Janney Montgomery Scott
Okay.
James Hill
About $13.8 million, I believe. I don't have the exactly in
front of me. The bank will find it somewhat differently than in the
financial statements, but that's the basis of it.
Brett Reiss - Janney Montgomery Scott
Okay. What was the EBITDA this quarter?
James Hill
The EBITDA was -$10 million.
Brett Reiss - Janney Montgomery Scott
Okay. So, when you report next quarter, the fact that this was a
very weak EBITDA quarter, what will the availability be the next
quarter?
James Hill
I expect the availability will be similar. Obviously that third
quarter of 2011 falls off and we add this quarter. So it will be
similar and perhaps marginally less.
Brett Reiss - Janney Montgomery Scott
But that's the way it works each quarter, it's aged an
additional quarter and depending on what the results are, it just
kind of chronologically gets baked into the pie?
James Hill
That's correct. Again, it's based on the trailing 12 months is
what they refer to. So the trailing we months at the end of each
quarter is the basis of the availability going forward.
Brett Reiss - Janney Montgomery Scott
Okay. I appreciate it. Thank you.
Operator
Thank you. (Operator instructions) The following question is
from Richard A. Durrett. You may now proceed.
Richard Durrett
Good morning, gentlemen.
Zeke Zeringue
Good morning.
Richard Durrett
I'd appreciate a comment on the future solvency of the
corporation.
James Hill
Richard, it's Jim.
Richard Durrett
Hi, Jim.
James Hill
We just talked about the bank line and as I look forward in
terms our use of cash, if you will, we've got about $8 million
remaining on our capital spend, so we don't have any capital
expenditures beyond that. So, effectively, our anticipated cash
flows will pay for that capital in the second half of the year.
The draws on the line of credit are going to, therefore, tend to
be based on our increased revenues. And, as such, we're going to
increase our receivables and to fund that working capital we're
going to have to draw on the line of credit. I don't foresee, based
on what I'm looking at any point in time at which our raws are in
excess of credit or in excess of our account receivable rather.
Will it get tight on the covenant, I think its possible, but again
there's a lot of asset back there. So that's something that would
be discussed with the bank as we go forward with this renewal.
Richard Durrett
Well, hopefully, the utilization will take care of that,
Jim.
James Hill
Yeah, of course. I mean that's the primary solution. You're
absolutely right.
Richard Durrett
Thank you very much.
Operator
Thank you. This concludes today's Question-and-Answer Session. I
would now like to turn the meeting back over to Mr. Zeringue.
Zeke Zeringue
Yes, thank you, operator. I want to thank everybody for their
interest and their questions. Obviously, as we discuss and have the
opportunity to discuss what we talked about today from an adoption,
nuances in the technology, we'll make those opportunities available
in the matter in which we can. I want to thank everybody today.
Operator
Thank you. The conference has now ended. Please disconnect your
lines at this time. Thank you for your participation.
See also
Don't Sell Yourself Short: ETF Edition
on seekingalpha.com