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00:01 Greetings and welcome to the KLX Energy Services Fiscal Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard.

Thank you, Ken. You may begin. Thank you, Ken. You may begin. 00:44 Please hold. Hang on one second..

02:45 Thank you operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services conference call and Webcast to review Fiscal second quarter twenty twenty one results. With me today are Chris Baker, KLX’s President and Chief Executive Officer; and Keefer Lehner, Executive Vice President and Chief Financial Officer.

03:07 Following my remarks, management will provide a high level commentary on the financial details of the second quarter and outlook before opening the call for questions and answers. Also be a replay of today's call and will be available by webcast on the company's website at klxenergy.com.

There will also be a telephonic recorded replay available until September seventeen and more information on how to access these features is included in the press release yesterday.

03:36 Please note that information reported on this call only as of today, September tenth, twenty twenty one and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay listening or the transcript reading.

In addition, management's comments may contain forward looking statements within the meaning of the United States Federal Securities Laws. 03:59 These forward looking statements reflect the current views of KLX’s management.

However, various risks, uncertainties and contingencies could cause actual results, performance or achievements to differ materially from those expressed in statements made by management.

The listeners are encouraged to read annual report on Form ten K, quarterly reports on Form ten Q and current reports on Form eight K to understand certain of those risks, uncertainties and contingencies.

04:26 The comments today may also include certain non-GAAP financial measures additional details and debt reconciliation to the most directly comparable GAAP financial measures are included in the quarterly press release, which can be found on the KLX Energy website.

Now, with that behind me, I'd like to turn the call over to KLX Energy's President and Chief Executive Officer, Mr. Chris Baker.

Chris?.

04:50 Thank you, Ken, and good morning, everyone. Thank you for joining us today for the KLX Energy Services fiscal second quarter twenty twenty one conference call. We are excited to report our second quarter results similar to the prior quarters.

I'll begin by providing an update on the broader market as well as some of the significant themes impacting our quarterly results. I will turn the call over to Keefer to review our Q2 financial performance before returning for some final comments on our strategy and outlook.

05:24 Following a seasonally weak first quarter that was exacerbated by Winter Storm Uri, as well as customer scheduling and well issues, the second quarter was characterized by continued broad based improvement in the market.

For the fiscal second quarter ended July thirty one, WTI prices were up over sixteen percent and natural gas prices were up thirty four percent and currently sit around five dollars per mmbtu. 05:52 Rig count was up approximately eleven percent ending our second quarter approaching five hundred rigs. Additionally, the U.S.

frac spread increased approximately thirteen percent during the fiscal second quarter, ending with roughly two forty frac spreads running across the U.S.

06:11 While the global economy still has a cloud of uncertainty due to COVID-nineteen, it does continue to show meaningful improvement in terms of market fundamentals, which bodes well for the domestic onshore market. U.S. oil demand for June twenty twenty one was almost back to pre-COVID levels of June twenty nineteen.

06:33 As we stated on our Q1 call, our customers continue to prioritize returns and capital discipline over production growth. Activity gains have been muted relative to past cycles.

However, it also appears that we have weathered the worst of the storm, and that despite lingering microeconomic headwinds there's a growing confidence that is building and driving greater levels of activity and spending.

07:00 We are proud to report that our Q2 revenue increased twenty three percent sequentially and adjusted EBITDA returned to the black for the first time since Q1 twenty twenty. Both came in ahead of our expectations than prior guidance. This quarter, commemorates the one year anniversary of the closing of the merger. 07:22 We have accomplished a lot.

Integrated the companies and realized synergies, all while navigating one of the worst turns in the history of the oil patch. I would like to thank the full KLX team for all of their hard work over the past twelve months. 07:38 Our twenty three percent sequential revenue growth compared favorably to only an eleven percent increase in rig count.

This was achieved by capturing our share of the increasing market, marginal pricing gains, albeit pricing continues to remain depressed, and increased market share in several key service lines.

07:59 Year to date, we've seen the rate of pricing improvement accelerate every month although we still have a long way to go to return to pre-pandemic pricing levels.

Our monthly revenue results have improved every month so far in fiscal twenty twenty one and we exited Q2 with solid momentum generating a new monthly revenue record for the combined company. 08:23 Through it all, KLX has continued to make progress on our cost reduction initiatives.

After having completed forty six million dollars in annualized merger synergies, we have now fully implemented the additional four point four million dollars and annualized fixed call savings that we're outlined during our Q1 earnings call. This partially benefited Q2 results and will fully benefit our Q3 results.

We experienced a ten million dollar increase in quarterly adjusted EBITDA from Q1 to Q2 and generated positive adjusted EBITDA for the first time in five quarters.

09:02 The considerable sequential improvement in adjusted EBITDA was driven by the absence of Winter Storm Uri, improved revenue and enhanced margin driven by a combination of synergies, increased utilization, marginally improved pricing, and significant operating leverage in the business after realizing the fifty plus million dollars in annual cost savings.

09:25 We believe that 3Q will build upon the positive momentum that has already been established in Q2. I'll discuss our outlook in greater detail later in the call. We exited 2Q on a positive run rate and expect our results to improve further in Q3. 09:43 With that, I'll now turn the call over to Keefer who will review our Q2 financial results.

Keefer?.

09:51 Thank you, Chris. Let me begin by discussing our second quarter twenty twenty one consolidated results. As Chris mentioned, we experienced sequential improvement in revenue across all segments and saw segment adjusted EBITDA return to the black for all three geographic segments for the first time since Q1 twenty twenty.

10:12 For the fiscal second quarter ended July thirty one, twenty twenty one, revenues were one hundred and twelve million dollars an increase of twenty one million dollars or twenty three percent compared to the fiscal first quarter of twenty twenty one.

10:26 Once again, the revenue increase reflected the impact of improving market activity across all geo markets and the vast majority of our product lines, particularly directional drilling, coiled tubing, rentals, and fishing.

10:40 Now to detail our revenue contribution by end market, Q2 twenty twenty one revenue was twenty nine percent drilling, forty six percent completion, fifteen percent production and ten percent intervention services, which compares to twenty seven percent, forty nine percent, thirteen percent, and ten percent respectively for the fiscal first quarter of twenty twenty one.

11:06 Drilling continues to increase its contribution to KLX post the merger with QES. This trend is driven by the leading directional drilling franchise we added via the merger coupled with our ability to cross sell rental equipment and accommodations as part of a more comprehensive offering for our drilling customers.

11:24 Turning to the completion side of our business, the biggest driver of our completions business remains our coiled tubing and rental product lines. We've made great strides pulling through plug sales and tubing services for our integrated coiled tubing offering throughout each of our geo markets.

11:41 We experienced a forty one percent sequential increase in dissolvable plug sales from Q1 to Q2 and are experiencing a very positive market reception for our latest generation dissolvable plug. On the production side, we provide a wide range of services for well reactivations and remedial work.

12:00 We saw our production services become a larger driver of KLX results in the second quarter and as oil prices climb back into the sixties and seventies, we expect to continue to see an uptick in production related activity.

12:13 Moving on to our consolidated profitability, adjusted operating loss was fourteen point nine million dollars for the quarter. Adjusted EBITDA and adjusted EBITDA margin were six hundred thousand dollars and fifty basis points respectively.

Adjusted operating loss and adjusted EBITDA improved sequentially by twelve million dollars and ten million dollars respectively. 12:36 I would also like to highlight a couple of items that negatively impacted our second quarter margin.

First, our quarterly cost of sales continues to be burdened by two point one million dollars of lease expense, five coiled tubing operating leases, which may impact our comparability to peers.

Second, we incurred standard costs of one point three million dollars within the quarter in order to mobilize and prepare equipment to meet the increased demand for our services in Q2. 13:05 I will now turn to the segment P&L review.

Beginning the segment review with the Rockies, the Rockies segment fiscal second quarter revenue of thirty three point six million dollars increased by nine point three million dollars or thirty eight percent as compared with the fiscal first quarter of twenty twenty one.

13:25 The sequential increase in revenue was primarily driven by stronger utilization and pricing across all product lines, primarily led by fishing, rentals, cement, coiled tubing, directional drilling and wire line.

Adjusted operating loss for the fiscal second quarter was two million dollars as compared with adjusted operating loss of six point eight million dollars in the fiscal first quarter of twenty twenty one.

13:51 Adjusted EBITDA was three point one million dollars as compared to the fiscal first quarter adjusted EBITDA loss of one point six million dollars. The increase in profitability was related to a combination of less white space on the calendar, improved utilization, modestly improved pricing, and cost synergies.

14:12 Now moving to our Southwest segment. Our Southwest segment increased its revenue by thirteen percent sequentially as compared to the fiscal first quarter of twenty twenty one generating revenue of forty three million dollars.

The increase in revenue was driven by stronger utilization and pricing across most product lines, primarily led by directional drilling, wireline, and rentals.

14:37 Q2 adjusted operating loss was three point six million dollars compared to fiscal first quarter adjusted operating loss of six point six million dollars and adjusted EBITDA was one point eight million dollars for the second quarter compared to fiscal first quarter adjusted EBITDA loss of seven hundred thousand dollars.

The increase in profitability was driven by a combination of improved utilization, modestly improved pricing, and cost synergies fully benefiting margin. 15:06 Now to wrap up the segment discussion with the Northeast and Mid-Con.

Fiscal second quarter revenues were thirty five point three million dollars up twenty four percent as compared to the fiscal first quarter of twenty twenty one.

Adjusted operating loss for the fiscal second quarter was three point two million dollars and improved two point nine million dollars as compared to adjusted operating loss of six point one million dollars in the fiscal first quarter of twenty twenty one.

15:35 Adjusted EBITDA was five hundred thousand dollars as compared to fiscal first quarter adjusted EBITDA loss of two point one million dollars.

The improvement in adjusted EBITDA was primarily driven by top line expansion due to utilization and pricing improvements and most product lines led by fishing, coiled tubing, and directional drilling, coupled with the reduced cost structure benefiting from the merger synergies and cost reductions driving significant operating leverage and the segment results.

16:05 Our adjusted corporate and other EBITDA loss for the fiscal second quarter was four point eight million dollars versus five million dollars in fiscal Q1.

With that said, the cost synergies from a merger are now materially benefiting the results of KLX and the full quarterly impact of the annualized forty six million dollars of synergies are flowing through the P&L.

16:27 Big picture, we've experienced a dramatic turnaround results in the last year since closing the QES merger at the end of Q2 twenty twenty. Adjusted EBITDA improved from a pro forma loss of nineteen million dollars in Q2 twenty twenty by twenty million dollars the positive adjusted EBITDA of six hundred thousand dollars in Q2 twenty twenty one.

This represents an eighty million dollars annualized improvement in adjusted EBITDA from Q2 twenty twenty to Q2 twenty twenty one. 16:58 Now, I'll turn to our consolidated balance sheet and cash flow.

Our long term debt increased to two seventy four million dollars, less our Q2 cash balance of thirty nine million dollars resulting in net debt as of the end of the second quarter of approximately two thirty five million dollars.

As of July thirty one, twenty twenty one, total net liquidity fifty seven million dollars including cash on hand of approximately thirty nine million dollars. 17:25 We also drew thirty million dollars on our ABL within the quarter to maintain a healthy cash balance and help support the current and continued rebound of the business.

With the drawdown, our credit facility has twenty eight million dollars of remaining availability and eighteen million dollars of net availability when factoring in the ten million dollars structural hold back tied to the springing fixed charge coverage ratio.

17:49 The continued management and preservation of our cash and liquidity remains a top priority, and with activity expected to drive further through the balance of the year, we will continue to proactively manage our cost structure and working capital to maximize margins and cash flow.

We'd also expect that our borrowing base would increase in conjunction with the continued revenue increases expected for Q3. 18:11 For the three months ended July thirty one, twenty twenty one, cash flow used in operations was twenty six million dollars and free cash flow loss was twenty seven million dollars.

There's cash interest of fourteen point seven million dollars paid in the quarter, which drove more than half of the quarter's cash decline.

Remaining balance to the cash decline was largely driven by a ten million dollars investment in working capital due to higher activity levels, so there were also incremental net expenditures for CAPEX and capital leases. 18:42 Capital expenditures for the quarter were approximately three point five million dollars.

Although most of the capital outlay was focused on maintenance spending, we did have some targeted growth expenditures as well. These were select projects focusing on very quick paybacks typically less than a year.

18:58 We sold two point five million dollars of our fleet assets within the quarter, offsetting approximately seventy percent of our quarterly CAPEX spend.

We continue to expect total CAPEX for twenty twenty one to be in the range of fourteen million dollars to sixteen million dollars and currently have three million dollars of assets held for sale, which we believe should sell in the second half of twenty twenty one.

19:20 Lastly, in an effort to normalize our reporting and improve comparability with peers, we announced yesterday that we will modify our fiscal year end from January thirty one to December thirty one.

This change will take effect for the period ended December thirty one twenty twenty one when we will file a transition ten K for eleven month period and will begin fiscal twenty twenty two on January one. 19:44 With that, I will now turn the call back to Chris to wrap things up..

19:48 Thanks, Keefer. I will close today's call by discussing strategy, consolidation, and then wrap up the call by discussing our Q3 outlook. We do not have a material update on the consolidation front at this time.

However, I can assure you that our team continues to review every opportunity available, where we believe their strategic fit, synergy value, operationally cultural alignment and balance sheet enhancement.

20:16 As discussed on prior calls, we believe further consolidation must occur to gain product line scale to remedy the pricing and utilization challenges based by the industry and better position the industry to be healthy for the long term.

20:32 While we've seen some consolidation activity in the services space, our merger with QES remains one of the largest diversified OFS consolidations to date. And most of the consolidation activity remains heavily weighted towards the EMP sector rather than oilfield services.

20:49 Having now successfully completed a large integration and center realization project, we are true believers in the power and benefits of consolidation and continue to examine potential opportunities to enhance our own business lines, operations, and balance sheet.

We believe we are now in a position where we can pursue additional consolidation and hope the next several months will present compelling consolidation opportunities. 21:17 Now to wrap things up, I'll discuss our Q3 outlook.

We've seen oil prices retrench approximately eight percent since the end of our fiscal Q2, but natural gas prices are up another twenty eight percent reaching their highest level since twenty fourteen. Rig count and market activity have largely continued their upward climb with generally strong momentum through the early part of our third quarter.

21:43 KLX’s broad footprint enables us to be well positioned to service the gas basins of the Northeast, East Texas and Louisiana, the Rockies and Eagle Ford. We are becoming increasingly encouraged by the ever improving industry outlook, but for the economy as a whole and for the OFS industry in particular.

22:04 There continues to be mounting evidence of improving fundamentals which should drive greater levels of activity and pricing through the balance of the year and into next year.

There continues to be some push and full in the ongoing economic rebound and fears persist regarding the Delta variant, the global supply is expected to remain tight given OPEC plus and U.S. Shale supply discipline and demand is expected to continue to improve in the short-to-medium term despite elevated WTI prices.

22:36 This gives us optimism that we can continue to strengthen our performance competitive positioning as we have already reduced our cost structure to industry leading levels based on our Q2 G&A burden, which stands at approximately eleven percent of revenue.

Yet we have the personnel equipment expertise and customer base to deliver in an improving microeconomic environment. 23:02 It is both encouraging and gratifying that we have been able to drive pricing of late.

We have been working tirelessly to enhance our profitability for expense reductions and improved utilization at a time when the price lever had for the most part been unavailable to us, but our persistent to paying off in the pricing gains we've achieved have been accelerating as we work through twenty twenty one.

This sets a foundation for continued margin improvement in the coming quarters. 23:31 With that said, we do continue to find it difficult to attract and retain personnel, which is one of the primary risk and impediments to growth today.

We are not only competing with other oil service companies to attract and retain talent, but with other industries as well, which is not something the industry has encountered in recent cycles. 23:52 We’re seeing more and more workers permanently leave the industry after the downturn last year.

To some extent, we've been able to mitigate this by focusing on employee utilization and talent retention. We have some of the best people in the industry and they are a key part of what differentiates KLX.

The experience, knowhow, and expertise of our team is foundational to the quality of the products and services we offer, and we will continue to do everything we can to attract and retain top talent to the KLX family. 24:26 While we are on personnel, I would like to touch on COVID-nineteen.

COVID remains a risk to our business as it jeopardizes the safety of our employees, potentially impact our ability to staff crews, creating unforeseen white space on our calendar and can ultimately impact demand recovery for crude.

We are proactively working to ensure the safety of our employees and the efficiency of our operations and we are encouraging and incentivizing employees to get vaccinated. 24:55 Now let me turn to the third quarter and our outlook for the rest of the year. Activity is on the upswing and continues to improve across all end markets of our business.

Drilling, completion, production, and intervention services. Utilization continues to improve and we are achieving pricing gains across all the vast majority of our product and service lines. 25:18 Given these favorable developments and barring unforeseen COVID and our customer scheduling delays, we expect to see revenue increase again in Q3.

With sequential uptick in the range of eight percent to twelve percent. Pricing gains combined with the sizable cost savings we have achieved through the year should result in sequential improvement in adjusted EBITDA.

25:43 Our second quarter adjusted EBITDA was just above breakeven, we exited the fiscal second quarter with a low-to-mid single digit adjusted EBITDA margin and positive adjusted EBITDA. For the balance of the year, we expect continued steady improvement activity and expect revenue and margins to increase accordingly.

26:05 In closing, let me thank our team members, customers and shareholders for their continued support.

We have now eclipsed the one year anniversary of closing our merger with QES and we are excited about all of the positive developments and steady economic improvement we are seeing and we are confident that KLX is well positioned to continue to provide our value added products and services as activity continues to accelerate.

26:33 With that, we will now take your questions.

Operator?.

27:15 Good morning, Chris and Keefer..

27:18 Hey good morning, Ian..

27:19 Good morning, Ian..

27:22 I wanted to ask about the different basin outlooks for the calendar second half just given the divergence and and crude. We've heard – I've heard mixed indications from some of your peers with regard to fourth quarter slowdown.

Some seeing, I think in Texas seeing more of a November, December white space at this point than maybe we had thought earlier in the year, but this gas price seems to be very constructive for a lot of your activity.

So could you just parse out the view between your oil work and gas work in the back half and what you expect in terms of seasonality beyond what you've guided for the prompt quarter?.

28:12 Yes, sure. I think look, we definitely we were coming into the third quarter and more visibility than maybe we did in prior second half of the year cycle, as we've all become very accustomed to fourth quarter budget exhausted. What I'd say is definitely East Texas Haynesville activity seems to be ramping up.

We're starting to see more and more RFQ’s in that basin. 28:35 With regards to your question around Texas specifically, look we definitely have some potential for white space in the back half of the year.

I would say we're starting to have conversations with some of those operators where they're thinking about going ahead and drilling through the end of the year in November and December, and I think it's a little early in the cycle for those decisions to be made, but I would say those decisions in conversations are pretty promising.

29:04 We're seeing this on the BD side of the business well as the completions side of the business.

So it's a little premature to give you a firm answer, but I would say the fact that they are considering continuing their program is nothing but a positive, right? And then with regards to, you know we clearly had a pretty material uptick in the Rockies some of that is gas work, but a lot of that is, it's episodic in two regards.

29:32 One customer concentration in the nature of the customers up there and their programs swings somewhat within a quarter and quarter over quarter and we've got, kind of cradle the grade activity there from the drilling side all the way through the completions and the drill outside of their programs.

The other is most of those pads up there exceptionally large. And so any delays whether they be COVID delays, wellbore trajectory delays or otherwise, can cause some swings in that revenue base. But by and large activity across the board seems to be picking up. I think it comes down to what happened in November and December to your point..

30:11 Okay. Got you. You mentioned Chris that you exited Q2 at low mid single digit EBITDA margins. If we just look at the full quarter, your EBITDA incrementals from Q1 and the Q2 were forty five percent to fifty percent in total.

Is that a fair way to think about the margin progression into Q3 as well, or are there other factors that could improve or dilute that incremental?.

30:43 Yes. So look it's a very fair question and we're pretty proud of the incremental in Q2. They were highly positive. I don't know that they're necessarily unfortunately sustainable on incremental revenue dollars, but we clearly saw extraordinary incremental.

I think a big part of that is look, there's enough operating leverage in the business coming out of Winter Storm Uri in Q1 where you've got white space in your calendar, some costs that you couldn't flush out etcetera. So that incremental revenue flow through exceptionally well.

31:15 The caveat, I would say with regards to incrementals going into Q3 is, there's a pretty broad diverse set of incrementals and margins on our product lines that have a range of call it fifteen to forty five percent grow there about depending on which product line you're thinking about.

The other is, we're all seeing quarantines from Delta and that can drive some inflation in your cost structure, especially around this revenue opportunities and quarantine cost, over time cost etcetera that I think kind of gets lost in the shuffle.

With that, Keefer, anything else to add around the incremental calculation?.

31:53 The only thing I’d add and you mentioned kind of fifteen percent to forty five percent depending on the product line is just the trends that we're experiencing on the pricing side of our business.

We mentioned this a bit in the prepared remarks, but the rate of our pricing improvements have been accelerating month over month that we worked through the year.

So, we would expect to continue to be able to walk pricing higher as we work through the remainder of the year and certainly would expect that as we get into next year, we'll be able to improve pricing even further there. That's the only thing I'd add, Chris..

32:24 Yes, that's perfect. And I think that is the key is making sure pricing continues to outpace the inflationary pressures we're seeing across the board and we work every data. If one step forward or two steps forward one step back sometimes if we work every day on that front..

32:42 Okay. And then last one, if you don't mind, Keefer I haven't finished pushing buttons on the model yet, but it looks like just given the rate of improvement in the second half, but with revenue still growing, working capital probably is not going to help you a great deal. So, it looks like free cash is still a bit remote for the second half.

Would you agree or correct me on that that we should look probably to twenty twenty two rather than second half of twenty one for the free cash inflection of the company?.

33:14 Yeah. I think that's right. As it relates to working capital, certainly activity continues to ramp we're going to be in a position where we're going to continue to make an investment in working capital. We're certainly focused on effectively managing the working capital to the best of our ability. Our AR days were down from Q1 to Q2.

We hope that's a trend that we're able to continue, but as Chris said, that's something that we are focused on day-in, day-out. 33:41 On the , we've been able to work effectively with our vendors. So, as I think there's free cash flow, there will be continued investment in working capital.

On the CAPEX side of the equation, we are forecasting fourteen million dollars to sixteen million dollars of CAPEX for the full year. 33:59 Most of that as we've mentioned is maintenance oriented in nature.

Maintenance spending will increase as our activity is picking up, particularly from Q1 to Q2 and then again from two to Q3 and through the rest year. So, we will have elevated CAPEX spending levels likely in the second half of the year compared to where we were in the first half of the year.

And I think that gives you most of the building blocks from an unlevered free cash flow perspective, and then obviously on the leverage through cash flow perspective we've got the fifty million dollars semi-annual interest payment that's payable in both May and November..

34:34 Got it. Thanks Keefer. Thanks, Chris..

34:38 Thanks Ian..

34:38 Thanks Ian..

34:41 Thank you. Our next question comes from John Daniel with Daniel Energy Partners. You may proceed with your question..

34:49 Hey, guys. Thank you. Just a follow on to Ian’s questions, you touched on Q4.

I’m just curious at this point if anybody, any of your customers are making commitments for twenty twenty two and if they are, again, touch on Ian’s theme, are you seeing more of that in places like the Haynesville or more is there a basin specificity that you can provide color on in terms of just that outlook?.

35:14 Yeah. Good morning, John. Look fair question, at the end of day I think, as you are all aware, we don't have a lot of contracted services similar to drilling the right frac spread, right? What I will say is, look, we're very excited about our positioning.

Some of the E&P consolidation that has occurred, I think it's very well because we have very strong relationships within our customer base that should pull through incremental activity in certain of those basins like the Haynesville as you referenced. 35:43 So, I think we're very well situated. We're just at the forefront of RFQ season.

I would say RFQ season has kind of kicked off a little early this year, but we're definitely seeing more of that activity directed towards some of those basins and we're seeing full fledged packaged RFQ’s for bundled services etcetera that I think we're exceptionally well positioned for and taking advantage off..

36:06 Okay. And then one on the labor market. I'm just curious, and if you look say your Permian employee base, what percent of those guys and gals come from the East Texas market who might now want to stay at home and work in East Texas, is that an issue you're facing there? 36:25 It's not an issue that we faced to date.

I think the biggest issue today is just been a retention of and whatnot. Look, we've had that same phenomenon occur in the past with South Texas crews going in as well right? You’re all familiar with that. And so, it's something that we will have to juggle and we'll work through, but we haven't had that as a road or hurdle to jump through to date.

36:53 I think most speaking for KLX, most of our employee base in East Texas and Haynesville is – or what I would say locals. We've got a great foundation there. And so we'll supplement and backfill as need be, but we that.

To your point on West Texas, you've got West Texas attrition in and of itself that is just the nature of the Permian that we work through all the time..

37:19 Okay. Guys, thank you for your time..

37:22 Yeah. No, appreciate the questions..

37:27 This concludes our Q and A session. I would like to turn the floor back over to management for closing comments..

37:35 Thank you once again for joining us on the call and for your interest in KLX Energy Services. We look forward to speaking with you again next quarter..

37:47 Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day..