Atlas Energy Solutions Inc. Q4 FY2023 Earnings Call

Greetings. Welcome to the Atlas Energy Solutions' Acquisition of Hi-Crush and 2023 Fourth Quarter Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to Kyle Turlington, Vice President of Investor Relations. Thank you. You may begin.

Hello and welcome to the Atlas Energy Solutions' conference call and webcast for the fourth quarter of 2023. With us today are Bud Brigham, CEO, and John Turner, President and CFO. Bud and John will be sharing their comments on the company's operational and financial performance for the fourth quarter and full year 2023, as well as insights on the acquisition of Hi-Crush that we announced today. After which, we will open the call up for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined under the U.S. Securities laws. Such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes or results could differ materially. You can learn more about these risks in the prospectus we filed with the SEC on September 12th, 2023, in connection with our recent corporate reorganization, our quarterly reports on Form 10-Q; and our other SEC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures, such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in this morning's press release. With that said, I will turn the call over to Bud Brigham.

Thank you, Kyle. Today, it's an exciting day, not only for Atlas but for Hi-Crush and their stakeholders, the Permian Basin sand and logistics market, and our customers. Atlas is acquiring Hi-Crush for $450 million, which consists of $175 million in equity, $150 million in cash, and a $125 million deferred cash payment in the form of a seller's note. The acquisition of Hi-Crush further strengthens Atlas' position as a leading provider of proppant and proppant logistics in the Permian Basin. Our increased scale and enhanced offerings are tailored to meet the needs of our large-scale customers in the Permian Basin. As it relates to the importance of scale and reliability, we recently heard a high-level executive from the leading oil service company coin the phrase 'more sand, more barrels,' and he is exactly right. With surface intensity rising, scale and reliability are paramount today, with the leading edge frac crews now pumping over 100,000 tons of sand per month. In my opinion, Atlas and Hi-Crush have been the two most innovative proppant companies within the Permian Basin, with the rollout of Hi-Crush's Encore mobile mines and the development of our Dune Express conveyor system, which remains on time and on budget, coupled with our innovative multi-trailer delivery solution. These disruptive offerings are currently helping to take trucks off the public roads and making the communities in the heart of the Permian Basin safer places to live and work, and we anticipate that the Dune Express will further enhance these benefits. We have the utmost respect and appreciation for what the team at Hi-Crush has built, and we are looking forward to combining best practices from our respective organizations to help our customers become even more efficient. The $450 million acquisition of Hi-Crush includes all its Permian Basin operations, consisting of two plants at Kermit, which share the same giant open boon as our existing Kermit facilities; seven currently deployed Encore Mobile mines, of which five were in the Midland Basin and two were in the Delaware Basin, with an additional Midland Basin deployment slated for the second quarter of 2024 and a night deployment planned for later in 2024. Atlas is also acquiring 100% of Pronghorn Energy Services with this acquisition of Hi-Crush, which is the leading provider of damp sand last-mile solutions. We are excited to combine Pronghorn's last-mile expertise with Atlas' innovative multi-trailer last-mile offering. We believe that the broadened offering will be well-received by our customers. The acquisition of Hi-Crush will add 12 million tons to our production capacity, which consists of 5 million tons of dry sand production at their two Kermit mines and approximately 7 million tons in the aggregate of wet sand production across their Encore mines. In sum, pro forma, Atlas will have approximately 21 million tons of dry sand production capacity and around 7 million tons of wet sand production capacity for a total of 28 million tons of overall production capacity. This scale is unmatched in the Permian Basin. The merits of this acquisition are numerous. First and foremost, this transaction enhances our geographic footprint and customer base in the Midland Basin, logistically advantaging us to more Midland Basin operators while also providing a complementary damp sand offering through the Encore Mobile mine portfolio. This is a significant improvement in our ability to compete for work in a subset of the market in the Midland Basin. Similarly, there is little customer overlap between the two companies, and Hi-Crush has very strong relationships with certain key operators in the Midland Basin. The broadening of our customer base as a result of the acquisition will be very beneficial, further aligning Atlas with one of the largest operators in the Permian. With the recent consolidation that has taken place in the Permian, size and scale have quickly become an absolute imperative to aptly service the development programs of these large-scale Permian operators and to help drive further efficiencies in the industry. We believe the acquisition pushes us to the forefront of the industry in that regard. This acquisition adds meaningfully to Atlas' competencies, products, and logistics offerings and makes us a better organization as a whole, more fit to lead the industry from the front. Atlas and Hi-Crush are two of the lowest-cost producers of proppant in the Permian Basin. This acquisition will provide us with valuable insights for the optimization of our production and logistics strategies and methods to lower costs and enhance efficiency. Hi-Crush has been one of the most innovative companies in sand and logistics, and our acquisition of its techniques, processes, and technologies should be exciting to our customers in the Permian. This transaction meaningfully increases the cash flow profile of Atlas pro forma for the acquisition and exhibits double-digit accretion across key share metrics. We expect to fully realize $20 million in annualized synergies by 2026. We now have a potential low-cost solution to increase volumes down the Dune Express, and we accomplished this without adding new supply to the market by absorbing Hi-Crush's Kermit operations, which sit about two miles from our plants at Kermit, where the Dune Express begins. Finally, with the acquisition of Pronghorn, we will have created the largest logistics last-mile service in the Permian with the capacity to move more sand on a yearly basis than anyone else that we know of. The acquisition allows us to further leverage our logistics offerings with additional scale, which should also increase efficiencies. Ultimately, our scale should provide even greater growth opportunities with market share expectations that better align with our sand production share. In summary, 2024 is already set up to be a very exciting year for Atlas. First, we are just a few quarters away from the commencement of the Dune Express, which remains on time and on budget and which should have a very positive impact on our cash flows next year. Second, the highly accretive acquisition of Hi-Crush provides our shareholders with greater visibility for 2024 and beyond due to the heavily contracted nature of our combined production and a more diverse customer base. And third, partly as a result, Atlas is uniquely positioned to match up with the growing scale of our Permian Basin customers such that we can uniquely provide the differentiated capacity and throughput as well as associated efficiencies and reliability that Permian operators need. Our pro forma production capacity of over 28 million tons following the completion of acquisition is easily the largest in the Permian. It also makes us the largest proppant manufacturer in North America. Furthermore, this production is nearly 80% contracted for 2024.

Thanks, Bud. And I also echo your enthusiasm for the Hi-Crush acquisition. In addition to providing more color on the transaction, I will also provide some initial commentary on our fourth quarter 2023 standalone results and provide some additional guidance on our outlook for 2024 post-acquisition. As Bud mentioned earlier, following the closing of the acquisition, on a combined basis, we'll have 28 million tons of annualized production capacity, increasing to about 29 million tons in 2025 with a full year's contribution and the benefit of these additional Encore deployments. The effective date of the transaction is February 29th, 2024. As our contracted volumes and Permian activity levels remained strong and completion efficiencies continue to compound proppant usage, we'd expect to continue to operate at greater than 85% to 90% utilization going forward. Taking into account Hi-Crush's contracts, we expect our sand prices for 2024 to average between $26 and $28 a ton. Assuming just over three quarters of contributions from Hi-Crush, we expect 2024 adjusted EBITDA to range between $425 million and $475 million. We expect total CapEx for 2024 to be between $335 million and $360 million. This includes between $285 million and $305 million in growth CapEx, consisting of $220 million for the construction of the Dune Express, between $25 million and $45 million on Encore deployments, and another $40 million in other CapEx. We are forecasting maintenance CapEx for 2024 to be between $50 million and $55 million. The $175 million equity component of the acquisition consideration consists of approximately $9.7 million of newly issued shares of our common stock, which amounts to just under 9% of our outstanding shares on a pro forma basis. The upfront cash portion of the consideration and the near-term capital expenditures of Hi-Crush have been financed with a new $150 million acquisition term loan with Stonebriar Commercial Finance under an amendment to our existing credit facility and with a draw of $50 million under our amended and upsized ABL facility. The $125 million in deferred cash consideration is secured by a seller's note, which bears interest at either 5% in cash or 7% when paid in kind at our option. The maturity of the seller's note is in 2026 but can be paid off at any time prior to that without penalty. Our net debt as of December 31st, 2023, pro forma for the acquisition and related financing is approximately $245 million, consisting of $505 million of debt less $260 million of cash. We will have a modest 0.5% net leverage ratio at closing and plan to methodically pay down debt using a portion of our significant expected free cash flow while also returning capital to shareholders as we have done consistently in the past. Our acquisition of one of the leading proppant suppliers in the Permian Basin greatly enhances our ability to increase shareholder returns. As Bud highlighted earlier, our anticipated enhanced cash flows from the acquisition supports a 5% increase in our total dividend, which is now $0.21 per share, comprised of a $0.16 per share base dividend and a $0.05 per share variable dividend. Pro forma maintenance CapEx beyond 2024 is expected to be between $50 million and $60 million annually, providing Atlas with multiple avenues to further increase shareholder return once the remaining growth CapEx associated with the Dune Express and additional Encore mine subsides. The heavily contracted nature of our operations post-acquisition reduces our cash flow volatility, and with the commissioning of the Dune Express, our ability to increase shareholder return is strengthened by this transaction. Given the transaction structure, which includes an equity component and a deferred payment, our balance sheet and liquidity will remain healthy. The acquisition of Hi-Crush sets Atlas up to thrive in tough market conditions and positions Atlas to deliver enhanced returns in a normalized environment. I will now turn my attention to our standalone fourth quarter and full-year 2023 results. 2023 was a remarkable year. We sold 18 million shares and raised approximately $324 million in gross proceeds in our initial public offering in March. Accounting for our latest dividend amount, we will have paid out $146 million in total dividends and distributions to our investors since inception. We delivered full year total company revenue of $614 million, an increase of 27% year-over-year. Total company adjusted EBITDA was $330 million, up 25% year-over-year. We achieved our first sand delivery with our assets in January, our first double trailer delivery in March, and our first triple trailer delivery in April. Our logistics revenue was $146 million, up 96% year-over-year. We completed our new Kermit plant facility in December, on time and on budget, increasing our standalone production capacity to 16 million tons, up from 10 million tons. In October, we announced a corporate reorganization transaction or UP-C Simplification that enabled us to trade under a single class of common stock. 2024 will be another exciting year as we look forward to the integration of our new operations following the completion of the Hi-Crush acquisition, the completion of the Dune Express, and the arrival of our two new state-of-the-art dredges. For the fourth quarter of 2023, we reported total sales of $141 million. Our revenue from profit sales was $100 million. Our profit sales volumes were down more than expected quarter-over-quarter to 2.6 million tons. Aside from typical holiday and weather slowdowns, we saw our customers taking extended holiday breaks given budget exhaustion driven by efficiencies. However, we have seen our customers return to normal activity levels in the first quarter of 44%. Our average sales price for the fourth quarter was $39 per ton. Moving to service sales, which is revenue generated by our logistics operation, we reported $41 million in revenues for the quarter. As of February 1st, we have taken delivery of all 120 trucks, which is up from 27 trucks from our third quarter update. In total, cost of sales excluding DD&A for the quarter decreased by $1 million to $67 million. For the fourth quarter, our per ton plant operating costs were $10.63 per ton, which is above the prior period, driven by lower volumes. Furthermore, we expect the delivery of our new specialized dredging equipment in early 2024 to provide incremental improvements in operational performance and further reductions in our mining costs once these assets are fully commissioned by the middle of this year. Royalty expenses for the quarter were down 17% to $3 million due again to lower volumes. SG&A expense for the quarter was $14 million. Gross interest expense for the quarter was $5 million, which is offset by $3 million of interest income generated during the period, resulting in net interest expense of $2 million. We expect our interest income to decline in future quarters as we draw down on our cash reserves from a normalized level as we complete our growth projects. Depreciation, depletion, and accretion expense for the quarter was $12 million. We generated net income of $36 million for the quarter, representing a strong net income margin of 26% and earnings per share of $0.36. Net cash provided by operating activities for the quarter was $86 million compared to $55 million during the third quarter. Adjusted EBITDA for the period was $69 million, representing a sequential decrease of 18% and an adjusted EBITDA margin of 49%. Adjusted free cash flow, which we define as adjusted EBITDA less maintenance CapEx for the quarter was $57 million, representing a sequential decrease of 18% and adjusted free cash flow margin of 40%. Lastly, we spent a total of $106 million on growth projects in the fourth quarter, which includes our new Kermit facility, the Dune Express, our Wellsite Delivery Assets, and production enhancement in our existing facilities. We incurred $12 million of maintenance CapEx during the quarter. With that, I will now turn the call back over to Bud.

The near-term merits of this acquisition are easy to see, and the real value will be created over the next five years as the entire basin will benefit from a larger, more innovative, and more reliable proppant and logistics provider. We will have the ability to supply incremental sand in a tight market similar to the first half of 2023 and adjust production in periods of low activity, creating a more stable market for our investors and our customers. Since our inception, Atlas has looked for ways to bring proppant closer to the wellsite in order to lower costs and reduce traffic on public roads. We are innovators and disruptors, and with this acquisition, we are even better positioned to deliver further innovations and advancements to the most prolific shale basin in the world. That concludes our prepared remarks and we will now let the operator open the line for questions. Thank you all for joining us on our fourth quarter call.

At this time, we will be conducting a question-and-answer session. Our first question is from Don Crist with Johnson Rice. Please proceed.

Morning gentlemen. I think most of us were pretty surprised with the announcement this morning. But after stepping back and looking at it, the proximity of the Kermit mines and the addition of the wet sand and mobile mines makes a lot of sense. But in your eyes, how does this make Atlas a better company going forward, not only for 2024, but 2025 and 2026 and beyond?

Thank you. I will begin, and John may have additional thoughts. As we have noted, we have a high standard to meet due to our unique margins linked to our low-cost structure. However, this deal is truly exceptional. First, it involves a highly complementary asset base, making it a transaction where one plus one equals three. Additionally, like us, they have been at the forefront of innovation, allowing us to share similar cultures and values in an entrepreneurial and innovative environment. The significance of these synergies will become increasingly evident over the next five years. Regarding specifics, we have consistently stated that scale is crucial. Operators are proving that scale enables cost reduction, margin enhancement, and increased automation, and we must align with that. In terms of proppant, it's about throughput and reliability that come with scale. This partnership will provide greater redundancy in the field and more options for operators, which will help us reduce bottlenecks in sand supply. Our logistics must give us an advantage with every operator in the Permian, and this marks significant progress for us, especially in the Midland Basin. Furthermore, this transaction brings a complementary customer base from logistically sound assets in the Midland Basin, which will benefit our shareholders. Lastly, John may want to add to this: this deal is very accretive even before we realize the full benefits of synergies and best practices across our assets, and we believe it will help us accelerate capital returns to our shareholders over time. John, do you have anything to add?

We recognized that in pursuing the acquisition, it was essential to find something that aligned with both our financial and operational objectives. As Bud mentioned, this acquisition complements our operational goals. On the logistics front, Atlas has established itself as one of the leading logistics providers in the Permian, and Pronghorn is also among the largest in the region. Therefore, immediately, we will have the largest logistics frac sand provider in the Permian. Operationally, this acquisition also allows us to expand into the Midland Basin, providing better logistical advantages for our sand supply to well sites. Regarding the Dune Express, we are confident that the proximity of their terminals will enhance production capabilities as we launch Dune Express. Additionally, we expect considerable synergies on the operational expenditure side. Financially, this acquisition meets our expectations as a company, delivering a high internal rate of return with a payback of under three years on significantly contracted volumes. This will support not only future acquisitions but also our commitment to returning cash to shareholders through dividends. Overall, we believe that this larger company will lower our production costs while ensuring we maintain industry-leading margins, contributing positively to our long-term goals and those of our shareholders.

Hope that helps, Don.

Yes. And just one kind of semi-related follow-up. As you were bringing in the electric dredges this year, as analysts had your costs coming down quite a bit for 2024. As you roll in the Hi-Crush assets, I don't know what their operational costs are today to produce. Can you give us a little bit of guidance around that? And is this going to increase what we had previously?

Back in 2021, our costs were at $650 per ton when we were fully relying on dredge feed for our mining process. That amount has now risen to $10.30 as we have ramped up production and our dredges struggled to keep up. We are currently commissioning one new dredge, with another set to be operational soon. Once these are integrated into our mining operations, we anticipate our long-term mining costs will decrease to the mid-$7 range per ton, which covers just the mining aspect. For reference, Hi-Crush reported operational expenses of over $11 per ton in 2023, significantly higher than our target of $7. However, we remain hopeful that we can reduce this figure over time. Looking ahead, based on our modeling, we expect our costs in 2024 to be around $9 per ton, and we believe there will be additional synergies to explore. Overall, we expect to bring down our total company costs to about $7 per ton. It's important to note that I didn't consider any potential synergies related to general and administrative expenses or maintenance capital expenditures, which are also likely to decrease. Consequently, we believe we will be able to produce sand at a lower cost per ton compared to operating independently.

I appreciate all the answers. I'll turn it back.

Yeah. You're welcome.

Our next question is from Luke Lemoine with Piper Sandler. Please proceed.

Good morning. John, you mentioned earlier, but when you're at your current facility, you can see the two high-pressure mines right next door. Can you discuss any plans to connect this Dune Express? Also, you touched on this previously, but what about your ability to convert the Hi-Crush mines to dredging from yellow iron?

Yes, Luke, the proximity to our current mine is important. We haven't fully assessed the costs associated with this, but we believe there could be beneficial synergies from the Dune Express perspective. Connecting one or two mines via conveyor will likely be more economical than adding another 5 to 6 million tons of capacity. We definitely see potential for significant cost savings there. Regarding dredging, we are currently investigating this option. While we haven't made a complete evaluation yet, we are looking into it. I believe we will have an additional drag soon, and we may explore the possibility of transferring operations to that location. They have water resources similar to ours, so we need to determine how feasible this will be. Additionally, there are other possibilities to consider. If we can't fully dredge mine there, the dredges arriving soon will provide a substantial amount of feed for our existing mines. We might also be able to move those dredges to their sites and supply their processes. In summary, there are numerous opportunities and options available that we are still assessing as we move forward.

Okay. And then on the Encore Mobile Mini mines, can you just talk about your opportunity and comfort with what sand, the mining operations? And maybe if you can see some opportunity just to kind of improve the operations as well.

Yeah, this is Bud. I might just start, but John will probably add to it. I think some of you probably heard us already on. We were concerned about the challenges associated with wet sand. And obviously, we can sell out of dry sand. So we weren't particularly motivated to move that direction. It's really a credit to Hi-Crush and their team and again, their culture, their innovative culture that they've really sought those challenges and doing a great job with the wet sand. So that, combined with the fact that it's logistically advantaged to operators there over in the East side of the Midland Basin, particularly made it compelling. And again, it's credited to those guys and it's very complementary to what we're doing. John, do you want to add to that?

I think the Hi-Crush team has done an amazing job with wet sand and on the logistics side as well. As a company, we are going to come together to share the best ideas and see if we can apply anything they are doing in our operations. We will also look for opportunities to implement things we can do at their operations, such as at their Encore mines.

Automation...

Automation and things like that; to incorporate that in. So I definitely think there's going to be some opportunity there as well.

Okay. Thanks a bunch, and congrats on the deal.

Thank you.

Our next question is from Jim Rollyson with Raymond James. Please proceed.

Good morning, everyone. Congratulations on the transaction. John, could you provide a breakdown of the revenue and EBITDA from Hi-Crush's sand operations compared to their logistics? I understand we don't have all the financial details yet since the deal isn't closed, but any rough estimates would be helpful for our modeling.

I'm going to let Brian answer that. Yes. Jim, it's pretty close to 50-50. They're also very heavily weighted in the logistics business like us.

And do you think, Brian, margin-wise, is their logistics business somewhere running close to what you guys have been doing historically? Just kind of trying to figure that part out to get to the 110 to 125 of guidance.

Yes, very similar. Obviously, we've got a change coming up with the Dune Express to expand margins. But historically, it's pretty similar.

I want to provide some thematic insights to help you understand the logistics. During a recent conference, we discussed that historically, 70% of our operational expenses have been attributed to labor in the field. With the implementation of the Dune Express, we are completely removing the need for labor in that 42-mile transportation to one of the most productive regions in the country, located in the Northern Delaware Basin. After that, we will manage the last mile logistics. This represents a significant advancement in our cost structure and potential profit margins, which we expect will enhance our earnings by 25%. Additionally, we are focusing on high-capacity trucking solutions with double and triple trailering, which is leading to a substantial decrease in our cost per ton delivered. In the Midland Basin, Hi-Crush is also taking steps to minimize truck usage and cut down on travel time with the Encore mines. When you consider the long-term impact of these upgrades on our logistics, it shifts our operations towards a more midstream model, which is quite promising for our profit margins moving forward. Our company's margins, as highlighted on Slide 14 of our investor presentation, are unmatched, and we currently operate at about half the valuation multiple of our competitors with similar margins. As we progress, the growth in our scale, the strategic assets we are acquiring, and our innovative culture will allow us to continue reducing costs and increasing our already impressive margins. Would anyone else like to add to that?

Yes, I think it's well covered.

Thanks for that color, Bud. And then, John, last thing, just on the $26 to $28 a ton kind of full year pricing, maybe a little color. When we sat here a quarter ago, you guys were kind of talking market within the mid-upper 20s to low 30s, and you were still about 40% contracted. Obviously, on a combined basis, you guys are 80% contracted. Maybe some color on how the Hi-Crush contracting weighed on that versus just where the market has been, where the weak market we've had going into the back half of the fourth quarter? Just kind of how you ended up with this range versus where we had been historically.

Yes, Hi-Crush has a contract profile that reflects a higher level of commitments at a lower price than what we were contracting at. Essentially, this is an adjustment that indicates their contract situation. As you know, they are nearly fully contracted for their 2024 volumes, and those contracts are at a lower price compared to our contract profile.

Got it. Thanks, guys.

Thank you.

Our next question is from Sean Mitchell with Daniel Energy Partners.

Good morning, guys. Congrats on the deal. Bud, I think you addressed this a little bit in your opening comments, but can you just talk a little bit about customer overlap in particular in Kermit or in the Delaware because obviously, the Midland is somewhat new, but what's the overlap and customer mix here in Kermit?

There isn't much overlap. Our customer bases are very complementary. The assets are primarily focused on the Midland Basin, and the logistics also cater to that area. However, our logistical operations, like the Dune Express and high-capacity trucking, have seen a greater impact in the Delaware Basin. Therefore, it has developed organically into a situation where our customer bases complement each other well. We have faced logistical challenges on the far eastern side of the Midland Basin due to the long distances required to transport our proppant, making this relationship particularly beneficial.

Yes. I think there is very little overlap. Most of the largest producers in the Permian Basin have built strong relationships with their customers, and those customers value those connections just as much as ours do. We look forward to maintaining those relationships and continuing to serve our top-tier customers moving forward.

I mean, I think part of it is logistics is so key to your proppant sales. And so it's been natural that even though Kermit plant has been more weighted to the Midland Basin because that's where the logistics assets are. And we dominate the Delaware because our logistic assets are second to none in the Delaware. So it's really worked out well and very complementary.

And Bud or John, as you look at the combined assets of the combined company, where do you see maybe an opportunity for growth? I mean, what are you most excited about in terms of silos, boxes, more trailers, mobile mines? What are you most excited about when you look at the combined assets?

I would like to make a general comment. John may have some specifics to share. I think it’s really exciting to see where Atlas stands, especially after this transaction. The basin and shale are undergoing significant changes, and we might be in the early to mid-stages of transitioning to a more factory-style operation. It's all about scale, which is evident on the operator side. On the service side, we are uniquely positioned with our logistics and proppant capabilities to match the scale of the operators. This distribution network will create ample opportunities to simplify operators' tasks and remove bottlenecks, especially in relation to sand and blending. We are in a strong position to achieve that. I believe we will encounter many growth opportunities and discover potential developments we cannot even envision yet. John, would you like to add anything?

Yes. There is nothing specific to highlight other than the fact that these two companies have been the primary investors in the frac sand and logistics space. As of now, we cannot precisely predict the future growth areas. However, I can assure you that we will continue to make those investments and collaborate with our operating partners to enhance efficiencies at the well sites. Additionally, the intensity of frac operations is set to increase, as I mentioned earlier in this call. We will be looking for ways to assist our customers in boosting that intensity.

And Sean, real quick, you talked about growth. I think one thing we're excited about is growth in distributions, which this acquisition certainly enhances that.

Absolutely. Well, guys, thanks for the time, and congrats again on the deal.

Thank you. Really appreciate it.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

Yes. We want to thank everybody for joining us for this call. This is an exciting and really transformational event in our company's history. We really look forward to following up in subsequent quarters. So thank you all very much.

Thanks, guys.

Thank you. This does conclude today's conference. Thank you for your participation. You may now disconnect.