Earnings Call Transcript - XPRO Q1 2022

Operator, Operator

Hello, everyone, and welcome to Expro's Q1 2022 Conference Call. I’m Melissa, your operator. I now have the pleasure of introducing Karen David-Green to start the call. Karen, it's all yours.

Karen David-Green, Moderator

Welcome, everyone, to Expro's First Quarter 2022 Conference Call. I'm joined today by Mike Jardon, CEO; and Quinn Fanning, CFO. First, Mike and Quinn will share their prepared remarks, and then we will open it up for questions. We have an accompanying presentation on our first quarter results that is posted on the Expro website, expro.com, under the Investors section. In addition, the first quarter financials are downloadable on the Expro website under the Investors section. The downloadable financials include historical Frank's and legacy Expro financials along with the combined company pro forma historical results. I'd like to remind everyone that some of today's comments may refer to or contain forward-looking statements. Such remarks are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date, and the Company assumes no responsibility to update any forward-looking statements as of any future date. The Company has included in its SEC filings cautionary language identifying important factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A more complete discussion of these risks is included in the Company's SEC filings, which may be accessed on the SEC website or on our website at expro.com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in our first quarter 2022 earnings release, which can be found on our website. With that, I'd like to turn the call over to Mike.

Mike Jardon, CEO

Thank you, Karen. Good morning and good afternoon, everyone. The first quarter was a strong start to 2022 as we observed improving fundamentals in both our business and the industry. Before the merger last October, Expro and Frank's were both market leaders with esteemed reputations for safety, service quality, and innovation. The newly combined company now possesses the scale, scope, and financial profile necessary to compete effectively in what I believe to be the most attractive and dynamic energy services market I've seen in my thirty years in the industry. Our results from the first quarter and our outlook for 2022 and beyond demonstrate the advantages of Expro's well-balanced portfolio of services and solutions that cover the entire well life cycle. As mentioned previously, we consider through-cycle resilience to be a significant competitive advantage for Expro. We are also in an excellent position to take advantage of cyclical recovery, which is already beginning. Along with our current range of services and solutions, Expro’s global operating presence in vital growth markets positions us well to benefit from increased spending and activity. We maintain a leading-edge innovation platform and technology portfolio that enable us to assist our customers in achieving their efficiency and emissions-related objectives, seize market share, address industry trends, and lead the next phase of our sector. Moreover, our robust balance sheet and merger-related synergies give us considerable financial, operational, and strategic flexibility, enabling us to boost growth and create long-term value for our stakeholders. On today’s call, I plan to cover three main areas: our first quarter performance, an update on our integration process, and observations on trends in the broader industry environment. In the first quarter, we reported revenue of $280 million and adjusted EBITDA of $37 million. Using a combined pro forma viewpoint, revenue and adjusted EBITDA for the first quarter increased year-over-year by 12% and 54%, respectively. However, revenue and adjusted EBITDA decreased by approximately 5% and 27%, respectively, compared to the previous quarter. These sequential results were influenced by lower activity levels in our Europe, Sub-Saharan Africa, and Asia Pacific regions, counterbalanced by higher activities in North and Latin America, as well as the Middle East and North Africa. Well construction remained relatively stable compared to the previous quarter, while well management, which encompasses well flow management, subsea well access, well intervention, and integrity services, saw a decrease of about 8% quarter-over-quarter. Our first quarter results aligned well with our expectations. We made significant progress on integration initiatives during the quarter, and the overall energy and energy services backdrop continues to improve positively. Nonetheless, challenges like capacity constraints and lingering effects of COVID have caused some projects to be delayed, which we expect will lead to short-term pressure on margins. Importantly, the benefits of our diverse portfolio became evident as we improved our business mix and our team capitalized on favorable industry fundamentals and our broad array of innovative solutions to secure new business and strengthen ties with existing clients. We secured contract wins and extensions totaling $364 million, showcasing the strength of our customer relationships and the appeal of our solutions in the marketplace. In North and Latin America, we were awarded contracts in Brazil and the U.S. for slickline operations and the provision of tubulars, hammer services, double joining services, and tubular running services. We also advanced our CENTRI-FI implementation with our first operation for a client in the Gulf of Mexico during the quarter, receiving positive feedback from customers on its safety and efficiency while managing tubular operations. The CENTRI-FI system represents an important advancement in reducing rig floor injury risks and streamlining operations by consolidating control of tubular running equipment and minimizing personnel requirements. In the Europe and Sub-Saharan Africa region, our team attained contracts across our four product line groups in Norway, Azerbaijan, Mozambique, Ivory Coast, and the U.K., highlighting our focus on service delivery and mobilization efficiency. This work covered exploration, appraisal, and decommissioning activities. We conducted a unique well integrity surveillance program in Norway using our Octopoda system, deploying a specialized suite of survey technologies, including annular monitoring services and a downhole camera. The results allowed the customer to define its strategy for late-life production, marking a first-of-its-kind service offering in our industry that enables proactive monitoring and management of wellbore integrity. In the Middle East and North Africa, we secured a significant contract providing production packages, including early production facilities, mercury removal, and gas compression packages, thanks to our strong relationships and proven service quality in the region. We also won our first tubular running services contract here, where legacy Expro had a strong presence but legacy Frank's was not previously active. In the Asia Pacific region, we secured contracts in Malaysia, Thailand, and Indonesia for subsea landing strings and well test bleed-off packages for a deepwater campaign, as well as wireline interventions and desalinization services. The average job performance score in this region for the first quarter was 94%, reflecting our commitment to high service quality standards. At the Offshore Technology Conference this week, we were honored with a Spotlight On New Technology Award for our autonomous well intervention system, Galea, recognizing its innovative technology and substantial environmental and safety impacts compared to existing methods. Galea reduces the need for conventional and labor-intensive wireline rig setups, helping to minimize environmental disturbances and enhancing operational efficiency. During the quarter, we also advanced our innovation platform to create next-generation solutions that will differentiate Expro and attract new customers. In addition to our strong in-house innovation efforts, we are selectively pursuing external growth opportunities. For example, we acquired the distributed fiber sensing company, SoleSense, during the quarter. This acquisition enhances our existing well intervention and integrity portfolio, enabling us to utilize advanced diagnostic data for better decision-making on well performance and integrity. Our collaboration with SoleSense over the past 18 months culminated in a successful high-temperature production profiling survey in the U.K., achieving results that conventional well logging would not allow. We also deployed the latest generation CoilHose from a light well intervention vessel to deliver nitrogen lift services for a customer in Norway, showcasing Expro's capabilities to operate at greater pressure and depth. This advanced design not only permits open water subsea interventions but also expands operational limits for traditional operations, significantly enhancing the versatility of this innovative technology. Another highlight in the first quarter was our provision of downhole fluid capture services using our newly developed nonreactive sampling system, which maintains an inert environment for sample collection and analysis, ensuring accurate assessments of hydrocarbons. This is crucial for optimizing production facility and pipeline designs. We are effectively executing our integration plans to improve coordination and collaboration between former Frank's and Expro teams as we operate as a unified organization. We have made significant progress on our comprehensive integration strategies established before closing. In the first quarter, we consolidated several facilities, including those in Abu Dhabi, Baku, and Cairo. As we navigate this process, we have recognized the true strength of our combined team. As previously outlined, we aim to achieve cost and revenue synergies of between $80 million to $100 million within 24 to 36 months following the merger. Six months into the integration, we have identified and begun implementing about 80% of the projected $55 million in cost savings, and we are confident in our capacity to achieve the full $55 million in annual cost synergies within the first year, with the potential for $70 million in total savings within 24 to 36 months. We anticipate realizing revenue synergies ranging from $10 million to $30 million in EBITDA through expanded customer relationships, increased rig time, and greater engagement over the full life of fields. We are on track to fulfill our synergy targets while strengthening our operational model and lowering costs to significantly improve margins. Our confidence in Expro's unique position to capitalize on these synergies and achieve further revenue and margin growth is supported by the progress we have made to date in realizing short-term synergies from the merger, the positive market fundamentals indicating that a multiyear recovery in the industry and global economy is underway, and the potential for considerable upside in this cycle due to the years of underinvestment in the sector. Furthermore, we recently released our first environmental, social, and governance report, which presents transparency regarding our performance and outlines Expro's near- and long-term ESG priorities. This report merges efforts from both legacy Expro and Frank's while highlighting our commitment to building a sustainable business and a better future for our employees, customers, and communities, including our goal of achieving net-zero carbon emissions by 2050. Our support of geothermal well service projects since 1987 positions us as a recognized, safe provider in that sector. We're witnessing growing opportunities in geothermal and have recently won two major contracts, solidifying our role as an integrated service provider in this emerging market. In line with our environmental commitments, we installed a water recycling system at our manufacturing facility in Egypt during the first quarter, substantially reducing water usage in yard operations. This highlights our dedication to environmental improvements. As mentioned before, we plan to allocate about 50% of our research and development budget in 2022 toward carbon reduction initiatives, focusing on developing solutions that will assist our customers in meeting their emission reduction targets while enabling Expro to reach its own goals. Before passing the call to Quinn, I’d like to share some perspectives on the market trends we are observing. Despite heightened volatility caused by the Russian war in Ukraine, where Expro has minimal historical activity, commodity prices are expected to remain favorable for energy services due to tight supply and recovering global demand. We continue to see encouraging signs of a long-term recovery and believe the outlook for energy services is the most promising it has been in over a decade. We foresee increased demand for our services and solutions throughout 2022 and beyond as operators aim to boost production from existing assets and develop new fields. We are already noticing a surge in deepwater and offshore activities. The projects in the pipeline seem poised to support multiyear growth for the energy services sector, particularly in North and Latin America, the Middle East and North Africa, Sub-Saharan Africa, and Asia. As noted last quarter, while many of our clients will likely prioritize maximizing investments in their existing wells, the substantial underinvestment in new oil supplies in recent years should lead to new final investment decisions, enabling sustained growth across all our operations and geographical markets. Additionally, natural gas demand remains robust both in the U.S. and globally, driven by a combination of increasing economic activity as COVID effects wane, low inventory levels, extreme weather events early in the quarter, and supply concerns related to Russia. These factors have prompted many European nations to rethink their energy security and alternative supply options. This demand, alongside supply constraints, is expected to fuel new infrastructure developments and elevate activity levels even further. International Oil Companies are also shifting to increase their natural gas production share as a means to better balance their portfolios. Concurrently, national oil companies are enhancing field development efforts to bolster their economies, with some previously shelved projects now being reconsidered, especially in Europe for energy security reasons. We anticipate that IOCs will increasingly favor lower-risk development phases moving forward while reinforcing their commitment to reducing emissions and positioning for a transition to greener energy, where we believe Expro can make a significant contribution. We expect international exploration activity to lean towards near-field and infrastructure-driven projects in the immediate future. The outlook for the remainder of 2022 suggests a continued recovery in exploration and production expenditures, though varying across countries. In the medium term, final investment decisions are projected to rise, with nearly 60% expected offshore. Despite a minor demand growth slowdown in the first quarter, we predict that oil and gas demand will return to 2019 levels by next year, necessitating a renewed focus from operators on replenishing produced reserves after several years of underinvestment and fewer discoveries. Currently, operators remain largely focused on optimizing prior investments. In line with past recovery patterns, we expect incremental operational expenditure spending and brownfield enhancement initiatives to be initial customer priorities. We are seeing signs of a recovery in well intervention and integrity projects in select markets, areas where Expro traditionally excels. Overall, offshore, deepwater, and tight oil projects are anticipated to be the most significant growth areas, further supporting sustained growth for Expro given our expertise in subsea well access, complex well construction, and production optimization services. Encouraged by favorable commodity pricing, we continue to see rising activity levels, and we anticipate this momentum will increase as we move through 2022 and beyond. Expro is well-positioned to assist our customers in the current market landscape, and we look forward to greater demand for our existing services along with new opportunities leveraging our enhanced portfolio. We are setting ourselves apart in the market by emphasizing our comprehensive capabilities across the entire lifecycle with a commitment to integrity in every aspect, whether it concerns connection integrity, service delivery integrity, or enhancing well management integrity. As previously mentioned, we remain dedicated to investing approximately 50% of our R&D budget in energy transition and environmental advancements, which will be essential as customers globally accelerate their carbon reduction strategies. By focusing on safety, service quality, and technological excellence, we aim to maximize value for our customers, shareholders, and all stakeholders. With that, I will turn the call over to Quinn to discuss our financial results.

Quinn Fanning, CFO

Thank you, Mike, and good morning and good afternoon to everyone on the call. As Mike noted, I will cover the results for the quarter ended March 31, 2022, and will primarily highlight our sequential performance compared to the quarter ended December 31, 2021. To recap, we reported revenue of $280 million for the March quarter, which was up $29 million or approximately 12% relative to the combined revenue of Expro and Frank's in Q1 2021 and was down $16 million or approximately 5% relative to the December quarter. The sequential decrease in revenues was driven by lower activity across our Europe and Sub-Saharan Africa or ESSA and Asia Pacific or APAC segments, partially offset by higher activity in North and Latin America or NLA and Middle East and North Africa or MENA segments. Adjusted EBITDA for Q1 2022 was approximately $37 million, representing a $13 million or 54% increase year-over-year relative to the combined adjusted EBITDA of Expro and Frank's in Q1 2021 and a sequential decrease of approximately $14 million or 27% relative to the December quarter. Adjusted EBITDA margin in Q1 was 13% as compared to 17% in Q4 2021. The sequential decrease in revenue and adjusted EBITDA was driven by a combination of seasonally lower activity, particularly in Europe. And as Mike noted, some projects that we expected to begin in Q1 slipping to the right. Our activity mix was less favorable in Q1, and we also recognized a couple of million dollars in mobilization and other start-up costs on projects that are scheduled to begin in Q2. Partially offsetting these items was lower support costs. As highlighted in our press release, adjusted net income for the first quarter of 2022 was $0.01 per diluted share, compared to an adjusted net loss for the fourth quarter of 2021 of $0.03 per diluted share. I'll also note that we have reclassified approximately $10 million of quarterly support costs as direct costs in order to conform the presentation of legacy Frank's costs with that of legacy Expro. There is no impact on segment EBITDA or adjusted EBITDA. However, historical and prospective contribution margin and support costs that we include or will include in our press releases, conference call slides and the Investors section of our website have been or will be updated to reflect this reclassification. In this context, Q1 contribution margin at 37% was down approximately one percentage point year-over-year and approximately three percentage points sequentially, again reflecting negative fall-through on lower revenue and a less favorable activity mix as well as transitory costs associated with new projects. Q1 support costs at $71 million totaled 25% of group revenue and were down approximately $5 million relative to the combined support costs of Expro and Frank's in Q1 2021, and down approximately $1 million relative to the December quarter. With synergies and operating leverage associated with an expected rebound in quarterly revenue, our intent is to manage total support costs to 22% of group revenue or less. Total liquidity at quarter end was approximately $348 million. Cash and cash equivalents, including restricted cash, was $218 million as of March 31. Total liquidity also includes $130 million that is available to the Company for drawdowns as loans under a $200 million revolving credit facility. The balance of the facility is available for bonds and guarantees. Expro had no interest-bearing debt at the end of Q1 2022, and the Company has no interest-bearing debt today. During the quarter ended March 31, 2022, cash used in operating activities net was $14 million as compared to cash provided by operating activities of $16 million in Q4 2021. Q1 adjusted operating cash flow, reflecting cash used in operations before cash paid for interest, severance and other expenses, and merger and integration expenses, was negative $1 million compared to positive $41 million in Q4 2021. Trade AR was relatively flat quarter-over-quarter, but DSO was up a couple of days quarter-over-quarter, reflecting lower revenue in the quarter and payment delays on undisputed amounts due from a number of our NOC customers, somewhat consistent with the comments from a number of the other public energy services companies. Accrued liabilities were also down quarter-over-quarter, largely as a result of Q1 payments of annual incentives. And inventory was up approximately $6 million quarter-over-quarter, reflecting growth in order backlog and our desire to make critical spares in order to efficiently execute on a higher anticipated activity in H2 2022 despite the currently challenging supply chain environment. Capital expenditures totaled $11 million in the first quarter compared to $28 million in the fourth quarter. In addition, we used $8 million of cash during the first quarter to acquire well intervention and integrity-related technology that Mike referenced in his prepared remarks. Core CapEx as a percentage of revenues continues to trend downwards with management focused on maximizing utilization of existing assets and, where practical, limiting new capital expenditures. The Company continues to plan for 2022 capital expenditures in the range of approximately $90 million to $100 million, or approximately 7% to 8% of expected revenue. We also continue to expect to be free cash flow generative for 2022, but expect that free cash flow will be heavily weighted in the second half of the year. Now moving into the details by operating segment. NLA revenue for the first quarter of 2022 was $104 million, an increase of $4 million quarter-over-quarter. The increase was primarily driven by well construction services in the U.S. and Mexico as a result of higher customer activity and equipment sales, partially offset by lower subsea well access and well flow management revenues in the U.S. due to both lower activity and subsea equipment sales during the December quarter that did not reoccur during the just completed March quarter. NLA segment EBITDA for the three months ended March 31, 2022, was $22 million, or approximately 21% of segment revenue and was up approximately $1 million quarter-over-quarter. For Q4 2021, NLA segment EBITDA was also 21% of segment revenue. As I mentioned on our last earnings conference call, legacy Frank's has a particularly strong position in NLA and we expect that NLA financial results. The combined company will continue to benefit from the incremental scale and complementary operating footprints and customer relationships that were made possible by the merger. For the ESSA segment, revenue in Q1 was $82 million, which was down $12 million or approximately 13% quarter-over-quarter. The sequential decrease was primarily driven by lower well flow management and well construction services revenue in the U.K., Azerbaijan, and Angola due to a combination of seasonally lower customer activity levels and project delays as well as due to nonrecurring equipment sales in Norway that occurred in the December quarter. ESSA segment EBITDA for the March quarter was $12 million or approximately 14% of segment revenue, a decrease of approximately $8 million quarter-over-quarter. The decrease in segment EBITDA was primarily attributable to lower activity levels and a less favorable activity mix during the March quarter. The MENA segment revenue in the first quarter was $51 million, an increase of approximately $2 million or about 4% quarter-over-quarter. The sequential increase in revenue was driven by well flow management, equipment sales in the United Arab Emirates as well as in Saudi Arabia in the first quarter. MENA segment EBITDA in the March quarter was approximately $15 million or about 30% of segment revenue, a decrease of about $1 million or about three percentage points quarter-over-quarter. The decrease was primarily due to lower activity on higher-margin contracts and a less favorable activity mix. The MENA region is one of the regions in which legacy Expro has a strong historical position. We expect good growth in our MENA business over the next couple of years as our MENA-based customers look to expand production capacity, and we continue to expand our MENA-based relationships by both supporting our customers' anticipated increases in activity and by leveraging the broader services and solution portfolio of the combined company. For APAC, revenue in the third quarter was approximately $44 million, which was a decrease of about $8 million or approximately 15% sequentially. The decrease in revenue was primarily due to a combination of lower customer activity levels, nonrecurring equipment sales and the completion of certain projects during the previous quarter in Thailand, Malaysia, and Indonesia, which was partially offset by higher subsea well access revenues in Australia. APAC segment EBITDA for the March quarter was $5 million or about 12% of segment revenue, a decrease of approximately $7 million or about 12 percentage points quarter-over-quarter. The decrease was primarily due to lower activity in higher margin contracts, a less favorable activity mix, and mobilization costs and project startup delays, a portion of which was COVID-related with a new subsea project in the region. As Mike mentioned, our integration plans are progressing well, and we are already starting to realize the significant synergy benefits we anticipated when we first announced our business combination. As discussed in our last earnings conference call, during the fourth quarter, we identified an actioned cost savings representing more than 50% of our previously stated $55 million of run rate cost synergies within the first 12 months following the merger close. As Mike mentioned, through the first quarter of 2022, we have identified and actioned approximately 80% of our synergies capture plan, both in regard to headcount and annualized value in dollars. We also completed the consolidation of a number of international facilities. Also of note, we expect that we'll complete our migration to a single ERP platform by late summer, early fall, which should allow us both to streamline a number of key business processes and to enhance decision-making in the currently dynamic operating environment. It will take a quarter or two for financial results to reflect a number of our synergies initiatives, but we remain confident that we are on track, if not a bit ahead of our integration plan. As to our near-term outlook, we expect that Q2 2022 revenue be up sequentially by plus or minus 10%, and reflecting elevated commodity prices, a seasonal rebound in activity and a potential uptick in international short-cycle investments, which we expect will gain traction as we move into the second half of the year. Adjusted EBITDA margin in Q2 should again be in the area of 12% to 14% of consolidated revenue. Looking at a couple of quarters out, we continue to expect that our revenue run rate will approach that of the pre-pandemic 2019 revenues of legacy Expro and legacy Frank's on a combined basis, implying quarterly revenue of approximately $325 million to $350 million. With the benefit of fall-through on incremental revenue, a more favorable activity mix, and synergies, we expect that adjusted EBITDA margins will be in the area of 20% of revenue as we exit the year. As always, our objective is to enhance long-term value for our shareholders, employees, partners, and the communities in which we operate. With that, I will turn the call back over to Mike for a few closing comments.

Mike Jardon, CEO

Thank you, Quinn. We started 2022 with solid first quarter operating performance that drove significant growth on the top and bottom lines and demonstrated the potential of our resilient, flexible business model. Our broad portfolio of services and solutions continue to create opportunities in the growth markets that will be key to Expro's long-term sustained success. Our innovative platform, next-generation technology, and solutions and ESG focus are differentiators that continue to rapidly advance our reputation and outstanding track record with customers as a leading well expert. We are incredibly excited about the strength and position of Expro and our ability to capitalize on the favorable outlook for our business. Our great momentum can only be achieved through the focus of our team, which has maintained through the merger and our ongoing integration process. Our talented group of global team members are supportive of each other, and that translates to high levels of service and support for our customers. Their work drives our success day in and day out as we accelerate growth, improve profitability and enhance value for shareholders, employees, customers and partners. Thank you again. Operator, let's go ahead and open up for a few questions.

Operator, Operator

We'll take our first question today from Taylor Zurcher of Tudor, Pickering, Holt & Co.

Taylor Zurcher, Analyst

My first one is just on pricing. So you operate in a number of different sort of end markets, but a lot of them have really good industry structure that results in a more stable pricing through the cycle. But at this point, I mean you talked a little bit about capacity constraints impacting the Q1 numbers. You've also got inflationary pressures blowing pretty strong in the background. So curious if you could just give us an update on any sort of pricing indicators you're seeing across the portfolio? And if you're having any success or think you might have success pushing pricing over the back half of 2022?

Mike Jardon, CEO

Okay. Well, thanks, Taylor. It's a good question. I guess what I would say is that, ultimately, the conditions are really becoming favorable for us to get pricing traction, both across product lines as well as geographies. And yes, we are starting to see some net pricing improvements. Geographically, overall net pricing momentum is most prevalent today in the U.S. That's where we're really starting to see that. And our expectation is that we'll continue to see those net pricing gains; they'll kind of move eastward. They'll move internationally over the next couple of quarters. And ultimately, for us, we're much better positioned internationally. So I do think we'll start to see some pricing levers, some pricing traction in the back half of the year. But ultimately, for us, we are seeing some pricing improvements today. We are seeking price increases, in particular, around personnel rates. And then also, for some of our assets that we're really loading up, we're getting good utilization of, things like subsea well access, particularly with some of our higher-end landing strings, but also around well construction, especially in deep water and some of the complex activities, we're starting to see the ability to get some pricing traction there. So good signs, good indicators that we're going to see more of this as we move forward. And I think we'll really start to see the most amount of leverage and pricing traction in the second half of this year, which fundamentally, I think, really sets us up well for continued activity growth, but also better pricing as we go into 2023.

Taylor Zurcher, Analyst

Yes. Good to hear. Follow-up just on kind of the demand outlook. Mike, I think you said in the prepared remarks that you're seeing some acceleration in deepwater and offshore activity. Those are pretty similar comments to what a lot of your offshore-oriented peers have talked about in prior weeks, and it feels like Latin America is a strong market. West Africa, increasingly a strong market into the back half of the year. And I guess I'm just curious if you could flesh out those comments a little bit more. Where are you seeing the most improved demand? And is it a function of this Russia-Ukraine situation forcing operators to think long and hard about accelerating investments or just a mix of everything?

Mike Jardon, CEO

Sure. No, I think it's a really good question. I guess what I would say is, ultimately, internationally, the short-cycle OpEx-type investments, that's what we're really starting to see strength, and I think that will be very much be the case in the second half of the year. So production optimization, production enhancement, intervention, those type of activities, I think we'll continue to see that. And that really allows that kind of short-cycle OpEx-type activity. That's the international operators' version of going out and completing more wells in U.S. land. But I think ultimately, offshore activity, I think it's well positioned to grow both in shallow and deepwater, I think particularly as operators starting to increase their infill drilling as well as their tieback type activity. So I think that's going to be strong. You touched on those areas. Latin America, I think, is going to be quite a strong area. Brazil in particular. And we're starting to see more technical inquiries and more discussions around some of the deepwater plays in West Africa. And I think as operators continue to kind of firm up their plans. And yes, I think the ongoing challenges in the Ukraine are starting to drive some of those decisions. So fundamentally, I said to begin with that this is probably the most constructive environment we've seen in my 30 years in the industry. And everything we see, and I think it's why you hear some comments, consistent comments from all of the service providers, our peers as well as ourselves. Everybody is kind of seeing the same indicators from customer momentum and customer inquiries and order backlog building and those type of things.

Operator, Operator

We don't have any further questions registered at this time. So I'd like to thank you all for joining. You may now disconnect. Have a lovely rest of your day. Thank you.

Mike Jardon, CEO

Thank you, Melissa.

Quinn Fanning, CFO

Thank you, Melissa.