Greetings and welcome to the KLX Energy Services Third Quarter 2021 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, Mr. Dennard. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the KLX Energy Services conference call and webcast to review fiscal third quarter 2021 results. With me today is Chris Baker, KLX Energy's President and Chief Executive Officer; and Keefer Lehner, Executive Vice President and Chief Financial Officer. Following my remarks, management will provide a high level commentary on the financial details of the third quarter and outlook before opening the call for questions and answers. There’ll be a replay of today's call and will be available by webcast on the Company's website at klxenergy.com. There also will be a telephonic recorded replay available until December24, 2021. More information on how to access the replay features was included in yesterday’s earnings release. Please note that information reported on this call speaks only as of today, December10, 2021 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. These forward looking statements reflect the current views of KLX’s management. However, various risks and uncertainties and contingencies could cause actual results performance or achievements to differ materially from those expressed in the statements made by management. The listener or reader is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. The comments today may also include certain non-GAAP financial measures, additional details, and reconciliations of the most directly comparable GAAP financial measures are included in the quarterly press release, which can be found on the KLX Energy website. And now, I'd like to turn the call over to KLX Energy Services' President and CEO, Mr. Chris Baker. Chris?

Thank you, Ken, and good morning everyone. Thank you for joining us today for KLX Energy Services fiscal third quarter 2021 conference call. Let me begin by highlighting a snapshot of our strong third quarter results as well as some of the significant things impacting our business during the quarter. After this, I will turn the call over to Keefer to review our financial performance in greater detail before returning for some final comments. The macro backdrop for fiscal Q3 was the most constructive in years, WTI price averaged $73 per barrel and we exited our fiscal Q3 with oil 13% higher than where we began the quarter. Henry Hub natural gas prices averaged $4.90 per MMcf, and we exited our fiscal Q3 with natural gas 37% higher than where we began the quarter. Recount over the same period expand at 55 rigs or 11%. Beginning with our fiscal third quarter results, I'm very pleased to report that the third quarter revenue increased 24% to $139 million, which was double the high end of our 8% to 12% guidance provided on the Q2 call. The sequential increase in revenue was largely driven by an improved commodity price environment and associated increases in utilization, market share, and pricing across the majority of our drilling, completion, production, and intervention product and service lines. Fiscal third quarter adjusted EBITDA was $5 million, improving materially relative to Q2 results, and what's positive for the second consecutive quarter. Additionally, we ended the quarter with total liquidity of $80.8 million and available liquidity net of the FCCR holdback of 70.8 million, an increase of approximately 13.6 million or 24% compared to Q2. Despite the market improvement, there're always countervailing forces that they're monitoring, and this time is no exception. We are in the midst of an…

Thank you, Chris. Let me begin by discussing our third quarter 2021 consolidated results. For the third quarter ended October 31, 2021, revenues were $139 million, an increase of $27 million or 24% as compared to the revenue for the fiscal second quarter of 2021. Revenue growth was driven by broad increases in drilling, completion, production and intervention activity. On a product line basis, drilling, completion, production and intervention products and services contributed approximately 28%, 49%, 14% and 9% to revenue respectively for the fiscal third quarter of 2021.Adjusted operating loss for the quarter was $9.6 million. Adjusted EBITDA and adjusted EBITDA margin was $5 million and 3.6% respectively. Adjusted EBITDA improved by roughly $4.4 million compared to fiscal second quarter. On an annualized basis, this would imply a $20 million run rate for Q3 2021. And when compared to our year ago Q3 2020 results would imply a $42 million annualized improvement driven by a combination of realized cost synergies as well as a significant rebound in our underlying activity and pricing. Total adjusted SG&A expense for Q3 was $13.8 million, which equates to roughly 10% of revenue. Our adjusted corporate and other EBITDA loss for the fiscal third quarter was $5.1 million, which represents only 3.7% of revenue. We believe these metrics highlight the merit of the QES merger and the associated cost synergies. KLX now has one of the most efficient cost structures in the OFS industry, and we believe we can scale further from current levels with minimal SG&A additions. Turning to review our segment results. Let me begin with the Rockies, the Rocky Mountain segment fiscal third quarter revenue of $36.5 million increased by $2.9 million or 9% as compared with the fiscal second quarter of 2021. The sequential increase in revenue was primarily driven…

Thanks Keefer. I will close the call by discussing the current market environment and notable changes taking place therein as well as our forward outlook and our efforts to achieve higher returns via pricing gains. Looking out towards Q4 and beyond, we believe that a constructive commodity price environment is here to stay as opposed ramping demand, incur production limits, SKUs, the supply demand equation in favor of a constructive macro backdrop going forward. Only this trend, pricing continues to plot in upper path. And the rate at which pricing is improving is continuing to accelerate, which bodes very favorably for our business and the industry as a whole through 2022. This positive outlook is clearly tenuous as we've experienced recently on Black Friday due to the Omicron variance. However, thus far, we have not seen any of our customers materially alter their plans and it seems like WTI is regained steam as more as learned about Omicron. As you know, I've spoken in the past about how rising commodity prices have disproportionately benefited E&P companies in the early stages of the market up cycle. Conversely, this has largely come at the expense of oilfield services companies as the fragmented nature of the industry and surplus of available equipment kept prices depressed. However, we are now at a point where demand is absorbing a greater proportion of the available supply of equipment, and more importantly, available crews. As a result, we are able to attain greater levels of pricing power than was possible in the past few quarters, and we believe this trend will accelerate into 2022 as operator activity continues to increase. The simple reality is pricing has to continue to increase due to supply chain challenges. I will now provide some color and guidance on Q4 in 2022.…

Thank you. We do have a question from John Daniel of Daniel Energy Partners. Please proceed. Please go ahead, sir.

Can you guys hear me now?

Good morning. We’ve got you John.

Sorry. I'm in the middle of nowhere, Texas, and I've got terrible service, but I'm trying hard to listen to you guys. The question is just a comment on assets that are sort of against offence, the costs to reactivate those should activity continue to ramp? Just what we should be thinking about in terms of reactivation costs?

So as you know, it's a very good question because there are plenty of assets still special as this one throughout the industry. What I would say is, we're very much still in the process of finalizing our budget for next year. So I don't have a specific number because it's very product line specific. That being said, I think the phenomenal job this year of offsetting reactivation costs via asset sales, et cetera. We still have some assets held for sale probably about $2.6 million that we expect will close at some point in time next year, if not even in the fourth quarter of this year. And so, there is as you would expect, no way that we can curtail CapEx to the levels we preserved at this year. That being said, the economic sustaining of the incremental assets in the face of what we've seen recently, which we're very optimistic about, which is double digit price increases, start to finally make sense. And so, we're finalizing that process today, but I would say we're pretty well situated when it comes to incremental activity, especially on the rental, the frac valve side, et cetera. We've actually spent a lot of that money this year and are pretty well situated for incremental activity going into Q1.

Okay, great, good job on the top line this quarter. Thanks for taking my call.

Yes, anytime. Absolutely, appreciate it.

That concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. End of Q&A:

Thank you, operator. We are very optimistic about the macro outlook for the remainder of 2021 and into 2022. Thank you once again for joining us on the call today and for your interest in KLX Energy Services. We look forward to next quarter

Thank you. This does conclude today’s conference. You may disconnect your lines at time. And thank you for your participations.