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Basic Energy Services (NYSE:BAS)

Q1 2013 Earnings Call

April 25, 2013 9:00 am ET

Executives

Sheila Stuewe

Kenneth V. Huseman - Chief Executive Officer, President and Director

Alan Krenek - Chief Financial Officer, Senior Vice President of Finance, Treasurer and Secretary

Thomas Monroe Patterson - Chief Operating Officer and Senior Vice President

Analysts

Michael Cerasoli - Goldman Sachs Group Inc., Research Division

John R. Keller - Stephens Inc., Research Division

Brian Uhlmer - Global Hunter Securities, LLC, Research Division

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

Blake Allen Hutchinson - Howard Weil Incorporated, Research Division

Travis Z. Bartlett - Simmons & Company International, Research Division

Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to Basic Energy Services' First Quarter Earnings Conference Call. [Operator Instructions] This conference is being recorded, today, April 25, 2013.

I would now like to turn the conference over to Sheila Stuewe. Please go ahead, ma'am.

Sheila Stuewe

Thank you, George. Good morning, everyone. Welcome to Basic Energy Services' 2013 First Quarter Earnings Conference Call. We appreciate you joining us today.

Before I turn the call over to management, I have a few items to go over. If you would like to listen to a replay of today's call, it is available via webcast by going to the Investor Relations section of the company's website at www.basicenergyservices or by telephonic replay until May 10, 2013. That information was provided in yesterday's earnings release.

The information reported on this call speaks only as of today, April 25, 2013, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of the replay.

Before we begin, let me remind you that certain statements made by management during this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on management's current expectations and include known and unknown risks and uncertainties and other factors, many of which the company is not able to predict or control, that may cause the company's actual results or performance to materially differ from any future results or performance expressed or implied by those statements. These risks and uncertainties include the risk factors disclosed by the company in its registration statement on Form 10-K for the year ended December 31, 2012, and subsequent Form 10-Qs filed with the SEC. Further, please refer to these statements regarding forward-looking statements incorporated in our press release issued yesterday. Please note that the contents of this conference call are covered by this statement.

At this point, I'll turn the call over to Ken Huseman, President and Chief Executive Officer.

Kenneth V. Huseman

Thanks, Sheila. Welcome to those dialing in for the call today. Alan Krenek, our Senior Vice President and Chief Financial Officer, is joining me on the call. Before beginning my usual commentary, I'd like to introduce Roe Patterson who's also here with us. As we announced last month, Roe is slated to take my place as CEO when I retire later this year. Roe joined the company in 2006 and has been instrumental in helping build the company over the last several years. He has served as our Chief Operating Officer since March of 2011, so he's familiar with all aspects of our strategy and operations. We are fortunate to have someone with Roe's leadership capabilities and broad knowledge of the industry within the company to continue moving Basic forward. You'll be hearing him speak on future calls.

Now as to our first quarter financial performance, we are generally pleased with our results, given the level of demand and the competitive environment in each of our markets. We are especially satisfied that our margins remained in line with our fourth quarter results, despite the reset of unemployment taxes which always impact the first quarter.

Even more than we anticipated, our customers sat on the sidelines for most of the first quarter, as they finalized their budgets and waited for more favorable weather. In late March, we saw the seasonal increase begin to occur, with activity improving gradually through this point in April. As we move to the spring and daylight hours increase, we believe that maintenance and workover activity levels will rise accordingly. We also anticipate that rig counts at oil-driven markets will increase and create demand for completion services.

Taking a look at each of our reporting segments, Completion and Remedial Services, our largest segment, experienced a 3% decline in revenue. A flat to declining rig count in most markets reduced demand, while several winter storms in the Mid-Continent portion of the country interrupted utilization of our completion related services.

Looking forward, our Pumping and Coil Services calendars are fairly full and we're benefiting from lower spend and other major input cost, so we anticipate revenue and margin improvements for this segment in the second quarter and beyond.

Our Well Servicing segment, our best performing segment in the quarter, showed a 4% sequential increase in revenue as utilization rose to 69% for the quarter and our average rate per hour was up 2%. Pricing overall remained flat but a higher proportion of barge and the other 24-hour rig work drove the increase in average rig rates. Margins in this segment declined slightly due to the reset of the unemployment taxes. Since this segment is our most labor intensive, the impact was about 90 basis points to the segment margin, a bit more than for the company as a whole.

Absent that unemployment tax impact, margins in this segment would have been flat sequentially. I'd say the weather -- we also had a bit of a weather impact in this segment which delayed some work in the Mid-Continent part of the country.

Near term, we expect revenue and margins to move higher, as utilization rises significantly through the summer and into the fall. Again, we don't see much opportunity for significant rate increases until industry utilization stabilizes in the upper 70% range.

Revenue in our Fluid Services segment was up about 3%. The increase was mainly due to the investments we made in expanding our Water Solutions Services and disposal wells. During the first quarter, we had a full quarter's contribution from the acquisitions of Saltwater Disposal of North Dakota wells and a partial quarter contribution for the Atlas Equipment and Petro Water Solutions acquisitions.

Segment margin improved to 31.4% compared to 29.1% in the fourth quarter. I'd remind you, however, that the fourth quarter was burdened with $2.5 million of unusual expense associated with cleaning up a 40-year old disposal well in our Permian operation. So adjusting for that expense and the effect of the unemployment tax reset, margins would have been essentially flat quarter-to-quarter. We expect margins to continue in that low 30% range until we see increased drilling activity soak up the excess capacity plaguing this segment.

Our Drilling segment showed a 2% sequential decline in revenue due to reduced utilization of our lower horsepower rigs. Day rates moved 3% higher due to mix change to higher horsepower rigs on average. Our segment margin increased to 35% from 32% in the fourth quarter due to lower maintenance and repair costs.

Now, I'll turn the call over to Alan for a more in-depth review of the financial results for the quarter.

Alan Krenek

Thanks, Ken. I'll start out by reviewing our first quarter financial results, including our balance sheet, cash flow and capital expenditures. When making comparisons, my comments will focus on sequential changes. At the end of my comments, I'll turn the call back over to Ken who will speak to our near-term outlook.

I wanted to give some additional details on our revenue and segment profit during the first quarter. First, the Permian Basin continues to contribute more than 40% of our total revenue. Second, revenue in our largest segment, Completion and Remedial Services, was comprised as follows: Pumping Services, 56%; Rental Tool, 26%; Coil Tubing, 13%; Snubbing, 4%; and the remainder, Other. And in our Well Servicing segment, our Taylor Rig manufacturing operation generated revenue of $3.7 million and segment profit of $516,000 in the first quarter, compared to revenue of $4.3 million and segment profit of $829,000 in the fourth quarter of last year.

As we had projected, G&A expense was $42 million or 14% of revenue. This was slightly lower than the fourth quarter amount of $43 million, adjusted for special items, which was also 14% of revenue. We expect that G&A expense will be approximately $42 million per quarter for the remainder of 2013.

Depreciation and amortization expense increased to $50 million in the first quarter, up from $49 million in the prior quarter, mainly due to the first quarter capital expenditures and the recent acquisitions. We expect that depreciation and amortization for the second quarter will be approximately $51 million. We now expect that depreciation expense will grow at a slower pace as we progress through this year, as a result of our lower capital spending program in 2013.

Net interest expense of $17 million in the first quarter, slightly lower than the fourth quarter. We expect quarterly net interest expense to be $17 million going forward. Our first quarter effective tax benefit rate was 46%. We expect that the effective tax rate to be 46% for the full year of 2013. The increase from the 2012 operating effective tax rate of 38% is mainly due to projected impact of the Texas gross margin tax and booked tax differences, which have a fairly consistent dollar amount, having a more significant effect on our expected results in 2013.

Our net loss for the first quarter was $9 million or $0.22 a share for both basic and diluted per share with weighted average shares outstanding of $40.3 million. No shares were repurchased during the first quarter. At March 31, we had $20 million remaining for share repurchases under our approved share repurchase plan.

Moving on to the balance sheet. We had a cash balance of $81 million at March 31, down from $135 million at December 31, mainly due to the acquisitions we completed in the first quarter, as well as the capital expenditures we made. Total liquidity, including availability under our revolver, was $309 million. There were no amounts drawn on our revolver.

Our DSO at the end of the first quarter was 68, up from 66 at December 31. The increase in DSO was not attributable to any one customer. We continue to closely monitor the financial condition of our customers and pursue extensive collection efforts at all levels of our organization to minimize our bad debt exposure.

We ended the first quarter with $886 million of total debt, consisting of $300 million of the recently issued senior notes that are due in 2022, $477 million of senior notes that are due in 2019 and $109 million of capital leases. Our total debt-to-adjusted EBITDA at the first quarter end was 3.2x, with the interest coverage ratio at 4.3x.

During the first quarter of 2013, we generated $9 million of cash from operating activities. We used $47 million in investing activities, including $16 million for acquisitions and $40 million for cash capital expenditures, and used $15 million for financing activities.

During the first quarter, total cap expenditures, including capital leases were $54 million, comprised of $15 million for expansion projects, $36 million for sustaining and replacement projects and $3 million for other. Expansion capital spending included $8 million for the Fluid Services segment, $6 million for the Completion and Remedial segment, $659,000 for Contract Drilling and $460,000 for Well Servicing.

During 2013, we plan on investing approximately $185 million in capital expenditures with approximately $40 million of that being funded by capital leases.

At this point, I'll turn the call back over to Ken.

Kenneth V. Huseman

Okay. Thanks, Alan. It goes without saying that our business is driven by the level of the stability of oil and gas prices. So we pay attention when we hear rumblings that our customers are becoming more cautious regarding recent volatility in oil prices. Despite that recent volatility, though, we believe our customers will continue with their current plans as long as WTI remains in the mid-80s or higher. On the other hand, should oil prices fall and remain below $80 per barrel for an extended period, we will see a sharp decline in activity levels and cuts in capital budgets. We don't anticipate such a drastic decline taking place, but we've experienced unexpected fluctuations in the past, so we regularly remind ourselves, and everyone else who follows this industry, of what drives our business.

Natural gas prices remain a major variable as well. The price is flirting with $4 per Mcf. We are beginning to see an uptick in activity in the Farmington, Ark-La-Tex and other gas-driven markets. Certainly, a positive development, but not enough for us to revise our overall outlook for 2013. If gas prices should stabilize near current levels, we could see some real increase in demand for the workover and remedial services throughout those dry gas markets. All in all, things are moving in the right direction. Activity levels are gradually increasing and our customers have reiterated plans to spend their capital budgets. That leads us to believe that 2013 oilfield spending will move upward as the year progresses, but not reach a healthy level until the end of the second quarter.

We are still forecasting that 2013 will be a mirror image of 2012. Although we anticipate that pricing will remain flat, we believe our margins will benefit from increased utilization. As a result, we anticipate returning to profitability late in the second quarter and, on a full quarter basis, in the third quarter.

As Alan stated, we plan to spend about $185 million in capital expenditures this year. That is quite a bit less than we will book in depreciation, but that doesn't mean we're intent on shrinking our asset base. We are, however, committed to being cash flow positive, which requires being cautious in the near term. We can quickly ramp up spending to upgrade and expand the fleet as we see market conditions support those decisions. And as we've stated before, we are evaluating acquisitions, but only those with compelling valuations.

Now, operator, let's open the call for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Michael Cerasoli with Goldman Sachs.

Michael Cerasoli - Goldman Sachs Group Inc., Research Division

And then, I guess, I'll start off with -- can you just elaborate maybe on E&P companies, the comment you made on E&P companies gradually increasing spending. Is this more a general statement that captures both completion and maintenance type work? Or is there a skew to any particular side?

Kenneth V. Huseman

Well, it's based on what our guys in the field hear from their customers, both in terms of planned drilling activity, on the capital side, as well as they're being pretty aggressive in setting up plans for workover programs, which is also capital, but pretty -- maintenance programs that have a sense of urgency to them as the weather improves. So it's pretty much across-the-board and, in fact, we've seen some of that in the gas-oriented markets as well. So reentries, some workover activity, that sort of thing. So it's pretty broad-based, I think.

Michael Cerasoli - Goldman Sachs Group Inc., Research Division

Okay. And then, in regards to the customers, the type of customers that are kind of making or are increasing, gradually increasing spending. Is it across all levels and types of customers? Or is it specific to an individual type? I'm kind of the differentiating between privates, independents and majors, et cetera.

Kenneth V. Huseman

I think, anybody that owns a well, an oil well, right now, has -- fits into that category. Of course, the majors, large independents, in the shale plays have -- or the non-conventional plays, have the acreage. So the drilling activity would be dominated by those guys, for sure.

Michael Cerasoli - Goldman Sachs Group Inc., Research Division

Okay. And then, my last question is, you talked about how your team did a good job managing cost. Is there any read across we can make on the magnitude of more cost management kind of impacting margin growth. Is there more cost that can be extracted that might generate more upside risk in regards to margins as we kind of progress through the year/

Kenneth V. Huseman

Labor is our largest cost component and we've really paid a lot of attention to overtime and making sure that we have the most efficient group in the field. As activity increases, we will more fully absorb a lot of that labor, particularly the salary type. So we'll see margin growth there. It's not going to be driven by cost cuts. I think, over the last year or so, we've pretty much eliminated any discretionary spending. So we have to have people to perform this work and we kept those around to the extent we could afford to in each area. So we'll more fully absorb that labor as activity picks up. And that's where the margin increases. But we're not projecting any pricing of consequence and there's not a lot of cost yet to take out of the system. Now one big benefit which won't recur is, for instance, in our Fluid -- in our Pumping business, we've seen sand prices, for instance, drop by 50%. Well, that savings is there but it's not going to go down again to that extent. So it's all going to be utilization driven.

Operator

And our next question is from John Keller with Stephens.

John R. Keller - Stephens Inc., Research Division

Just -- maybe you could help us just frame up the order of magnitude here on the Completion and Remedial business and maybe how revenues progress throughout the quarter. I think, you've qualitatively talked about March being a much better month than the previous 2, but is there any order of magnitude, or you can give us any kind of color, how the revenue played out through the course of the quarter?

Kenneth V. Huseman

Alan, do you have that? You can talk about the...

Alan Krenek

Yes. As I think, as we've said, February was a pretty low month, just because of the weather issues that were encountered and it being a short month. But I think, as we said in our March operating update, it upticked nicely in the month of March and we expect that activity to continue into the second quarter. And as the drilling activity increases, of course, the pumping side of the Completion and Remedial segment would be the service line that will benefit the most from that. And that's where we expect a lot of the revenue improvement that we talked about.

Kenneth V. Huseman

The 10% increase overall in the company would certainly apply to that segment.

John R. Keller - Stephens Inc., Research Division

You're talking on a sequential basis?

Kenneth V. Huseman

Yes. On a sequential basis. Yes. That's right.

John R. Keller - Stephens Inc., Research Division

Got it. Okay. And then, when you -- sticking with that segment for a second, when you talk about your schedules for the frac and coil tubing being "pretty full," does that mean that you're starting to see a fair degree of visibility there? And how far out is that?

Kenneth V. Huseman

We are seeing some visibility. Our -- as in each of these yards have calendars, customers are telling us to schedule work and -- now there's no guarantee that they'll actually do that, we've seen jobs pushed in the past, in recent past, but it does give us the visibility through the second quarter and, actually, well into the third quarter now. As I said, there's no guarantees that they'll actually pull the trigger but they've asked us to slate those dates.

John R. Keller - Stephens Inc., Research Division

Well, I guess, from a...

Operator

I'm sorry, we lost him. Next up is Brian Uhlmer with Global Hunter.

Brian Uhlmer - Global Hunter Securities, LLC, Research Division

I wanted to, real quick, clarify a question on that. We're up 10% across the company, it sounds like that's going to be fairly evenly spread across the segments, is that the correct way to look at that?

Kenneth V. Huseman

Well, that's what we're predicting, it won't turn out that way, I bet. But that's the way to look at it at this point.

Brian Uhlmer - Global Hunter Securities, LLC, Research Division

Okay. Good deal. Second, and kind of more strategic question, for you all. When we're talking about kind of you point out getting into full-service water along with disposal wells and trucking and tanks, et cetera, is there anything else beyond that, that you're looking at that's interesting in terms of recycling technology? Or produce water or anything like that, or pipelines or anything else in the water business? Or is it just more of the same strategy?

Alan Krenek

Pretty much more of the same. We have added the fluid recycling business to those 2. We're focusing on growing the fluid recycling part of the Fluids business with those acquisitions. The size of that overall Fluid Service business dwarfs, obviously, the increment currently that we'll get from those 2 acquisitions. But we think that having that capability and expanding it, building on the expertise that we acquired will allow us to move that into a much bigger part of our revenue stream over the next year and into the future. It also allows us to provide a kind of a one-stop shop for our customers in the fluid handling needs.

Brian Uhlmer - Global Hunter Securities, LLC, Research Division

Right, right. And are you going to start targeting one or 2 specific basins? Or is it a broad base, wherever you've got hauling and trucking, you think you've gotten inroads, how do you look to roll that out over the next 1.5 years?

Kenneth V. Huseman

We've already deployed those assets in, essentially, each of the major operating regions that we provide Fluid Services in now. And as I said, it's miniscule in relation to the total business volume, but we think we have a -- or establishing a beachhead in each of those markets to expand that business from.

Operator

And next is Neal Dingmann with SunTrust.

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

Ken, 2 quick ones. First, you kind of were alluding to this, but just wondering, based on your expectations, what does current bidding activity look like? Has that, I guess, late last month and then now into April, has that started to, I don't know, moderately or materially increase both on the completion and on the well service side? Or what's going on with the bidding activity?

Kenneth V. Huseman

If you're referring to the price action, I think that's subsided now. We're constantly fielding inquiries for -- to provide services. But as I said, our calendars are getting pretty full, so that's an indication that activity has picked up, and the customers are pretty happy with the service providers that they have.

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

And then just one follow up. Not really a peer, but just know another company mentioned yesterday virtually not reallocating any equipment, just one. And your thought, Ken, as far as that we know now, either from you or Alan, if you could give us a little bit of an idea of looking at the well servicing and the completion, as far as where that, I guess, quarter-to-quarter, it seems like most of the business has been in the same regions. Number one, is that the case? And then, number two, do you see, going forward with the remainder of the year, much in the process of reallocation?

Kenneth V. Huseman

I think that our fluid -- in our pumping business probably it's where it's going to be. There's always -- we're always backing up one region with another, that's just normal. But as far as wholesale relocations, I don't expect that we'll see any of that. Our Well Servicing business is the same. We've added -- reactivated some equipment as we've seen activity grow, but there's no repositioning, per se, that needs to be done in that business, either. It's more of unstacking equipment, in a couple of cases, but in most of our markets, it's just getting a better utilization of what's there already. And then in our Fluid Services businesses, we have the fleet where it needs to be, regionally, anyway. We move within the region all the time but -- so there's no big relocations planned.

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

Okay. And then, just lastly, Ken, I was wondering as far as -- just on the contract drilling side. Any thoughts of adding some more rigs there? I mean, you did a great job, I guess, it was about a year or so ago, when you not only added them but you had them under contract and you continue to have that under contract. Just wondering what your thoughts are on non-contract drilling expansion?

Kenneth V. Huseman

We certainly have our eye open for any good deals like we were able to put together over the last couple of years, but there's nothing on the horizon. It's like all of our other businesses, we're pretty optimistic if something -- an opportunity shows up, we'll take a look at it. But it's really hard to predict where you're going to find those. We're not opposed to it.

Neal Dingmann - SunTrust Robinson Humphrey, Inc., Research Division

Okay. So that could be in the play, I guess, which you've mentioned in your CapEx. Obviously, still have some room for capital expansion, if you see the right deal?

Kenneth V. Huseman

Yes. The CapEx budget that Alan spoke of, does not contemplate any acquisitions in that number. So any acquisitions would be on the top of the $185 million we project spending on CapEx.

Operator

And next is Blake Hutchinson with Howard Weil.

Blake Allen Hutchinson - Howard Weil Incorporated, Research Division

Just wanted to first start off with your thoughts on Well Service margins. You spent a little time here. I guess, the 30% level has kind of been a bit of a bogey here. We spent some time below that, given the seasonal depression in activity. As we come out of that, I know you associated kind of high-70s utilization with the ability to push price. Can you get back to something around that 30% gross margin at utilization in that mid-70s type range?

Kenneth V. Huseman

I think so. We'll move into that realm in the second quarter, if utilization continues to move as we expect it to for seasonal factors. Just longer days -- longer daylight days and just overall higher spending on the part of our customers pushing that utilization higher. There's a lot of fixed cost associated with that business as well as our other businesses, so we'll see those margins move up in lock step, almost, with utilization.

Blake Allen Hutchinson - Howard Weil Incorporated, Research Division

And then, just sticking with the kind of the margin outlook. I guess, I'd take the commentary, so far, in the Completion and Remedial Services segment and, given that, it was pressure pumping and Coil that were a bit depressed, in February, and during the quarter. If we're thinking about the snapback and how powerful that can be on the margin front in the business, could you do something in terms of a maybe 300- or 400-basis point improvement in that business? Or is that just getting a little too aggressive?

Kenneth V. Huseman

Yes, maybe you need to slow down there a little bit.

Blake Allen Hutchinson - Howard Weil Incorporated, Research Division

Okay. And then, just in terms of your build out of -- your continued build out of your SWD infrastructure, what should we be modeling, if anything, in terms of -- in tandem with expansion of the trucking base over the year?

Kenneth V. Huseman

Alan, you want to comment on that?

Alan Krenek

Yes. I mean, we expect the count to end up the year somewhere near 1,000. So that would say that we'd add about 30 or so trucks by the end of the year, which is a slower pace than what we've been doing. And then we could also expect to be adding, organically, about one disposal well a month through the end of the year.

Operator

And next is Travis Bartlett with Simmons & Company.

Travis Z. Bartlett - Simmons & Company International, Research Division

Following up on one of the previous questions, it sounds like the expectations for margin increases in the Completions business, less than 300 to 400 basis points in Q2. But is it possible that segment margins return to Q3 levels of, call it, 39% by the end of the year? And if not, I mean, could you -- how should we think about exorvate [ph] margins within that segment using what you're seeing today as the framework?

Kenneth V. Huseman

Well, the -- of course, that's purely a -- how far those margins can move is a bit dependent on -- significantly dependent on the rig count. I think, we'd need to see some -- to get back to those close to 40% margins, we'd probably need some pricing recovery. Our pumping services is the lion's share of that segment, so we need some pricing power to help move those margins to that neighborhood. Now, the other subsegments, tools, snubbing and coil, are producing pretty good margins that -- when we're fully utilized. But the pumping services is what's drug those margins down to the point they are. So we'll need to some pricing there before we get back to those levels.

Travis Z. Bartlett - Simmons & Company International, Research Division

Okay. And potentially, increases in the natural gas to racket rig counts as to get you there on pricing?

Kenneth V. Huseman

Yes, it doesn't matter which -- what they're drilling for, I think, as long as it requires more pumping equipment.

Travis Z. Bartlett - Simmons & Company International, Research Division

All right. Okay. And then, second and final question here, just looking at the Taylor business revenue was down for the second straight quarter, what are you guys currently seeing in that business for new build orders and, if you can, in what areas do you see new rigs being added to the market by competitors?

Kenneth V. Huseman

The -- I think, we'll see a focus on adding replacement rigs for our old account to pick up any slack that they have in terms of -- in relation to external orders. To the point, to this point, most of the equipment's been going to California.

Operator

Next is Daniel Burke with Johnson Rice.

Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division

Question on the coil business. We've seen some -- you guys were drifted a bit lower, but overall, your results in coil have been relatively consistent over the last year. Of course, you've added a couple of units, but we've seen some -- more challenging comps from a couple of peers. Can you update me on what you see out there in the coil business and maybe how your geography plays into your coil outlook?

Kenneth V. Huseman

I think, we feel like we're pretty well placed with our coil fleet. I think, I'll ask Roe to comment on -- he's on top of this on a daily basis, on our coil market.

Thomas Monroe Patterson

I think, our coil's is well positioned. We're in the Mid-Continent, primarily. We have steady, and have had steady, drilling programs with our customers in those markets and that's probably the difference you see between us and maybe some of the peers, that their coil is positioned in markets where rigs are going up and down. And we've been fortunate enough to be in some markets where activity has been pretty steady. I think that's the main difference.

Kenneth V. Huseman

And the size of the market that we targeted, in terms of diameter, coil diameters. We've never aspired to be the big-time coil provider with large diameter coil. And that's probably where the weaknesses developed.

Daniel J. Burke - Johnson Rice & Company, L.L.C., Research Division

Okay, that's helpful. And then, I guess, as a second question, on the SWD side. Adding one well per month, rolling forward here, I know, you all have alluded to the challenges on the permitting side. And just, I guess, I wanted to confirm, is there any potential you'll face any delays or permitting issues? Are you guys far enough down the process that, that one per month schedule feels pretty good looking forward through the year?

Kenneth V. Huseman

I think we'll average that. It's still pretty lumpy, in terms of when we can get those, not just the permitting done, but all of the construction of those wells. It's a pretty drawn out process. And so, if we had delayed getting an electrician out there or a power company delay, there's just a whole litany of things that can cause a delay in commissioning one of those wells. But I think, on average, we'll hit that one per month over the course of the year.

Operator

[Operator Instructions] Next up is Jim Rollyson with Raymond James.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Ken, just circling back to the guidance. I think, we've spent a little bit of time on the 10% increase you're kind of looking for and maybe have some visibility there. But for the full year, to get revenues roughly back to similar levels to last year, which I think is what you said, it also implies you continue to have kind of mid-plus single-digit growth on top of the 10% in the back half of the year. When you think about visibility and what you're hearing from customers, like how comfortable do you feel with that statement? Or how much visibility do you have there on the -- beyond the second quarter?

Kenneth V. Huseman

Well, the -- as you know, we don't have contracts on any of our business. So that's a pretty bold comment on our part. We may have to eat that later, but at this point, based on customers sticking with their plans to spend what they said they're going to spend, we think that the second half of the year, and probably we'll start seeing signs of that pretty quickly, develop into a pretty busy oilfield market. Now we're not going to have all the pricing back, obviously, but we don't expect to. But we added some assets in the middle of last year that we'll have a full-year impact of, which helps that. And so at this point, I think, we're pretty comfortable. If our customers do what they've indicated, then we should see an extremely busy second half of the year.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

And what, in your mind, is the biggest risks or holdups to them spending? Is it infrastructure bottlenecks? Or is it just commodity prices? Or people? Or, I mean, what do you think the biggest risks are in that?

Kenneth V. Huseman

That -- it's those darn old commodity prices. I think, the industry typically throws money at it to overcome the infrastructure and service bottlenecks, but it's comfort in the stability, or the level of stability, of oil and gas prices.

James M. Rollyson - Raymond James & Associates, Inc., Research Division

Got you. And on the gas side of things, you mentioned gas being up here, of late. You're starting to see a little bit of signs of things like out of Farmington pick up. If gas hangs around $4-plus for the rest of the year, how much -- how big a magnitude of improvement do you think you'll see? And do you think that starts actually helping some segments from a pricing standpoint, just because you might spread equipment out a little bit?

Kenneth V. Huseman

Well, I think, it could actually -- it could move the utilization, particularly in the well servicing fleet, industry-wide, probably up 5 or 6 percentage points. Because of the underutilized equipment that's still in some of those markets. And then, that would provide some of us the opportunity to move equipment around and take advantage of that. I still wouldn't bet on pricing just yet. Because it won't be too long before we get into the winter slowdown, where gas activity may be get -- they get pretty strong in the fall, but the days get shorter and all that. It's just hard to get that utilization up in that level late in the year.

Operator

I'm showing no further questions. I'll turn the call back to management for closing remarks.

Kenneth V. Huseman

Okay. Well, thanks, everyone, for calling in. And we look forward to speaking to you after our second quarter call, our second quarter earnings release. Thanks, everybody.

Operator

Ladies and gentlemen, this concludes our conference for today. If you'd like to listen to a replay of today's call, you can dial (303) 590-3030 or 1 (800) 406-7325, with the access code of 4610548. We thank you for your participation. You may now disconnect.

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