John Schmitz: Well Jim, it is an area that that we’re very interested in managing whole lot type of waste streams for our customer base. It is an area that fits together because whether you’re working a solid surface facility and once you do the separation and extract either skim oil or solids for landfill or fluids for disposal, it fits within our footprint of our expertise and the asset base that we have on it. We also think there’s probably an interaction between the landfill and our disposals and the value of that disposal because of the leachate. So we think it fits within the asset base and we think it fits within the thesis of value add for waste management for our customer.
Michael Skarke: And maybe just to add on that, it’s really a natural vertical expansion for us because as John mentioned, the solids management’s often co-located with our existing infrastructure base. And so it’s a very collaborative combination. And then from return profile, margin profile, it really fits, it’s consistent with infrastructure. So we view them largely the same.
Jim Rollyson: Yes, makes perfect sense. And maybe Michael, just going back to the kind of backlog for new projects, as you guys have talked about, it continues to grow. As you look forward and build out your network through M&A and just unlock more opportunities there, I’m curious what you think of as becoming constraints to growth there because you’ve got so many potential opportunities. Is it capital? Is it people? Like, how do you think about what actually constrains your ability to pursue all these opportunities in backlog?
Michael Skarke: So the backlog is very robust and we’re really excited about it. The returns that we’ve mentioned in the underwriting previously, but they’re attractive. And so I’m confident between cash flow and potentially some other sources will be able to continue to fund it and take advantage of that growth. People are always a challenge, but it’s not near the challenge. It was a year or 2 ago. So I really don’t see that as a constraint either. One of our challenges is just, it takes a while to sign a long-term contract with Chief, with an operator, and then it takes a while to construct that asset or link it up, network it, and then to work out the bugs and really deliver the cash flow. So I think one of the challenges just for us is we see this opportunity set in front of us, but the earnings aren’t going to fully materialize for several quarters.
John Schmitz: I think one thing I might add, Jim, to kind of your question is particularly as we’re adding assets through acquisition here, I think it’s a pretty different stage of acquisition integration than where we were a couple of years ago where we were adding companies. And lots more application of systems process people. These are really adding assets on a discrete basis into an existing platform that can be integrated pretty efficiently and fairly streamlined from an acquisition integration standpoint. So certainly should be a more straightforward exercise than we went through a couple of years ago from a balance sheet and a liquidity and a cashflow management standpoint as well.
Jim Rollyson: Right. Much more plug and play versus what you were doing before. I look forward to seeing this kind of unfold over the next 24 months with the backlog you’ve got going now.
Operator: Our next question is from Tom Curran with Seaport Global Securities.
Tom Curran : I’ll just start with 2 follow-ons to Jim’s question about your newly expanding solids management and waste solutions portfolio here. Do you expect there to be opportunities, and if so, would you be interested in moving into minerals and metals extraction on that side? And then could this also enhance the array of prospects that the industrial solutions group has beyond the oil and gas sector?
Michael Skarke: The solids management, as we mentioned, we really think it fits infrastructure because it’s largely co-located. It’s a space that we’ve been slowly building or in a position we’ve been slowly building with the landfill from Nuverra in the 3 saline injection wells that we acquired from the recent disposal acquisitions. One place that I do think it expands to would be around beneficial reuse. So this is something that we’ve been focused on. For some time, we’ve evaluated multiple solutions and multiple companies. We’ve got a signed commercial contract with a large operator. We’ve got a successful pilot in a Permian. And so there is opportunity there. There’s still certainly challenges as it relates to the economics.
And there’s no silver bullet, but the interest continues to grow. One of the challenges with desalinization or parcel desalinization is the salts. And so whether you’re managing the salts or the iron or other solids that’s something that is a challenge with most of those solutions. And so as we think about expanding solids management beyond drill cuttings, oil and water based mud, soil reclamation, tank bottoms that’s one area where I kind of see near-term expansion into.
Tom Curran : Makes sense. I can see the beneficial reuse angle there. But turning to water services, could you give us an idea of how far along you are with the rationalization and margin enhancement initiatives and when you would expect to have that business’ composition where you want it to be in terms of having completed all of the yard closures, the field ops consolidation, the non-core disposals, just where are we at and when are you targeting to have that all finished?
Chris George: Yes, good question, Tom. We certainly picked up the pace of some of that decision making in the first part of the year here. And that’s carrying into the second quarter. The consolidation elimination efforts are focused around narrowing the scope of particularly some of the more commoditized service offerings that we mentioned like fluids hauling and geographies that may be a little less non-core to the overall full life cycle solutions, particularly around the infrastructure platform. We can also continue to look at opportunities and areas where we can enhance the segment via automation and technology. But the overall focus is on the core application of the business around the maintenance light, less labor-intensive and higher margin areas of service that are going to be critical to the overall full lifecycle solutions with infrastructure.
But that assessment is being made today, it’s well underway. We saw some of that in the first quarter, and in the second quarter we’re going to see the benefits of that on the margin side of up to 21% to 24%. So we’re going to start to see some of the pull through of those decisions. But we’re going to going to continue to make those here in the first half of the year, but I think we should largely have made most of those by the time we get to the middle end of the summer here. Ultimately if something’s not core or not earning a return on assets worthy of a replacement investment dollar, relative to our other alternatives, particularly around infrastructure as Michael talked about we’re looking at all of this capital competitively, and some of those things are probably things we don’t need to be spending time on.
