Michael Skarke: No, it’s a great question, Tom, and I wouldn’t – I couldn’t articulate it better. I would add that there is a fourth lever there which is really yard consolidation or rationalization. So we’ve put a lot of assets together and a lot of yards together and there is some overlap and there’s frankly some underperforming. And so that is going to be a material lever that we’re just now really starting to get into, we had a few that occurred this quarter. But we’re expecting more and I think that one is going to be material. And we’re very early innings in addressing it. In terms of leveraging infrastructure contracts and relationships, that’s also one that’s relatively early in terms of us addressing. I would point that in the announcement yesterday we had the announcement in the Haynesville where we secured a long-term service contract at the customer’s request off of the infrastructure contracts that we put in place.
And so we think those kind of opportunities exist and that’s going to be market share but also margin accretive for both for both segments. Supply chain, that was something we put in place this year, really centralizing supply chain. Moving to something that’s more formalized and structured. Nick, I’d probably look to you as to where you think we are on that development.
Nick Swyka: Yes, I think as far as the – getting the contracts in place and the procurement centralized, we’re in early innings, I think in terms of seeing the results financially very, very early there. So I think the bulk of that will come in 2024, that’s probably contributing just a few basis points in the current service margin.
Michael Skarke: And then the final one you mentioned Tom was automation and that’s the one that I would say that we’re furthest along. We’ve really been a pioneer in terms of water solution automation. It’s something that we think is a differentiator, it’s something that a way that we can do something safer, more cost effective and more reliable than relying on sometimes lower skilled labor and so it’s something that we’re – while we’re further along than the other initiatives, it’s one that you’re never done in, there’s always more. And so that one will be later endings but still pretty good runway.
Tom Curran: Got it, that’s helpful breakdown and additional color there. Thanks for that. And then Nick, I realize you are still finalizing the plan and expectations to provide formal 2024 guidance, but maybe just some preliminary metrics here for cash flow in 2024, are you still targeting conversion rate for EBITDA to free cash flow of about two-thirds and expecting maintenance CapEx to run about $50 million per quarter, give or take $5 million to $10 million.
Nick Swyka: Tom, I’d see maintenance CapEx as lower than that. I’d say again preliminary basis. I’ll talk more about it next quarter, but we’re probably looking at $60 million for the full year, maintenance CapEx. But for now, give me $10 million on either side of that and we’ll get a little more direct next year. I think the two-thirds free cash flow of EBITDA, that was partially driven by the working capital opportunity we had for this year. So I think for next year, it’s probably going to be a little lower, but as I think about our free cash flow for this year, we had $75 million debt outstanding in the first quarter. We’ve taken that to zero, with $25 million cash on hand. We’ve paid out over $65 million of shareholder returns this year on top of that, and then we’ve executed on our CapEx budget and stayed within that budget while adding some really critical projects.
So this is a strong cash flow generating business here. It will be strong next year, I think we do probably have initial growth infrastructure projects as Michael mentioned that are likely to come in higher than this number – this year’s number. So I’m excited about that and we’re going to do that as always with a very conservative solid balance sheet and look at all the opportunities, both organic and potentially M&A related as well.
Michael Skarke: And then one point just to reiterate on the growth infrastructure projects for next year, those projects have strong contractual – long-term contracts around them. They are generally production weighted or being driven by secular trends such as recycling. So we feel really good about those investments in a flat or even slightly down market because of the contractual support and because of the production in secular trends that exist there.
Tom Curran: Got it. And just to be clear, I was saying $15 million per quarter or $60 million for the year. So it does sound as if that’s unchanged.
Nick Swyka: No, I misheard you there, Tom. So that $15 million per quarter maintenance CapEx, it sounds like a good number there, not 50, but yes.
Michael Skarke: It’s 52.
Tom Curran: Right, yes, exactly. All right, thanks guys. I’ll turn it back.
Nick Swyka: Thank you, Tom.
Operator: Thank you. Next question comes from the line of Don Crist with Johnson Rice. Please go ahead.
Don Crist: Good Morning, gentlemen. I wanted to ask about the specialty chemicals. I know it’s been a couple of quarters now since you’ve been doing the tailored solutions per formation and you’re getting more data back – flowback data etc. Any kind of updates there and is the demand increasing still in that specialty chemical segment?
Michael Skarke: Yes, couple of things on that Don. First, we’re seeing operators continue to be more and more focused on chemistry and its compatibility with produced water and just well results. And so we’re getting really good reception as we have those conversations with our customers. In terms of the results that we’ve seen, I mean, we’re pretty happy with the improvement in market share and margins we’ve seen with chemistry over the last few quarters, and we really contributed to what we’re doing in terms of creating more water tolerant solutions designed for produced water. And so we’ve gotten some pretty good feedback with the customer – with our customers on that. We’ve got direct open dialog with both operators and pressure pumpers.
