John Daniel: Okay. One more, if I may. As you think about growth through acquisition, can you — I’m assuming you see more opportunities within Oil and Gas for consolidation, or is that — [I being incorrect with] (ph) that view?
Bryan Shinn: Well, I think there are definitely opportunities, and as you can imagine, over the years we’ve had a number of different conversations with parties on both sides of a transaction. I feel like the — as you know well, the issue in the oilfield is there’s usually not much time where buyer and seller expectations actually overlap in terms of valuation. And depending on where the cycle is, one side or the other feels like they’re not going to get a good deal. So I think that’s been the biggest issue, quite frankly, to getting something done here. And frac sand in particular has been up and down over the years in terms of valuation. So it makes it doubly hard to do that. Hopefully, this will show a path towards getting things done.
It certainly establishes some expectations around what things might be worth. So sometimes that’s what it takes to kind of light the fuse, if you will, to get more done. And I’m really hopeful that we do see more consolidation in that part of our business.
John Daniel: Fair enough. Thank you for including me.
Bryan Shinn: Thank you, John.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Stephen Gengaro with Stifel. Please proceed with your question.
Stephen Gengaro: Thanks, Brian. Just two quick follow-ups. You mentioned, I think, 80% of sand in the Oil and Gas business contracted for 2024. Does what — I assume what underlies that is support of the contribution margin [ton] (ph) that you obviously provided, but what — is the pricing situation right now fairly stable, you think? I mean you did mention slight over-capacity right now, but how do we think about that supply-demand dynamics for frac sand right now?
Bryan Shinn: Yeah, it’s a great question. As I said in my prepared remarks, there’s a slight oversupply right now of capacity. And we’ll see prices down a couple of dollars a ton versus where we exited from Q4. So if you look at 2024 to Q4 of last year, things will be down just a bit on pricing. But I do feel like things have stabilized and we see pretty consistent pricing out in the market today. As always, the spot price is a few dollars less than the contract, but I think we’ve stabilized in the market in a very healthy spot, particularly relative to history. And I think that’s how you have to view this. 2023 was a really strong year. 2024, I think for most of us in and around, anywhere in the service company chain, probably going to be a little bit off versus ‘23, but again, that was kind of a historic year for many companies, I think.
But I still feel really good about where we are in ‘24 and like the pricing and the contracts that we’ve signed and continuing to be able to have plus or minus 80% of our capacity under long-term contract really gives us that visibility and that confidence that we’re going to have a very good year here in ‘24.
Stephen Gengaro: Great. And then just the second quick one is when you think about capital allocation, and I know John asked a little bit about M&A, et cetera, but when you think about the balance between dividends, buybacks, and reducing debt, where are you sort of ultra comfortable with the debt levels where more of the cash would start to flow directly back to shareholders to buybacks and dividends?
Bryan Shinn: So I think just backing up and looking at capital allocations, the first thing that we want to do is make sure that our industrial growth needs are fully funded. So that’s kind of priority one for us. And then we look at the things that you mentioned. Obviously we’ve reduced a lot of debt over the last couple of years, about $334 million I think since Q2 of ‘22. I would say that given the still relatively high interest rates that we and others have out there, we’ll always have to look hard at debt repurchases. Thinking about, like, leverage levels, kind of specifically to your question, we finished last year about 1.4 times net debt to TTM EBITDA basis. That’s a good place to start. I think we might go a little bit lower there.
We’re sitting about, well, just under two times growth levered, and so I think there’s room to still take that down a bit more, and I tend to think about through the cycle where do we want to be. And so if we can stay, let’s say under three times net levered through a cycle, that feels like a pretty good place to be as well. So we have a lot of different metrics that we look at, even to think about where we want to go and we’ll be opportunistic in making those calls. We chat with the Board every quarter and think about exactly what decisions we want to make with our cash. So we’ll constantly monitor that and pick the right choices for our investors and all our stakeholders.
