Hello, everyone. So for our next slot here, we have ChampionX, with us is the President and CEO, Soma Somasundaram. He is the legacy Apergy and Ecolab and now ChampionX several years ago. ChampionX provides really production fluids, it's artificial lift, and it's also some drilling products as well. It's a very exciting part of the story. Soma served as CEO of Apergy prior to the merger, and previously served as CEO of Dover Energy before the creation of Apergy. Thank you very much for joining us, Soma. Absolutely. Thank you. So maybe we just start with kind of a broader picture on just kind of duration and the cycle as you see it. We're seeing upstream spending increasing 15%-20% over the next several years. Your business is more production focused, it's later cycle. So how does that spending translate into your growth, into your future revenue, and kind of how do you see this playing out? Yeah. As it kind of turns into the production side? Yeah, Dave, first and foremost, thank you for having us. You know, always a pleasure to be in the conference, you know. Like you pointed out, I think, we are, you know, very positive about the multi-year duration of this, cycle. As, you saw in March, we laid out, in our own investor day, the multi-year, duration of this cycle, and, where we pointed out the next set of barrels, particularly about... We said that between now and 2030, about 6 million of incremental barrels will come from deep water offshore, and another 6 million from global and conventional, including what we are seeing in the Middle East and Latin America. So we believe this, the multi-year duration of this, cycle is very constructive. Given our portfolio is very production focused, you know, the continued growth in production and all the investments that is going on in offshore as well as Middle East and Latin America, we see that translating into, you know, additional barrels. And as those barrels come online, you should see a nice step up in our continued revenue growth in those. So we are, we are very excited about it, and we are very positive about how our portfolio is positioned to take advantage of that. Not to put a number to it, but, I mean, five years visibility, is that fair to say that you think you have at this stage from? Yeah. When all that production comes on? Yeah, that's reasonable to say, because, you know, when you look at, the offshore developments and deepwater developments, and also look at places like Guyana, the plan, you know, companies- Mm-hmm. Like Exxon and Hess have laid out, the developmental plans they've laid out, what's happening in Brazil. All that translates into, at least a three-five year visibility here. So if we look at the production chemical side, how does the offshore component differ than, say, the rest of the world? Is it... It's a higher margin business, which I believe. Mm-hmm. Can you just kind of talk maybe a little bit about why it's a higher margin business and why? Yeah. Why that offshore side is so attractive to ChampionX? Yeah. You know, particularly offshore, you know, it comes with the two levels of complexity. You know, one is the technical challenge or the technical complexity. We all know that deepwater and offshore, how difficult it is in terms of trying to make sure that you are keeping the integrity of the producing well in place. And the technical complexity associated with that, combined with the complexity of logistics, supply assurance, because supply assurance is critical in offshore. So these two, when you look at these two factors, you know, there's probably in the sphere of companies doing production chemicals, there's, you know, other than us, probably there is one other company that can really perform this type of products and services. The technical challenges and the complexity translates into, you know, a higher moat for our products and services, and then that translates into higher margins. This type of expertise has been built over decades of experiences, and then having technology centers strategically located, being able to have network of production facilities and distribution points and bases available to provide the supply assurance to the customers. You know, that is not easy to replicate. That's all been in place. That's all in place. You don't have to replicate anything- Any of those. your bases. And how do you manage getting the chemicals out to the rigs? Right. So you also have the subcontractors to provide that? I assume that's all part of the supply chain. Yeah, it's usually, you know, the way that works, that's usually the customers, the supply vessels, right? So think about a typical way it happens is, you know, in a place like Guyana, right? So we will we have a base in Guyana, right, where we maintain our inventory as well as, yeah, small blending type capability to make sure that we can continue to provide those. So, and then, on a weekly basis, the supply vessels that will come around, and we will pump our chemistries. Because these are liquid chemistries, we pump those into the hull of the supply vessels, and then they in turn, as they get to the platform, which could be, you know, 60-100 miles offshore, they pump that back into storage facilities, which we maintain on those platforms. We always have our people on the platform 24/7, who are monitoring the quality of the crude being produced... and making sure that the appropriate chemistry, you know, dosages and things are properly set. That's all part of the moat? That's all part of the moat, and we provide all of that to the customer. The other market you mentioned is the Middle East. Less of a moat there, onshore. Can you talk about that market? That's an area you've been trying to build out into- Correct. If I'm not mistaken, I think maybe you could remind us kind of what the initial footprint of ChampionX was when you first merged, and kind of maybe where it is today, and where you're trying to get to? Yeah in terms of that business. Yeah. You know, and we have been in the Middle East for a very long time. For example, if you look at in the chemical side, our Saudi Arabian presence has been there for over 40 years, right? Similarly, we have presence in UAE, particularly in Abu Dhabi. We have presence in Oman, we have presence in... We have plants, manufacturing facilities, blending facilities in Dubai. So the Middle East presence and the footprint is well established, right? From a chemical perspective. Now, on the artificial lift side, you know, our presence have been initially we started off in Oman, so we have a really, really good footprint in Oman. We are probably the leading supplier of artificial lift in Oman now. Then from there we have expanded to Kuwait and, you know, and now we are in Saudi Arabia because of the chemical footprint. Now, what's interesting about Middle East for us is that the best is yet to come for us in the Middle East, right? You know, the reason is because the conventional oil that gets produced in the Middle East is, you know, traditionally not very chemically intensive, you know? So because the conventional oil is... and so we have been doing business in Middle East for a long time. We have about 12% of our revenues today come from Middle East. But when you look at the next set of developments that's happening, the Jafurah field that's happening, and those are more chemically intensive because those are unconventionals, and they are more chemically intensive. So when those fields starts producing, I think you will see higher level of chemical intensity come into play, which will give even a better growth opportunities for us in Middle East. So I don't know, so it's like, is it chemical intensity, I guess maybe the revenue opportunity per barrel, I guess? Correct. So it- It's gonna be shifting in the Middle East. Right. So the chemical dollar amount of dollars spent on chemicals per barrel of oil produced, when you think in those terms, you know, we have talked about this before, you know, deepwater and heavy oil, enhanced oil recovery, those are on the higher side of those, followed by unconventional. When you think about a simple conventional oil, right? Like a sweet crude, conventional oil, that would be on the low end of the chemical intensity. So this is why, you know, over a longer period of time, we laid this out, that as the harder to reach and harder to treat, the oil becomes- Better. Right. Yeah, the better for chemistry, the more artificial lift. And that's why if you look at, you know, in our Investor Day, we talked about the next set of barrels that's going to get produced. They're going to get more chemically intensive because they have to come from offshore or deep water. They have to come from global unconventional. They have to come from heavy oil production. They have to come from enhanced oil recovery. All of these play into this idea of higher chemistry intensity and higher production, you know, production systems, which is artificial lift. So from a, from a longer term perspective, we feel very good about the way the portfolio is positioned for continuous growth. So in these markets where production is gonna be on for decades, do you have long-term supply contracts? How does the contract structures or... Aside, set pricing aside. Right. Just in terms of supply, do you typically sign long-term con...? Like, what is long term to you? Right. So multi, you know, so usually the, the, in, international contracts tend to be multi-year. That would be like five years plus additional two year of extension. And but once, it's a, it's a... You know, once you- your chemistry and your supply assurance, everything works very good for the customers. Once they get used to the, you know, and, and when they... It's really, really, let me put it this way, unless your services and your chemistries are not working for the customer- You're not going there. Yeah, because, you know, the cost of changing is quite tedious and quite prohibitive for customers. On the offshore side, is that the same? It's the same in the offshore. Same, same. Yeah. That same structure. Yeah, absolutely. That gives you, once again- Right This goes into your visibility, your duration, that you can actually see it. That incremental production coming on in the Middle East, has that already been signed, that contract out, or that would that fold into your existing agreements, and they would just kind of carve it up? Yeah. It's not been signed yet- Okay Because it's still in the developmental stage, right? And we are active participants in it, both from production chemicals as well as artificial lift. Today, we have the leading share production, you know, in the production chemicals in Saudi Arabia. Okay. You know, so, so we feel we'll have a—Because we've been there over 40 years, so we have a very important role to play. We have played a very important role, and I think we'll continue to play a very important role. Okay. So but those volumes, those all come on in- Right 2026, 2027, 2028 as offshore, but that's sort of- That's right The upside there. Then we can shift to the U.S. side. I'm just kind of curious, this is a market which I would think probably most people in this room are probably thinking is not going to grow the next or very modest growth- Yeah Let's say, the next three-five years. So how do you, as ChampionX, how do you grow in this market? What does, what does the U.S. mean to you? Is it just sort of a placeholder while the rest of the world grows? Like, so how do you, how do you view the U.S. from a production? Yeah, I think the U.S. is, you know, just like the international offshore, the U.S. is in the same type of situation where, you know, the next barrel of oil requires more technology. It's in the same cycle. We do think that the U.S. production will continue to incrementally grow. You know, today, if we say we are at 12.5 million barrels a day or so, we do think next year we will see production growth in the U.S. barrels, you know. Our estimate is right now, you know, it can grow 400,000-500,000 barrels a day next year. And we think that over the next three or two or three years, it can even grow up to 40 million barrels a day. You know, we think that- We are sure. Yeah. So it'll grow. So for us, you know, when you look at the U.S., U.S. land, if you look at what customers are really focused on in U.S. land, in the production side, it's really optimizing the capital spend and optimizing this. And that really works for the production-focused businesses. Mm-hmm. Because the adoption of new products, the adoption of digital, it's been really, really high. You've seen our digital portfolio grow, you know, in the CAGR rate in the last six years of, like, 24%-25%, right? So we find the spending on production... Because customers are not trying to cut back on production- Yeah. They are trying to either maintain it or incrementally grow it, right? So they are optimizing the CapEx to incrementally grow production. Yeah. So we see that as a positive for production side. That's number two. Number three is the adoption of new technologies, as we talked about. Yeah. So, I think we feel that we'll incrementally grow. You know, we grew last year nicely in U.S. land. We'll grow nicely this year. I think in 2024 will be another, another growth year for us in U.S. land. Great. Margin certainty. Yeah. Coming out of COVID, there was a lot of, you know, inflation, or your raw material inflation kind of caught you off guard, caught the industry off guard. Right. Your contracts, kind of some of them got a little upside down in there, I think. Can you talk about the margin certainty now? I think you do. Do you feel confident that that's all sort of in the rearview mirror, that even kind of any other scenarios going forward, that you'll be able to continue to kind of have that margin certainty going forward? Yeah. You know, we feel structurally, you know, both with the efforts, with the pricing efforts we did, plus some of the restructuring work you saw we did, as well as the continued productivity efforts we did. We feel structurally we have moved ChampionX in a margin profile to 20% level plus. You know, you've seen our PAT margin profile move up to 22% plus, naturally. We have seen our PCT margin profile move up to 20% plus now. So we think that structurally, we have moved the margin profile, and we feel very confident about that, you know. And you saw in the last quarter, we saw a line of sight to exiting this year at 21%-t he margin. Mm-hmm So we see that line of sight to exit at 21%. So what you should expect from us, given the multiyear, you know, visibility and the duration of this, what we are seeing, you should see us continuously move the needle on the margin. You know, and I recognize once you get to 21%, the next step tends to be, you know, gets harder. Harder. Right? So, but we expect, you know, in a typical volume, we should implement at about 30%, you know. So that, combined with some productivity, continued productivity improvements, which is part of our DNA, I think you should see us continue to inch this margin up even beyond the 21%. Okay. Maybe we shift over to your PAT business and talk about artificial lift a bit. Yeah. Predominantly a U.S. business. Yeah. Rig counts fallen 100 rigs in the first half of the year. Obviously a different type of spend, but how does that manifest itself in the, into the lift business? Do you see... When you look out to 2024- Right. Does 2024 look different now with 100 less rigs in the rig count than it was a year ago? How does that? How do you sort of think about the relationship? Yeah, you know, I mean, the rigs and, you know, we have seen, over the last three-four years, the kind of a disconnect between the rigs and the artificial lift. And primarily because as customers continue to look at how do I maintain or incrementally grow production, you know? And what we find is, you know, the amount of ESP usage in the existing wells have gone up. Mm-hmm. You know, what used to be a one ESP usage, two ESP usage, now regularly we see, you know, the same well using ESPs three cycles. Mm. You know, those are ways customers optimize to make sure that, you know, they are able to maintain the production, right? So which means the artificial lift revenues per well, it continues to keep going up incrementally. Mm-hmm So that, combined with our share improvement- you know, we've seen even after the rig counts coming down, we are continuing to see, you know, sequential improvement in our Artificial Lift revenue. So we think that will also carry through into 2024. So we expect our Artificial Lift portfolio to grow in U.S. land in 2024. What's your split between ESPs and Rod Lift today? I would say ESP, I mean, rod lift is probably in the low thirties in terms of... I'm talking about as a percentage of PAT. Mm-hmm. Yeah. ESPs are in the high 20s. So between Rod Lift and ESPs- you know, we would be, like, 65% of the PAT. Uh-huh Okay. Interesting... You touched on it before, but the digital offering, can you talk about adoption? Yeah. I'm curious. I'm not sure if there's any way to ask, but if I think about all the different customers or wells that you have artificial lift on, what percentage of those wells today are you applying some form of digital on? Is it, like, 10%? Is it 15%? I mean, I honestly- Oh, it's, I have no, no concept as to what. Yeah, yeah. Yeah. So I would say it's, you know, about 35% or so today, you know. But the interesting part is if we go back five years ago and look at that number - that would have been in the... Yeah, in the high single digits- and low double digits. So the adoption of digital, customers, as they continue to look for efficiencies and... Yeah You know, so to give you an example, you know, if you take a, a typical ESP well, right? The ability to predict gas locks or ability to predict equipment failure ahead of time has huge implications for our customers. So for example, you know, recently with the, you know, we are looking at the four customers who have adopted our predictive monitoring in about 150 wells. So on an annualized basis, over the last 12 months, they have saved about $10 million. Mm. In work over costs and equipment, you know, rig, work over rigs and equipment mobilization costs and all that. So it's quite significant when you think about our customers avoiding an unplanned shutdown, right? So that combined with when you look at in a typical producing well, if, for example, in a Rod Lift well, you know, by incrementally spending a little bit more on digital, you can improve production by 4% or 5%. Right. So, I think, you know, there is more and more realization of this with our customers, and so that's one of the reasons it continues to grow well. So is digital first used in predictive failure on the ESP side, and then it turns into more production enhancement on the Rod Lift side? Right. Is that sort of how it all flows through? Correct. So we monitor for all of our customers, you know, we monitor their ESP wells, and they pay for, you know, monthly monitoring of those. We have remote operating centers from which we monitor. Mm-hmm. So between, we have today, you know, with, when you think about everything from ESP wells to rod lift wells, to, you know, we have compressor monitoring, we have, you know, today we monitor close to 195,000 assets, you know, in these remote operating centers. Interesting. Interesting. You talked about it, touched before, but you're leveraging the PCT footprint internationally to pull in the Rod Lift was one of the goals. Can you talk about some of the challenges and where and maybe where have you been successful so far? Yeah. On that model, and kind of, I guess you probably don't want to tell me where the next place is gonna be, but. Right. Maybe kind of how you're thinking about that expansion, international expansion over the next few years. Yeah. So, you know, if you recall, you know, when we closed on the acquisition, you know, we were right in the middle of COVID. Mm-hmm. So, clearly, you know, the restrictions around COVID were much, much severe for us internationally than in North America. So we found that in North America, the crossover was really, really fast. We could see the uptake. So if you may recall, in 2021, we reported a, you know, revenue synergies of about $24 million, right? And 18 of those came from North America. And then in 2022, we reported $45 million of revenue synergies. And in the investor day, we set the target of $60 million for this year for revenue synergy. And so we continue to see that nicely building up, and today I would say we have about $390 million worth of opportunity set we are working with, and about 190 of that is outside of North America today. Mm-hmm. Now, if you look at that opportunity set two years ago, it was a, you know, in the $50-$60 million range. So as the COVID restrictions have relaxed over the last couple of years, we could see that opportunity set starting to build out. And also with international tend to be longer cycle, as you know, because there are tenders, a longer cycle. So I think, you know, to the... You know, so I would be disappointed if we, you know, if we fall short of the $60 million this year, right? So I think we will—you should see as the year continue to improve on it. And then, you know, from a region perspective, I talked about North, North America, you know, but, you know, Middle East and Latin America and Central America continues to be those three areas- Those three areas. where we are seeing. On your drilling technology side, it is literally the tip of the spear when it comes to the oil and gas industry. My running joke is a lot—most people don't realize that the entire oil and gas world is centered in Provo, Utah. Yeah. Yeah. I'm just curious, you know, we've seen the rig count, as you said, it's fallen by about 100. Are you starting to see increasing demand on the bit side? Because we had this inventory component, right? Right. On the bits, which it gets exacerbated on the way down and the way up. Right. Can you tell us where we are today? Are you starting to see kind of orders ahead of kind of the rig count pick up? Any signs, I guess, of rigs being added that you would see, I guess, from, from your side in terms of- the drill bit insert demand? Yeah Not yet. You know, we are not seeing... You know, the way I would describe it right now is, you know, as the rig counts came down, you know, we could see some order rates starting to step down. Mm-hmm. So what I would say right now is we are fairly in a stable position in the order rates, but we have not seen anything, you know, uptick in the order rates we have had. But conversations with our customers seem to indicate that, you know, as we get into towards the middle to middle of fourth quarter, you know, we think that there will be some starting to see some increases in those. Historically, what have you seen? When the rig count kind of bottom starts to pick up, how long does it take for you to see that? Usually a couple of weeks. A couple. Okay, so it's almost- Yeah, yeah. You don't get an early- Correct. Look at it. Yeah. See, we don't—we won't see early look at it. And what you will see, what we have seen is that if suppose there's a jump in the rig, there's, you know, a meaningful jump in the rig, not like five rigs being added. I suppose if 25 rigs are being added at one go, then what we will see is a jump in our order rate because the restocking- Got it. Yeah, the restocking starts setting in. Right. Yeah. Yeah. So right now, you know, what we are expecting is, as we get into the fourth quarter, maybe towards the end of fourth quarter, we may see some- That's when you start to see that. Interesting things. Okay. I want to finish up with your Top Box Philosophy. Yes. Your guiding principle, I guess, you developed that about three or four years ago. What are you seeing out there today? We don't see a lot of private equity. Right. Doesn't seem like a lot of competition out there on the M&A side. Right. Are you... I guess the first question is, do you want, are you looking to add another leg? Are you looking for another Top Box opportunity, and what does that look like today? Obviously, I'm not asking you for insight. So just generally speaking, it seems this feels like it's a pretty good opportunity as a buyer. It feels like it's a buyer's market. Maybe I'm wrong, but could you talk about that a little bit? Yeah, I think it's true that it's a buyer's market. You know, I think you're right. That's not... You know, there's a lot of assets that are looking for home, you could tell, right? But from our perspective, David, you know, we published our capital allocation framework, right? In which—an important component of our capital allocation framework is the continuous return of capital. And we said we'll return 60% of our free cash flow through the cycle, right? So we are very committed to the capital allocation framework we published, because you may recall, that is an integral part of Top Box Philosophy, is to provide that consistent balanced capital allocation. But it also leaves us a little bit, you know, some money to continue to invest in new technologies, new growth pathways. So as we laid out in our capital allocation framework, you know, we'll continue to return capital to the shareholders. And then if you find a nice bolt-on, tuck-in, add technology, you know, because I think the portfolio we have, we are very pleased with it. So what we are now looking at it as saying is, how can we add the next set of incremental growth pathways? And that's how we got into emissions, right? Remember, we got into methane emissions management, and that business is growing really well, right, currently, and we are investing behind it. So similarly, we are looking at some pathways to invest behind in our digital aspect. But these will all be small, you know, $50 million less type of bolt-on type deals. but if we don't find, you know, the appropriate type of bolt-ons for us to add, I think we'll return the cash to the shareholders, you know. So that's the path we are on, you know. So just to go back to the emissions, the reason why emissions is sort of a top box for you is because that should be consistently, show consistent growth in the highs and the lows of the cycle? Correct. And that your view is that if I can prove that- Right. I can prove that duration, then my multiple. Right. Reflect that. Right. And- Simple way to put it, right? Exactly. And our whole Top Box Philosophy, right, David, is consistency through the cycle, right? And then ability for us to return, produce consistent returns through the cycle. For us, for me, that's the Champion value proposition, you know, and that's the Top Box Philosophy for us. You're proving it every day. Great. So thank you so much. All right. Thanks, David. Appreciate it.