DNOW Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 6 speakers on the call.

Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the DNOW Second Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. Mr. Brad Wise, Vice President of Digital Strategy and Investor Relations, you may begin your conference.

Speaker 1

Well, thank you, Rob. Good morning and welcome to DNOW's Q2 2024 Earnings Conference Call. We appreciate you joining us and thank you for your interest in DNOW. With me today is David Cherichinski, President and Chief Executive Officer and Mark Johnson, Senior Vice President and Chief Financial Officer. We operate primarily under the DNOW brand, which is also our New York Stock Exchange ticker symbol.

Speaker 1

Please note that some of the statements we make during this call, including responses to your questions, may contain forecasts, projections and estimates, including but not limited to comments about our outlook for the company's business. These are forward looking statements within the meaning of the U. S. Federal securities laws based on limited information as of today, August 7, 2024, which is subject to change. They are subject to risks and uncertainties and actual results may differ materially.

Speaker 1

Now it should assume these forward looking statements remain valid later in the quarter or later in the year. We do not undertake any obligation to publicly update or revise any forward looking statements for any reason. In addition, this conference call contains time sensitive information that reflects management's best judgment at the time of the live call. I refer you to the latest forms 10 ks and 10 Q that DNOW has on file with the U. S.

Speaker 1

Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information as well as supplemental financial and operating information may be found within our earnings release on our website at ir.dnow.com or in our filings with the SEC. In an effort to provide investors with additional information relative to our results as determined by U. S. GAAP, you'll note that we also disclose various non GAAP financial measures, including EBITDA excluding other costs, sometimes referred to as EBITDA net income attributable to DNOW Inc.

Speaker 1

Excluding other costs and diluted earnings per share attributable to DNOW Inc. Excluding other costs. Each excludes the impact of certain other costs and therefore have not been calculated in accordance with GAAP. Please refer to a reconciliation of these non GAAP financial measures to its most comparable GAAP financial measure in the supplemental information available at the end of our earnings release. As of this morning, the Investor Relations section of our website contains a presentation covering our results and key takeaways for the Q2 of 2024.

Speaker 1

A replay of today's call will also be available on our website in the next 30 days. We plan to file our 2024 Form 10 Q for the Q2 later today and will also be available on the website. Now, let me turn the call over to Dave.

Speaker 2

Thank you, Brad, and good morning, everyone. Before I talk about the business, I'd like to recognize the perseverance of our employees through the disruption caused by 2 recent storms, the derecho thunderstorms in May and the more recent Hurricane Beryl in July. Both storms directly impacted many of our employees causing widespread loss of power and destruction of personal property. Without hesitation, our DNOW employees, selflessly stepped up, extended a helping hand and supported one another and our communities. I'm impressed with the way we came together to help one another in a time of need.

Speaker 2

This collective response is emblematic of DNOW's culture and brings me a great deal of pride. In that same spirit of teamwork and community, in the Q1, we joined forces with WITCO Supply, tapping into a talented team with strong leaders and technical expertise who earn deep affection from their customers. Their supply chain design, strength in midstream, world class sales team and keen focus on customers piqued our interest when we pursued that combination. The Whitco people and culture were a natural fit with how we've transformed DNOW to live and breathe those same cultural attributes. During this last 6 months, it's remarkable to see the deep esprit de corps and cultural alignment our team share, elevating DNOW to expand our value and reach in the market to help fuel greater success together.

Speaker 2

In terms of highlights for the quarter, there were many. We produced strong earnings having grown revenues organically in the Q2 despite headwinds. We grew our legacy midstream business coupled with the onboarding of WIPCO where we have more than doubled our midstream coverage. We are seeing success along our track to double our energy evolution sales in 2024, a key element of our long term strategy. We generated inventory velocity of 5 turns in the quarter, a high mark, which is even harder to do in a slowing market.

Speaker 2

We drove the best DSOs we've seen since 2020 and we produced cash when we expected to consume it given a substantial cash generating 1st quarter. And with our quarter execution, we more than funded the share repurchases we made in the quarter. This is great execution by our teams. And now moving to our results. The strength in our 2nd quarter performance was evident against the combination of headwinds from lower gas prices, lower U.

Speaker 2

S. Rigs and completions and the unfavorable impact from the seasonal breakup in Canada. 2nd quarter 2024 revenue grew sequentially $70,000,000 or 12% from WIPCO's full quarter contribution combined with growth in international and in our legacy DNOW U. S. Energy Centers and Process Solutions businesses.

Speaker 2

We generated $50,000,000 in EBITDA for the quarter, strong bottom line performance, which was aided by $2,000,000 in favorable items not expected to recur in the 3rd quarter. We generated $18,000,000 of free cash flow during the quarter, bringing the year to date amount to $98,000,000 and our trailing 4 quarters free cash flow totaled $201,000,000 In North America, onshore oil and gas activity in the U. S. Is more challenging than in recent times due to E and P consolidation, low natural gas prices hampered further by a lack of natural gas takeaway infrastructure, LNG export capacity and political posturing. Yet we are focused on opportunities where we see growth.

Speaker 2

And one area we've been focused on is midstream. Our Whitco acquisition further expanded our business in the midstream market, a sprawling geographically diverse network of lacked units, pumping stations, metering kits and pipes, valves, fittings infrastructure, one that is aging and undersized for current and future demands. The midstream market vertically complements our upstream offerings and strengthens our partnership with and importance to the key manufacturers we support. This market provides a steady diet of day to day MRO business combined with a buffet of capital projects aimed at debottlenecking upstream capacity constraints through the expansion of midstream infrastructure with demand pulled through expanded export opportunities for crude oil, refined products and LNG. We remain excited about growing opportunities in the energy evolution space where we are seeing more use cases of CO2 and expanded enhanced oil recovery combined with an increasing backlog of CO2 storage permit submissions to coincide with capital investments in CCUS.

Speaker 2

Direct air capture technology remains promising, currently contributing to our revenue profile as we expect more units to be constructed to reduce the atmosphere concentration of CO2. And in the renewable gas, natural gas sector, our patented process technology from our EcoVapor business offers biogas and landfill gas operators the ability to treat their waste gas by removing oxygen, sulfur and excess water to meet pipeline transfer specifications. We are making progress in expanding our industrial adjacent markets with increased participation in the mining sector, the municipal water and chemicals markets. These target markets align well with our service areas, our current product lines and present new demand for our process solutions pump packages, mechanical seals and field service capabilities. On the international front, with industry experts forecasting continued capital investment and growth in activity in regions like the UK, Norway, Netherlands, Australia and the Middle East, we believe there is opportunity to improve the profitability of our international business as we strategically increase our focus on specific locations, products and solutions to provide the greatest value to our customers.

Speaker 2

Now some details on the business. In the U. S. Revenue was $512,000,000 up $77,000,000 or 18% sequentially from the full quarter impact of our Wipco Supply acquisition plus mid single digit revenue percentage increases from our U. S.

Speaker 2

Process solutions and our legacy U. S. Energy centers businesses. U. S.

Speaker 2

Rig counts contracted 3% sequentially, down 17% year over year as U. S. Completions declined 4% or down 13% year over year both contributing to the temporary slowdown that we're navigating. During the quarter, additional customer consolidations were announced And for some of our customers, those pending deals have impacted project timing, resulting in funding and approval delays or project timeline shifts. During the quarter, activity with our supply chain services customers improved sequentially driven by a blend of projects, well maintenance activity and infrastructure upgrades.

Speaker 2

We expect some of these larger customers by design to curtail their level of spending in the second half like we experienced last year. At our Williston, North Dakota mega center, we consolidated a number of 3rd party operating yards to a single centralized yard and expect the consolidation to improve customer service and enhance efficiencies. In the Bakken, we provided PVF to an operator currently 1 third of the way through their refrac program, an example of an operator analyzing older shale wells to improve their production through enhanced refracing techniques. In the Northeast, we secured a new materials management and integrated supply contract with a regional utility company who market natural gas, LPG, electricity and renewable energy solutions. In U.

Speaker 2

S. Process solutions, demand for our products grew sequentially despite lower completions during the quarter. Our FlexFlow H pump rental utilization rates remained strong during the quarter reflecting steady demand for our mobile horizontal trailer solutions used to dispose of produced water, the saltwater disposal and enhanced oil recovery applications. We are further investing in this business to capture market share and service other areas. Our mechanical seal, industrial air packages pump service and repair offerings have been a key focus area for growth and we saw notable progress in the quarter.

Speaker 2

Executing on our diversification strategy, we added a new pump manufacturer distribution agreement to expand our product offering in the municipal water market. We provided mechanical seals and pumps to several power generation operators. In the mining industry, we secured a supplier agreement from a uranium mine operator and in the chemical processing market, we are gaining traction by increasing our presence to a large installed pump market by offering aftermarket services tied to asset maintenance. Our pump packages, mechanical seals and field service is a fungible offering enabling opportunities for diversified growth and revenues across various industrial adjacent markets. In Canada, revenue was $56,000,000 for the quarter, lower 15% sequentially as expected, primarily due to the impact breakup has during the quarter.

Speaker 2

In the quarter, we noted several wins in industries that help diversify our core market. We secured a 3 year agreement to provide vendor managed inventory for a steel manufacturer and won a notable project with an independent power producer on top of the current day to day MRO business. We added a new Alberta based operator who plans to ramp up activity in the oil sands area and executed a 3 year PVF MRO contract with an oil and gas producer. For international, revenue was $65,000,000 up $3,000,000 or 5%. The increase in revenue during the quarter was primarily attributed to Middle East projects.

Speaker 2

Revenue with major oil and gas operators improved sequentially with the majority of revenue coming from brownfield projects as opposed to new infrastructure builds. Electrical products continue to be the majority of products sold by our international segment, followed by pumps, valves and industrial and safety products. A couple of notable projects include an FPSO project in Australia, an LNG project in Southeast Asia where we supply valves and fittings. And finally, in Norway, we secured a supply agreement contract from an OEM to provide electrical cable for facilities and new builds. And now a few comments related to energy evolution.

Speaker 2

Over the last few quarters, we've been delivering PVF products tied to a large scale gas gathering project that will transport natural gas and redeliver it to the Gulf Coast markets including for LNG export. The scope of the project includes a carbon capture portion that was permanently sequester up to 2,000,000 tons of CO2 annually. Across the U. S, we provided PBF products, customers used to upgrade existing infrastructure to eliminate methane atmospheric leaks. Many of these initiatives are tied to customer managed greenhouse gas reduction programs.

Speaker 2

We are making inroads into the mining sector by providing pumps and pipe valves and fittings products into the soda ash mines and the extraction of lithium to support growth in battery production. Through McLean International in the U. K, we provide an assortment of PPE tools and electrical cable for a variety of offshore wind projects. We also expanded our sales efforts and secured orders for tools, harnesses and electrical cable for a new offshore wind customer base in the Netherlands. Moving to our Digital Now initiatives, our digital revenue as a percent of total SAP revenue was 48% flat sequentially.

Speaker 2

With a major midstream customer, we completed systems integration, data visualization and a punch out e commerce catalog project. The enhanced integration drive a more user friendly and efficient method of sourcing and procurement for the products we offer to support their operations. With our AccessNow automated and unattended inventory control system, we were able to reduce costs and overall operating expenses for a customer at a downstream chemical facility. And switching to M and A, a key part of our growth strategy, Gienau is in a great position. We remain debt free with $197,000,000 in cash on our balance sheet and $579,000,000 in total liquidity that affords a multitude of options to organically and inorganically grow the company and increase value to shareholders.

Speaker 2

We are in various stages of engagement with multiple targets in our pipeline and are focused on accretive deals where we are the natural operator and where we can add value and increase the contribution of the acquired firm. With that, let me hand it over to Mark.

Speaker 3

Thank you, Dave, and good morning, everyone. Total Q2 2024 revenue was $633,000,000 up 12% or $70,000,000 from the Q1 of 2024. EBITDA excluding other costs or EBITDA for the Q2 was $50,000,000 or 7.9 percent of revenue. U. S.

Speaker 3

Revenue for the Q2 of 2024 totaled $512,000,000 a $77,000,000 increase or 18% higher than the Q1 of 2024. Year over year U. S. Revenue increased $56,000,000 or 12% from the Q2 of 2023. The U.

Speaker 3

S. Sequential revenue increase was driven by the full quarter contribution of Whitco paired with U. S. Growth in both Energy Centers and Process Solutions in the quarter. U.

Speaker 3

S. Energy Centers contributed approximately 74 percent of total U. S. Revenue in the Q2 and U. S.

Speaker 3

Process Solutions contributed approximately 26%. In Canada, for the Q2, revenue totaled $56,000,000 a decrease of $10,000,000 or 15% from the Q1 of 2024 as expected due to seasonal breakup. International revenue for the Q2 of 2024 was $65,000,000 up $3,000,000 or 5% sequentially, primarily from projects in the Middle East not expected to repeat in the 3rd quarter. Gross margins declined 110 basis points from the Q1 of 2024 to 21.8 percent with about half the change attributable to declining steel pipe prices, product and project mix and competition intensity and the other half primarily resulting from the impact of acquisition purchase accounting flushing out in the Q2 for inventory step up to fair market value. Warehousing, selling and administrative or WSA for the quarter was $105,000,000 up $4,000,000 sequentially, primarily related to the Whitco full quarter contribution, partially offset by approximately $2,000,000 in favorable WSA quarterly impacts not expected in the Q3.

Speaker 3

We forecast the 3rd quarter WSA level should approximate $107,000,000 and could lower towards $103,000,000 in the 4th quarter. In the 2nd quarter, we reported $9,000,000 of depreciation and amortization expense And for the Q3 of 2024, we forecast depreciation and amortization to be approximately $8,000,000 Now moving to operating profit. In the 2nd quarter, total company operating profit was $33,000,000 Respectively, the U. S. Generated $28,000,000 Canada delivered $2,000,000 and international contributed the remaining 3,000,000 in operating profit in the Q2 of 2024.

Speaker 3

Interest income in the period was $1,000,000 Now moving to income taxes in the Q2 of 2024, DNOW's income tax expense was 8,000,000 dollars 16,000,000 year to date. Our effective tax rate as computed on the face of the income statement was 25.8% year to date 2024. We estimate our 2024 full year effective tax rate will be approximately 27% to 28%. From a cash income tax perspective, we're not expecting to pay U. S.

Speaker 3

Federal cash income taxes in 2024 due to available net operating loss carry forward. Net income attributable to DNOW Inc. For the Q2 was $24,000,000 or $0.21 per fully diluted share. And on a non GAAP basis, Q2 2024 net income attributable to DNOW Inc. Excluding other costs was $28,000,000 or $0.25 per fully diluted share.

Speaker 3

Moving to the balance sheet. At the end of the quarter, we had a cash position of $197,000,000 and 0 debt. Cash increased by $9,000,000 in the 2nd quarter, driven by our cash generation from operating activities, partially offset by stock repurchases in the quarter. We ended the 2nd quarter with total liquidity of $579,000,000 comprising our net cash position of 197,000,000 dollars $382,000,000 in additional credit facility availability. Our existing $500,000,000 revolving credit facility extends into December 2026 providing DNOW with immediate access to capital under the facility.

Speaker 3

Ending accounts receivable was $403,000,000 a decrease of $7,000,000 from the Q1. Days sales outstanding or DSO was 58 days at the end of the second quarter, the lowest level since the Q4 of 2020. And inventory was $399,000,000 at the end of the quarter, a decrease of $29,000,000 from the 1st quarter with a quarter annualized churn rate of 5.0 times. Accounts payable was $278,000,000 at the end of the second quarter, a decrease of $61,000,000 from the Q1 primarily based on timing and volume of inventory purchased in the period. And for the Q2 of 2024, working capital, excluding cash as a percentage of annualized second quarter revenue was 16.4%.

Speaker 3

The 2nd quarter cash provided by operating activities was $21,000,000 $211,000,000 for the trailing 4 quarters ending June 30, 2024. We invested $3,000,000 in capital expenditures in the Q2 of 2024, bringing our 2nd quarter free cash flow to $18,000,000 We continue to execute on our share repurchase program that is authorized through December 31, 2024 and repurchased $10,000,000 under the program in the 2nd quarter. As of June 30, our cumulative repurchases under our $80,000,000 authorized share repurchase program totaled $67,000,000 Our commitment to growing the company through accretive organic and inorganic growth remains a key priority, while also having the ability to repurchase shares opportunistically as we use the tools in our capital allocation framework to generate attractive shareholder returns without deviating from our disciplined approach to balance sheet management. We continue to be debt free and keep cash flow generation a top priority. And with that, let me turn the call back to Dave.

Speaker 2

Thank you, Mark. Now switching to our outlook for the Q3 and full year 2024. In the U. S, we expect activity to be lower sequentially as U. S.

Speaker 2

Operating rigs and completions are expected to be muted due to weak gas prices in addition to customer budget throttling and tentativeness around upcoming U. S. Elections. In Canada, we expect growth from the Q2 as more favorable weather patterns afford increased activity. Internationally, we expect activities to be lower sequentially due to project timing.

Speaker 2

Taken together, we expect DNOW's 3rd quarter sequential revenues to be flat to down 5% from 2Q 2024 with EBITDA to approximate 7% of 3rd quarter revenues. And for the full year 2024, revenue could increase in the low to mid single digit percentage range compared to full year 2023 and our 2024 full year EBITDA percent could approximate 7% to 7.5% of revenue. Free cash flow for 2024 could approach $200,000,000 We have a legacy of supporting our customers for the past 160 years and the long term outlook remains strong as we are positioned to capitalize on market opportunities despite slowing activity advantaged by the solutions we offer today underwritten by our strong balance sheet. Our priorities are 1st, to finance and seize organic growth 2nd, to execute on strategic and tuck in margin accretive acquisitions and third, to opportunistically repurchase shares, a program which we intend to complete by year end. We will invest and grow our core market, capture additional revenues from the growth in investments tied to energy evolution and diversify our customer base by targeting revenue from additional industrial markets while driving efficiencies across our business.

Speaker 2

And finally, I'd like to close with where we began with our employees. I was fortunate to spend a couple of days in Wyoming at 1 of our brightest growth locations. We opened a new facility situated in the heart of the town designed with a customer focus set up for educating our customers on the products and services we provide. At the grand opening, we had over 130 customers, suppliers, employees, the Mayor and the Town Council, a true community event. 1 of the council members, an obvious fan of our team, shared some of his thoughts about who we are.

Speaker 2

Some of the sentiments shared which speaks to our culture as a whole include to be leaders requires creating lasting partnerships with our customers, our communities and our suppliers. The steadfast force keeps the wheels of each of our local industries and communities turning, infusing the lifeblood into our local communities and our company. We cherish, admire and celebrate our employees who are dedicated, skilled and passionate to delight the customer, who work tirelessly to help solve complex challenges. Our employees do more than sell steel products and the components to help our customers extract, gather, transport, process and market traditional and new energy to the world. Our employees build bridges, bridges that span not only between businesses, but also between innovation and tradition and between aspirations and achievements.

Speaker 2

We are building our bridge to the future and the solutions we offer today towards the promise of progress, the resilience of our communities and the spirit of collaboration. We are architects of possibility, engineers of growth, partners for sustainability and stewards of lasting impact. For all the women and men of DNOW, our opportunities are abundant to take DNOW to a bright future and to build bridges that connect the reality today to the promise of tomorrow. With that, let's open the call for questions.

Operator

Your first question comes from the line of Nathan Jones from Stifel. Your line is open.

Speaker 4

Good morning, everyone.

Speaker 1

Good morning, Nathan. Good morning.

Speaker 4

I think I'd just like to start off asking a question about what's changed for you guys over the last 6 months. We started off the year expecting some low growth, I guess, for the business. And now ex Wick Co, we're kind of looking more at minus 10. I think I know a number of drivers here in terms of what's going on in the market. But maybe you can talk about what's changed in your view of the market over the last 6 months and how that played out in terms of your order rates during the year and specifically in the Q2 and into the Q3?

Speaker 2

Okay. That's a good start off question, Nathan. In terms of what's changed, so far this year in fact for some time last year we saw rigs decline much of the year. I think they dropped about 20% in 2023 compared to the prior year and they continue to drop this year. As you know, that's one of the key barometers ultimately of the revenue opportunity for the company.

Speaker 2

In parallel to that activity or those metrics are completions trends. Completions have been down for several quarters. And if you recall over the last 4 quarters perhaps, not just DNOW, but industry participants have been calling for a bottom for rig count declines and completions, which just simply hasn't occurred yet. So we've seen further erosion in activity around completions and rig counts. And the current expectations are that may bottom in the second half of the year or early in 2025.

Speaker 2

So that gives us pause as to where we invest, how we resource the business, how we manage expenses and those things. But our view is we believe temporarily change. We think we've got some green shoots going or some bright spots going into next year, but that's been the kind of evolution in our thinking.

Speaker 4

That was actually going to be my follow-up question. You said that in your answer and you said in your prepared remarks as well that you think this is temporary. Can you talk about why you think it's temporary and what those green shoots are?

Speaker 2

Well, I think sure some things we believe are true or at least being talked about. Oil demand is growing for one thing. We think that accrues to our benefits. Export LNG opportunities are going to be growing in 2025 and 2026. We're well poised to capitalize on that.

Speaker 2

We think there is a tentativeness or a timidity by some about the U. S. Elections. And I think once the decision is made or the U. S.

Speaker 2

Citizens render a verdict, I think we'll see some tentativeness ease. Gas futures are expected to be in the $3 plus range and we'll benefit from that next year. Interest rate cuts, we think is I think most people think is imminent. That should grease the economy. Steel prices, while they've been declining for many quarters, we're starting to see some manufacturers talk about longer lead times and higher utilization rates.

Speaker 2

We believe that suggests an improved or a less lower product availability and we'll be well poised to run the supply chain better than the average participant out there, plus energy evolution as a key part of our long term growth strategy, we're gaining traction there. We expect that to grow. We had about $30,000,000 in energy evolution sales last year. We expect that to double this year. So those are the things that underpin our confidence going into next year.

Speaker 4

Okay. Thanks for taking my questions.

Speaker 2

You're welcome.

Operator

Your next question comes from the line of Jeff Robertson from Water Tower Research. Your line is open.

Speaker 5

Thank you. Dave, on the energy evolution, did you say $60,000,000 of potential revenue in 2024?

Speaker 2

I did. I did, Jeff.

Speaker 5

And do you have a view on based on what you're seeing from projects or customer inquiries of where that could go in 2025?

Speaker 2

We don't right now. I mean, what we think is what we're seeing is a significant ramp up in quotes, which to me is only suggesting more interest around budgeting and those kinds of things and we're seeing more orders and then more orders matriculate into sales in 2024 like we said. How that translates, What the timing is going to 2025? I don't think we have a good feel for that quite yet, Jeff.

Speaker 5

With respect to revenue per rig, I think you revenue per rig was about 15 or 1.5 in 2Q 'twenty four. It looks like in the U. S. It was quite strong. Are you seeing market share gains in the U.

Speaker 5

S? And with respect to consolidation, do you think as companies get together and maybe adjust their supply chain management practices that creates market share gains or maybe increased wallet share gains with some of your customers?

Speaker 2

Yes. I think the phenomenon that we're slowly beginning to see is as the our economy in our oilfield kind of focused space slows down, we're seeing some of our smaller competitors and they tend to be the competition we fight against day to day. They're being a little more careful. They're making some reductions. They're liquidating inventory.

Speaker 2

And as that's happening, our large customers are consolidating. And only a few distributors can adequately come up with the product requirements and pricing arrangements and geographic breadth to service those consolidated customers, we think that accrues to our benefit. So but now there's a period of time once these big companies come together where there's kind of a tiptoeing around and who's going to do what. There tends to be a delay in projects. Things get deferred.

Speaker 2

We believe we're feeling that right now. We think that will abate in the coming quarters. But so we think we're taking market share. We think long term those customer consolidations work to our benefit And we want to be poised to capitalize on it.

Speaker 5

And lastly, with respect to your midstream footprint, excuse me, with the Whitco acquisition, are you seeing increased activity as midstream companies look to try to debottleneck your gas network and I think Waha Gas in West Texas was way negative yesterday and there's obviously a lot of gas that seems to be stranded from a market standpoint. Is that driving activity that you think you'll see in 2025 and 2026 even?

Speaker 1

Yes, Jeff. This is Brad. I'll take that and maybe Dave or Mark can add additional color. But absolutely, we're seeing certainly with the associated gas produced in the Permian, with oil prices being well below $1 some challenges to move that gas to the Gulf Coast market. So we've seen a couple of announcements that's come out recently to help alleviate the large amount of associated gas there to help with additional takeaway capacity.

Speaker 1

And that's going to take probably a year to 2 years to add additional capacity. And I think the Matterhorn pipeline was delayed a little bit. I think LNG export capacity had some additional delays to be able to grow that out of the Gulf Coast with delays with Freeport LNG. So I think over the next 6 to 12 months, I think we'll start to see some more relief there. Really the question is, will the dry gas basins come back into play and be able to get some of that either dry gas from the Haynesville to the Gulf Coast markets?

Speaker 1

And can we get increased takeaway capacity from the Permian and Eagle Ford to the Gulf Coast markets as well. So what we think long term, demand sets up well for gas for us to be able to export LNG. And so DNOW sits in a good position to be able to capitalize on the midstream sector with our legacy business and with our Whitco business. We think we've got many of those basins I've mentioned as well as additional ones covered with our current service model and access to new customers that you mentioned that I mentioned earlier with WIDCO. Also think that in Canada, hopefully, we'll see some additional relief in LNG out of the West Coast there, maybe in the next couple of years.

Speaker 1

So again, long term, I think it sits up well. Short term, I think we're trying to alleviate some congestion and look for additional takeaway capacity to help drive incremental rig count demand tied to natural gas.

Speaker 3

Thank you, Brad.

Operator

And there are no further questions at this time. Mr. Brad Wise, I turn the call back over to you.

Speaker 1

Okay. Well, thank you for your questions today and your interest in DNOW. And we look forward to talking to everyone on our Q3 call, scheduled for November later this year. With that, I'll turn it back to the operator to conclude our call.

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