Q3 2019 Earnings Call
Good morning, and welcome to the Pro Petro holding Corporation's third quarter 2019 earnings Conference call all participants will be name listen only mode.
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After todays presentation, there will be an opportunity to ask questions to ask a question May Press Star then one on your telephone keypad to withdraw your question. Please press Star then too.
Please note. This event is being recorded I would now like to turn the conference over to San Sledge <unk> director of Investor Relations. Please go ahead.
Thanks, and good morning, everyone. We appreciate your participation in today's call with me today is Chief Executive Officer, Dale Redman as well as other members of management.
Yesterday afternoon, we released our earnings announcement for the third quarter ended September Thirtyth 2019, which is available on our website at www Dot Propetro services Dot com.
In addition, we also posted a presentation on our website summarizes our results.
Please note that any comments, we make on todays call regarding projections or our expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act.
Forward looking statements are subject to several risks and uncertainties many of which are beyond our control.
These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the FCC.
Also during today's call will reference certain non-GAAP financial measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release.
Addition to releasing our preliminary.
Third quarter results yesterday, we announced that the company and certain of its officers and directors have been named in a shareholder class action lawsuit that was filed in September 2019 and remains in its early stages.
The company has also been advised by the FCC that the FCC has opened an investigation into the company.
We will provide updates on these matters in the future as appropriate based on material developments.
The audit Committee has continued to review the matter as previously disclosed in the company's reports on form 8-K.
Filed with the SEC.
Importantly in connection with the review, our Board's audit Committee and management.
Have not identified to date any items that would require restatement of our previously reported balance sheets statements of operations statements of shareholders equity or statements of cash flows. However, the audit committee identified one unrelated party transaction that was not previously disclosed that.
Details of which can be found in our most recent 8-K.
Our management team continues to work closely with our independent registered public accounting firm and we hope to become current and our SEC filings as soon as possible. Although we do not expect to be concurrent in our filings prior to the end of 2019.
We believe the steps we have taken and we'll continue to take will result in a stronger pro Petro and allow us to focus even more energy on optimizing and growing our business.
Finally, after our prepared remarks, we will answer any questions related to our results and operations, so with that I'll turn the call over to Dale.
Thanks, Sam and good morning, everyone.
We appreciate you joining us for today's call.
We're going to focus on our financial results for the third quarter essentially did not hold a call last quarter, we'll make the review of our operations and recent initiatives, it's comprehensive as possible.
During this time, we've been very pleased with the impressive performance by our team, which has met supported by best in class customer portfolio operating in the Premier resource play in the United States The Permian Basin.
Our operating team and 10 in tandem with our customers continue to find ways to improve efficiencies.
Under challenging market conditions. These efficient operations produced some outstanding financial results.
Sam will share more financial detail said, but I would like to provide a few highlights for the third quarter.
Total revenue for the quarter was 541.8 million, a 2% increase from the previous quarter.
Net income was 34.4 million or 33 cents per diluted share.
Fair to 35 cents from the previous quarter.
And adjusted EBITDA for the quarter was 131.9 billion, an increase of 4% from 126.6 million for the second quarter 2019.
As I mentioned earlier, our efficiencies and the efficiencies of our customers have allowed us to continue to realize Paypal very favorable returns and stay utilized.
During the third quarter on a per effectively utilize crude basis, our team completed a record number of frac stages and pumping hours.
While also pumping record volumes of sand.
As it per stage percentage of approximately 92% also a record highlights our ability to perform at this level.
As we've said in the past our continued access to large high priority pads from our customers positions us to produce these impressive levels of throughput at the well side.
With that I'll turn it over to Sam to go over our financial results in more detail sand.
Thanks, Dale I would also like to thank our team and our customers for their continued efforts in the field.
Looking specifically at our sequential results for the third quarter.
Revenue increased to 541.8 million from the 529.5 million for the second quarter 2019, an increase of 2%.
The increase was primarily attributable to efficiency gains and beneficial changes in working mix.
Cost of services, excluding depreciation and amortization for the third quarter 2019 increased to 396.9 million from the 386.2 million during the second quarter 2019 generally in proportion to our increase in revenues.
As a percentage of pressure pumping segment revenues third quarter pressure pumping cost of services remained relatively flat around 73%.
General and administrative expense was relatively flat totaling 27.6 million as compared to 27.9 million in the second quarter of 2019.
Exclusive of 10.8 million of professional and advisory fees associated with our internal review $600000 of stock based compensation and $3.2 million of retention bonus and severance.
General and administrative expense was 13.0 million or approximately 2.4% of revenue for the third quarter of 2019.
Net income for the third quarter of 2019 totaled 34.4 million or 33 cents per diluted share versus the 36.1 million or 35 cents per diluted share for the second quarter of 2019.
Adjusted EBITDA increased approximately 4% to 131.9 million for the third quarter 2019 from the 126.6 million in the previous quarter.
Now turning to the balance sheet and capital spending.
We ended the third quarter with cash on hand of 109.2 million and total debt of 130 million during the quarter, we incurred capital expenditures of 87 million.
From spending on per Petros growth initiatives as well as maintenance capital.
Finally, total liquidity as of September Thirtyth.
Was 173.5 million, including cash and 64.3 million of available capacity under our ABL.
Capital expenditures incurred during the third quarter of 2019 were $87 million.
As of September Thirtyth 2019 per Petro had spent approximately $120.8 million on its verastem growth initiatives and expects to spend an additional approximately 58.3 million.
Through 2020 on the first three derisked in fleets.
This total includes a third turbine that the company has not yet agreed to purchase.
We believe a strong balance sheet and ample liquidity is a requirement to compete at the highest level in our sector and we will continue to be responsible stewards of capital.
With a view to maintaining a conservative capital structure that provides us flexibility through market cycles.
With that said, we will always keep all potential uses of capital as options moving forward with that I'll turn it back over to Dale.
Thanks Sam.
Now I would like to take the opportunity provide an update on the deployment of our upcoming drill stem fleet.
We continue to work alongside our equipment partners to ensure that our movement not only into electrically driven equipment, but also that our adoption of an innovative new pump technology is given the appropriate opportunity to succeed once it is delivered to the wells side.
To do this we have been pushing the limits of the new equipment as much as possible while that is still at our manufacturers facilities to avoid as much as possible having to optimize these fleets on the well side at the expense of our customers.
We have multiple parties involved from the generation of electricity all the way to the new long stroke automated verastem pubs, and we will continue to tweak and fine tune the entire package until we believe it is ready to perform at the well side.
Our expectation is to have the first fleet operational in the Delaware basin by the end of this year.
And the first deployment date will depend on the final adjustments, we're currently making.
Which could push initial deployment into early 2020.
That being said, where and close alignment with our suppliers and our initial verastem customer to give the new technology, the best opportunity to succeed.
We along with many of our current customers remained very excited about the dare stems opportunity to drive down well costs for our customers while at the same time, reducing our footprint and increasing our own operational efficiencies.
Next I would like to give you a brief update on the market and what we're seeing out in the Permian.
The back half of 2019 has no doubt been a challenge for our sector as we adjust and adapt to swings in activity and a change in approach from our customers.
The drawdown in activity has pushed us to intensify our focus on our own profitability and cost structure to maintain acceptable returns and utilization.
We expect the NPV space that we serve to remain very disciplined what their capital through the end of the year and into 2020.
That said, we currently expect to see a small increase in activity going into 2020, but we do not expected to come with an increase in per fleet profitability.
Because of this dynamic and the way the playing field has changed we're constantly looking for better ways to measure and position our company.
Over the past couple of years, we've also seen a hard shift in the Permian basin to pad development longer laterals and larger jobs volumes.
From an operational standpoint, the rapid transition we quickly discovered that one.
Reinvesting in our fleet to keep it young and high performing is a requirement not only to provide our customers with quality service, but also to allow us to make a return while doing so.
And second we must continue to work with innovative partners to pull new technology to the well side that address the evolving requirements of today's frac job and the needs of our customers.
As always our competitive position and success in the Permian Basin will rely on our ability to work with our customers and suppliers across the value chain.
We believe that on our ability to do these things has been the cornerstone to our success in the past and will remain so in the future.
Now our belief briefly turn it over to San before we begin our question and answer session Sam.
Thanks sale.
Before we open it up for Q and I would like to make clear that we're not able to discuss or answer any questions related to the internal review shareholder litigation.
FCC investigation or other related matters over.
While we are working to result matters as quickly as possible all the details we can share at this time with respect to those topics can be found in our in our SEC filings and disclosures.
However, if we would therefore respectfully request that you direct your questions today on our business and current operating environment.
That we'd like to open it up for questions.
Operator.
Thank you we will now begin the question and answer session to ask your question you May Press Star then one on your telephone keypad.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your questions. Please press Star then too.
Our first question today, we will come from John Daniel with Simmons Energy. Please go ahead.
Hey, guys good quarter.
Dale question for you.
Have there been any customer disruptions or customer losses as a result of the investigation process.
No Sir the.
Here in Q4 the.
Really this the budget budget exhaustion.
Seasonality and.
Yes, the softness of the market is today is the reason for what we're saying.
Okay.
Cool and then I'll turn that last one as a lot of your customers right now are going through the normal RFP process.
And I presume, it's reasonable to see your per fleet profitability decline next year is that a fair assumption just because of.
Where we are in the budgeting season in the process for bids.
Yes, I think it's early to make that statement, John but but obviously, there's pressure on pricing and every everybody's looking to reduce well cost and and were in those.
Discussions with our customers that this time.
Okay, I'll turn over to others and chime backend layer. Thanks, guys.
Thanks, John .
Our next question will come from tumble with Stephens incorporated please go ahead.
Good morning, and thanks for taking my questions.
On a timing.
So on pumping hours per crew it looked like it was a company record in Q3.
And so I wanted to ask if you could unpack some of the drivers for US there and then.
How much more room do we have to go to keep pushing those efficiencies higher forgetting about Q4 for a minute which.
We will be seasonally weak, but I'm thinking more into 2020.
Yeah told me. This is Sam I'll take that one you are correct on a on a pumping hours per crew basis. It is.
It was another slight increase.
A lot of that had to do with I guess, what we would call and improving job mix, we continue to speed.
Our customers.
Add more wells per pad.
We've we've we've migrated from what traditionally was.
One well pad operation out here in the Permian basin over the last few years too.
Many more.
Four and six well pad so during the quarter, we did see a higher percentage of three and four well pads as compared to two well pads.
That's just gives us more opportunity to pump more hours in the day.
Thank you Sam and just following up on.
What 2020 could look like Dale you mentioned in your remarks.
It it seems like utilization.
Could pick up some.
We enter into the new year I realize it maybe a little bit early to know exactly what that looks like but could you hazard a guess do we get back to maybe Q3 levels sometime in the first quarter or do you think the the acceleration next year, maybe a little bit maybe a little bit more delayed versus traditionally.
Yes, Tommy I guess, a couple of things there I think it's a little early to talk about.
No.
Full year 2020.
We have seen several of our customers delayed.
Lesions here going into the end of night team that will pick up in 2020, and that's really the uptick we're talking about.
Got a few of our customers that is a delayed completions, but continue to drill.
Through the end of the year, but a little early to to detail market conditions, and what that's going to look like full years 2020.
Okay. Thank you that's all from me.
Thanks Tommy.
Our next question will come from Byron Pope with Tudor Pickering Holt. Please go ahead.
Morning, guys.
Yeah.
He said the color on the remaining capital to be spent on the there's stem seats through 2020, just wondering if you guys could help frame how outside of that that drew stimulated capex. How you guys might be thinking at this point about capex as we as we step in to next year.
Yeah bar and I'll take a shot at that I mean, right now I think we quoted that we had around $58 million remaining on what the total total spend was going to be on these first through three derisked in fleets that total spend we outlined.
Previously was going to be around $180 million for all three fleets and that was.
That was assuming that we were to purchase the power source or the turbine for the third fleet of which we have not yet agreed to purchase we we still could obviously.
Make that purchase ourselves, but we're in talks with that customer in terms of of what will be best in terms of if our customer wants to own that third turbine or if we want to.
But on that on that remaining approximately $58 million. It's I can say, it's it should be relatively split.
Close to 50 50 between.
The last couple of months of 2019 and early 2020 in terms of how that capital split up so we will see a portion of it leak into.
2020, right now we don't foresee anything so substantial that's going to add to that to that number.
That does that answer your question.
Yeah. It does appreciate and I was just trying to think about kind of a baseline level of Capex as you think about 2020, but if it's too early to up to two.
It's really opine on that that's that's fine.
Sure Yeah, I think I, maybe help you out a little bit there I mean, we obviously most most recently have guided to maintenance capex on on active crews being between.
Six and $7 million on on an annualized basis per crew.
We would we would probably say that it's more realistic for next year to be at the top of that range.
Around $7 million per crew.
So that would be the baseline if you're trying to make an assumption on maintenance capital that probably use that $7 million per active crew.
Okay. That's helpful. And then just on the working capital front.
Nice improvement in receivables I didnt seem as though there would be any reason why Q4 would be a free cash flow positive quarter for you guys that have risen way to think about it.
Yes, I think I think thats reasonable I mean, we obviously can have some pretty significant swings and.
In a short periods of time on things like receivables.
But cash and liquidity or king.
And we'll be there will be focused on that through the end of the year and going into next year.
Guys. Thanks appreciate it.
Thanks Bye.
Our next question will come from Sean Meakim with JP Morgan. Please go ahead.
Thanks, Hey, good morning.
I want to Sean.
Could you maybe talk a little bit how pricing discussions with customers are progressing I'm just curious if there's any.
As they're trying to stay within their budgets is there any horse trading between volume versus price in the fourth quarter versus what could materialize early in 2020, just curious how youre thinking about that in terms of trying to help your customers get where they need to be from a capital perspective, but also putting ourselves in a good position into next year.
Yes, so that's a very fluid conversation and obviously, we're we're working with them.
In doing what we can to drive there well cost down.
Really focused at doing that at the field level, but that's carrying over into pricing discussions and.
We will continue to do that through the end of the year in and we've got a lot of customers, they're wanting to lock in some things next year and those talks are fluid.
But just like in our history, our ability to execute and be efficient on location helps those discussions and.
We'll continue to to work with them to get them, where they need to be and asked us to make a return on on a art.
Right and that's fair enough deal I appreciate that.
About the Dustin fleets.
Can you talk a little about that the factors that.
Could determine whether or not you end up purchasing that third turban or their customer does and I guess in light of the market conditions outside of these three fleets any changes with respect to expectations on a cash paybacks on those announced that we should be thinking about a.
Prior to what we've discussed previously.
No I would say no changes to to those discussions and.
Again, that's a very fluid conversation with the third turban turbine and.
We've got plenty of time to make that.
Decision between the two of us.
Our next question will come from Kurt Hallead with RBC. Please go ahead.
Hey, good morning.
When incurred.
Good to hear from me down.
So I appreciate that I appreciate the color commentary you guys have been providing with respect to some of the dynamics at play in the market and I just wanted to kind of come back around in.
Try to kind of help differentiate you know where were you guys are from an operational standpoint vis-a-vis you know some of the other competitors out in the marketplace. So when you guys talk about you know the that pricing dynamics and you guys talk about the ability to potentially find ways to reduce your cost. So wondering if you can just kinda give us.
Some some general sense on how that may or how you may see that.
So impacting say incremental or decremental margins.
You know from here and the context, a simple right in virtually every other instances, where we look at a service company you know when revenues are going down the initial phase usually.
Is.
Like 50% decremental margin because you can't cut cut cost fast enough and just wanted to give you an opportunity to kind of you know a talk about some of things you're doing that could potentially mitigate that decremental margin risk.
Yes, we're doing everything we can sit to.
Hang on to a margin.
And.
Just like any other cyclicality that we've been through a it's good to have great supply chain partners that help you do that.
And it's it's also great that your people on location.
Don't give way for your customer to look for reasons to.
Treated unfairly so those are the things we're doing a at this time.
The current Edassist, Sam I'll I'll.
Maybe trying to add on to that a little bit more I think I.
I think the last time.
We saw this specifically to pro Petro was probably a Q4 of 2017, where we saw.
Utilization dip going into the end of year, we obviously had a.
Had a decremental margin that year, but we had a pretty significantly improving job mix that allowed revenue to trend up so with with revenue most likely trending down.
Due to utilization in the fourth quarter. This year, I think theres, an opportunity where the decremental margin hit could be slightly more than than what we saw in Q4 17.
Although like Dale said, we're we're we're doing everything we can today and through the end of the year to preserve.
Reserve as much of that margin as possible.
Okay, and then Dan I appreciate you being a little bit kind of cautious on your commentary regarding the pace of activity going into next year, I guess I'm kind of curious just along lines of in maybe the indications that your customers as giving you in terms of when they when they plan to start getting active again.
Is that is that something that you feel is it's kind of like at the very early parts of of the year or do you think it's kind of a more of a gradual phasing throughout the course of the quarter.
Any any color on that'd be helpful.
I got I think thats, a customer by customer situation.
And I don't think you can draw a straight line to that that ramp and you know that theres some that.
Our telegraphing, it's it's going to be a quick after the first and others gradual so I think thats out with answer that question. Okay. That's fair and then if I can maybe just layer in one more just on the.
On the loss on a on asset disposals side, it looks like you've been running at about 6% of revenue over the course of past couple of quarters.
Is that something that will probably normalize at that level going forward do you expect that to trend a little bit lower.
At Curtis Sam.
It has it has undoubtedly been elevated.
In second and third quarters. This year I think previously we we had tried to outline that a lot of that was due in part to a rebuild program.
With the equipment that we had purchased from pioneer early this year.
We have since accelerated that rebuild or refurbishment program and and thrown some legacy equipment into the mix.
Fluid ends as a proportion of that number has gone down each of the last two quarters. There for I guess I would say, it's the a b the increase in that line item.
I'd say would be more due to a traditional sense and the fact that were.
Tiring equipment and large components earlier.
Earlier than usual to renew the life of those components and get them back working well, where we have a few things to finish up on that on that kind of accelerated refurb program for the end of this year. We're in we're.
Kind of in the in the works of evaluating of what that would look like next year are our hopes is to minimize that number as much as possible moving forward.
Okay, great. Thank you appreciate that.
Our next question will come from Chris Voice with Wells Fargo. Please go ahead.
Good morning, guys.
When it Chris.
I'm just curious.
20, 501 utilize leads and you're guiding to 18 to 20 in Fourq. You can you give the the number of fleets that you had crude in Threeq, you and expect to have crude in Fourq you.
We probably wouldn't speak to that.
Yeah, I mean, it's the the number of of.
So so the range of effectively utilized crews in the fourth quarter being 18 to 20, we will be crude in active in excess of that due to white space. The effective utilization comes down within that range.
Okay.
In terms of you know it's early thing that once you 20 would you expect revenue rebound in 128 to be driven primarily.
Then by just you know getting more work on the calendar for the crews that you do have active versus what are the prospects for fleet reactivations them.
I think the short answer that question is yes that increase revenue would come from increased activity and.
Like Dale spoke to earlier, we'll be doing everything we can from a pricing and cost control standpoint to.
Maximize margin below revenue.
Okay, and if I can just squeeze one last one in.
Do you feel like your pricing on a per stage basis is pretty much in line with the market in Threeq, you or higher and then in discussions with competitors I'd say consensus is that pricing is probably down 5% to 10% for for dedicated work does that sound about right you guys.
I think it's in line Chris.
Okay. Thanks, a lot.
Thank you.
Our next question will come from Stephen Gengaro with Stifel. Please go ahead.
Thanks, and good morning gentleman.
Oh I'm assuming.
Thanks, two things one quick the DNA has trended up the last couple of quarters any any guide for that as we go forward here.
And here.
Yes, it's it's mainly investigation fees I guess given.
Oh, that's showing up in a depreciate okay.
And in the depreciation amortization line.
Uh huh.
<unk>.
DNA, DNA or DNA, Oh, Dear DNA, sorry, depreciation appreciation and amortization.
It's just it's just mainly to expanded asset base.
Okay, and then as as we think about the yes your fold in the door stem fleets.
What's the impact how do we think about the EBITDA contribution for fleet. There I mean are we looking at.
Something similar to the existing freely that's the best way to look out in the near term or how should we think about that as we've given how the market has evolved here last couple of quarters.
I think though at this stage yet in line with with what we were currently.
Experience with our or other fleets.
And to be determined as Lee.
Identify cost savings.
And collaborate with our customers.
And then just as a follow up to that have you.
What's been sort of the conversations with customers around if weeks over the last couple of quarters is how is it evolving in are you seeing sort of greater interesting you just trying to get a sense for how you see that unfolding over the next year too.
Yeah, I think thats going to be a very fluid.
Situation and conversations to a and it in different parts of the Permian.
Conversations or.
Picking up because of some of the mandates in parts of those basins.
So.
<unk>.
We'll be able to share more as as we bring hours to market.
And Oh look forward to to giving more color then.
Okay. Thank you gentlemen.
Sure.
Our next question will come from Scott Gruber with Citi. Please go ahead.
Yes, good morning.
Owning Scott.
Still as you continue to test that there are some technology you would have you learned during the testing or is there any specific issue that needs to be addressed a ahead of deployment.
Yes, I think it's a little early you don't like to do.
The discuss many issues the software is great.
We're not Seine any major issues, there, which is very important and no alarming concerns at this point and looked very forward over the next couple of weeks of having that in our yard and.
Look forward to sharing more with you as as we move closer to having on on the web site.
Got it and then just on the last question around kind of general appetite for easily you mean, you guys have options through for three additional more three more diverse them fleets do you think you'll exercise one of those options and then 2021 or more.
So the market conditions are going to dictate that and it's not a decision that we rushed to make before June thirtyth of next year. So.
There's a lot of things will learn between now and then and.
Look forward to switch to that.
Got it and it just overall you know it's assuming the economics are still in the money is there any change in appetite on your behalf to pull the trigger on those options or would you still want to do so if the economics. So just are you still in the money.
Well, we'll we'll make sure that that our customer on the other side of that is is a a partnering with us to make that a good financial decision.
For our stakeholders.
And our just.
Got you guys I I guess I was I was coming out from the standpoint of deploying the capital.
To grow the business versus giving more cash or given cash back to shareholders in any change on that front.
Yeah, I think we'll be listening and and up to two to our shareholders and making that decision that the proper time.
And.
I think thats, how I would answer that.
[laughter] appreciate the color there. Thank you.
Thank you.
Our next question will comes from Vebs Vaishnav with Howard Weil. Please go ahead.
Hey.
So you have asked I'm not asking this assumes investigations obvious Baghdad, but can you talk about how other conversations that analyze CN bondholders regarding delays in Q.
Ongoing.
Yeah, Vebs, we're doing we're doing everything we can't and collaborating with all the appropriate entities to make sure companies in a good standing everywhere it needs to be that's about all we can comment there.
Okay.
All right.
Maybe I missed.
I apologize did you speak about like how should we think about the fourth quarter profitability right.
You talked about the number of seats, but it anyway, you can help us think about what the profitability could be in 14.
Yes, I did mentioned that a little bit earlier in just tried to make a quick comparison to our per crude profitability trend in 2017, when we when we experienced a slightly similar.
Drawdown in utilization.
So it's it's it's probably going to be a given that revenues coming down quarter over quarter. When it when it wasn't in 2017 that we could experience a slightly larger decremental margin than we saw in the fourth quarter.
Yes.
Oh no problem.
Can we can you help I just think about when we think about cash breakeven profitability sleek and I'm thinking about like.
What do we Dans SGN FSC, whatever you need to replenish fleet over the next nickel and duty as four engines and transmissions, what's that level of profitability bus fleet that is at minimum that you're required to be.
Gosh cash breakeven.
Yeah, I mean, we I guess I guess, we would kind of the define a fleet level cash flow is just simply EBITDA minus maintenance capex.
That should normalize for for things like fluid ends that you mentioned.
Okay.
I'm I'm not sure if we're willing to run the number of absolutely to breakeven just to stay active but those are those or types of things that were that we're working through a on a consistent basis to make sure we're measuring our business.
In the most appropriate manner, so that we can react to react to swings in the market.
All right, that's what I needed. Thank you so much.
Our next question will come from weaker Siad with Altacorp capital. Please go ahead and thank you for taking my question and Congrats said, Dan Sam So good quota.
Thanks in terms of your guidance regarding first quarter, you said profitability or you know mean beat me, maybe flattish is that referring to.
The fourth quarter profitability.
Third quarter profitability for the first quarter.
What car probably somewhere between at this point to the best of our ability to gauge.
Okay, and then could you it's now what the cost of fluid ends was in the third quota.
Oh, Yeah, Waqar I mean, we were with with the maintenance capital spend in the quarter. We were probably just off the top end of our six to 7 million range on an annualized basis.
And really all we can say I mean traditionally we've pointed to fluid ends you know being.
You know half for a little more than half.
Of that maintenance Capex number I can I can tell you that during the third quarter. This year it was below 50% of that number.
Okay, and say not normally you know the the loss of <unk> on disposal assets is generally a good indication of what the students costs could be that doesn't have to be flat quarter on quarter $31 million, how much of that would would be a fluid ends or what was on in that number.
Well well below half of that number due to what what I guess I mentioned earlier more a more traditional sense.
Of that line item and being our voluntary retirement of some.
A large components in pieces of equipment in this rebuild program that we talked about.
Yeah.
Great. That's all I have thank you very much.
Thanks recall.
Our next question will come from Tom Curran with B. Riley FBR. Please go ahead.
Good morning.
On a Tom.
When it comes to that active spread count you have just with pioneer.
Could you tell us what that averaged four three Q wherein exited the quarter and where do you have any better visibility on on.
Just that's specific demand into 2020.
Oh, Yeah, I mean, we we usually we usually don't quantify utilization or active crews and specific customers pioneer has been a great partner throughout this year in terms of utilization, we think they'll continue to be so going into next year and it's it's it's it's all on an individual customer by customer basis our.
How we're getting to activity early next year.
Are you.
Over the course of the quarter in terms of the churn you might have had within your active spread count.
Have have you already being able to exploit or do you see signs of being able to.
Take advantage of rivals.
Whose customers are becoming concerned about.
Their financial health or even viability as a going concern or are you already.
Poaching jobs here or there or do you expect that that type of opportunity.
To to ramp from here.
Yeah, Tom I wish it focused on the customers that were serving.
We're just trying to make sure we take care of their needs and that's really what we're focused on.
Alright, thanks for taking my questions.
Yeah.
Our next question will come from Harry Pollens with Bank of America. Please go ahead.
Hi, guys. You can you talk in more detail about your effective utilization guidance and helping it's going to understand your cost structure.
We expect any believe it or is that a 18 to 20 fleets effectively utilized on your totaled 27 deployed please thanks.
Yeah, Harry I'll take that one so just to level set we define a an effect fully effectively utilized fleet as working 75 days in a quarter or 25 days in a month.
So like we said earlier, there's there's many cases, where we can have staffed an active.
Through a number of crews in excess of our what we will call effectively.
Utilized cruise.
So knowing that this is the people business and our performances is mainly totally dependent upon the strength of our team, we'll do our best to hang on to.
As many key personnel in times like this when when when activity draws in so we will be staffed in excess of that.
Effectively utilize number that we that we quote or or or guide to their for.
Probably being margins being something like EBITDA margins.
Due to that.
Okay. Thanks, one more so on the second to Derisk them fleets have you talked about timing is with regard to deployment on those two.
So we'd expect those in the beginning of the year almost kind of the timeline there.
Yeah, it'll be they'll be spread throughout a 2020 or.
And we'll have a much better Sanchez, we rolled out but the first one.
Eric.
Got it thanks, guys appreciate it.
Thank you.
This will conclude today's question and answer session I would now like to turn the conference back over to Mr. Dale Redman for any closing remarks.
Again, we appreciate all of you participating in today's call and.
I have a great Thanksgiving.
And holiday season.
I.
Whose today's conference. Thank you for attending today's presentation and you may now disconnect.