Q4 2019 Earnings Call

I would not like to turn the conference over to Sam sludge Chief strategy and administrative officer, please go ahead. Thanks and good morning everyone. We appreciate you boss. We we appreciate your participation in today's call with me. Today is Chief Executive Officer Philip Globe interim Chief Financial Officer, Darren holderness and Senior Vice President of Operations, Adam Munoz yesterday afternoon. We released our earnings announcement for the fourth quarter and year ended December 31st, 2019 additionally last week. We announced the number of strategic actions to align our cost structure to better reflect current expected lower activity levels. These press releases are available on our website at w w w dot services.

Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the private Securities litigation Reform Act off 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've always listeners to review our earnings release and the risk factors discussed in our filings with the SEC also during today's call. We will reference service on gaap financial measures reconciliations of these non-gaap measures to the most directly comparable gaap measures are included in our earnings release.

Additionally management continues to provide information to its independent registered public accounting firm in order to allow it to evaluate the sufficiency and scope of the audit committees internal review page and Associated findings.

As well as the company's proposed remediation plan management is working to complete its preparation of quarterly and annual financial statements to allow its independent registered public accounting firm to perform quarterly reviews and an audit of the financial statements as of and for the year ended December 31st, 2019, the company cannot wage currently predict when this process will be completed the company also continues to work diligently to become current in its filing obligations with the Securities and Exchange Commission off as soon as reasonably practicable practical and it currently expects to do so prior to the expiration of the additional training. Granted by the NYSE on July 15th, 2020. Finally after our prepared remarks will answer any we will answer any questions related to our results and operations. However, we will not answer any

Friends with respect to the internal review the SEC investigation or our outstanding litigation with that. I'd like to turn the call over to Philip. Okay. Thanks Sam and good morning. Everyone else. We appreciate you joining us for today's call.

Giving the timing of our call as well as recent developments with the covid-19 pandemic in the depressed commodity price environment. We plan to focus the majority of the days commentary off the market and operational update, but I would first like to Craig and Craig to congratulate the petrol team on yet. Another strong finished close out a solid year in 2019 Tartine prude throughout 2019 that are strong employee LED operation and blue-chip customer base continue to foster a truly differentiated service offered. We will leverage these differentiating factors to compete in protect our balance sheet in today's rapidly changing Market with that. I'd like to turn it back to Sam for a quick Financial overview.

Thanks Phillip. I'd also like to thank our team and our customers for their continued efforts in the field that our employees daily service to our customers. None of what we do is possible. It's Phillip mentioned. We would like to spend as much time as possible today speaking with you about more recent developments. So I would like to refer you to our press release that we published yesterday for quarter over quarter and full-year financial, that said I would also like to highlight with a solid start to 20 20. We have had with effective utilization in the first quarter of 18.6 leads with strong efficiencies and a favorable job mix although due to declining activity in March. We no longer expect our first-quarter financial performance to meet correct consensus expectations would also like to take a moment to reiterate propetro strong balance sheet and capital structure.

As we announced yesterday as of March 30th, 2020, we had total liquidity of 193.4 million including cash of 143 million and fifty point four million of available capacity under the company's revolving credit facility, which had an outstanding balance of $110 million at March 30th. 2020, Although. Our borrowing base will be adversely impacted by the expected decline in our customers activity are disciplined commitment to executing projects with part of returns will also allow us to protect our capital structure.

With that said we continuously look for ways both internally and externally to protect the Financial Health of our company moving forward, Turn it back to Philip. Okay, Sam. Thanks. I'd like to turn and take a chance to give you a brief update on our doorstep project as we've previously announced off electrically-powered Thursday and Fleet began its first pad on January 5th.

the fleet

Successfully completed multiple stages one pad the some limited assistance from conventional fleets that were supporting the operation.

During this acclimation process. Our team saw promising developments from the Berenstain system.

Through close collaboration with our manufacture. We've made improvements to certain parts of the system.

Upstream of the Durst in pumps themselves, we witnessed outstanding performance from the electric motors the electric distribution equipment the power turbine the power the turbine powering the athlete and the gas delivery system.

In February our team along with a global decided to be best to remove the fleet from our customers location and return the fleet back to the manufacturing facility. So some modifications could be made to things like the software and the calibration the pump cylinders at the time. We believe this was the most effective way to are allowed to allow our manufacturing Partners the opportunity to make the adjustments to the equipment in a controlled environment. So we did not risk Interruption to our customers operations.

It also believe these modifications to be vital to allow us to provide an efficient service to our customers going forward.

As I mentioned earlier along with our first thirst em customer remain remain encouraged by what we have seen thus far from the system in the field. Although we were still early birth process of proving this technology. We have already seen early signs of prolong life of certain Expendable parts that we believe will eventually lead to a more efficient and cost-effective hours of operation. We also continue to evaluate improve and improve the system and its operation as we gather more operating data and have more experience with it at the Well site.

We're excited to see the first plate back in action after the most recent improvements as in recently redeployed to the website as we have previously disclosed wage options on additional Durst in fleets these options expire at different times through December 31st, 2020. If Global has indicated a willingness to extend the duration of these options is our evaluation of the new cleats continues, and we navigate the current market and in Industry uncertainty

Just as we have done with terrorists In Perpetual will continue to internal evaluate its own equipment offering by exploring Innovative tools that are safer more environmentally friendly efficient and cost-effective the Quest for equipment that is more purpose fit for the whales and jobs of today will be vital in our Arena to remain competitive.

Sam mentioned earlier we did see a very strong start to the year with activity beginning to drop off in March after the onset of the covid-19 pandemic and the sharp decline in crude prices long as both of these Dynamics developed are operating in sales team began to work very closely with each of our customers to understand how these are beings would affect their near and long-term plans.

It soon became.

May I have it in the completions activity would rapidly decline over the past few weeks. Our activity Outlook has been very fluid as as we always have our team remains in close contact with our customers the best position ourselves to remain active and viable that said we're experiencing severe negative impact on pricing for our services and activity as the economics for our customers projects have deteriorated substantially.

With the backdrop of these challenges, it will be very important for propetro to preserve its strong financial position through controlling cost internally as willing as well as having the discipline to step away from work that does not produce a positive return.

As we announced late last week, we have already implemented multiple cost measures such as right-sizing our Workforce reducing Capital expenditures negotiating lower pricing on Expendable life as well as internalizing certain services that were previously outsourced. We will continue to evaluate evaluate additional measures to assist this in further streamlining the cost structure.

From an employer standpoint the covid-19 pandemic is undoubtedly produced a very unique set of challenges to our business and businesses across the globe to ensure we were protecting the health and safety of our employees our customers and the community we have implemented various strategies and processes aimed at mitigating the threat of the virus to our employees and we will be monitoring and adapting to New Challenges moving forward.

And finally a blue-chip customer base is immensely important and challenging times these vital Partnerships. We share with our customers will help us navigate Market uncertainty off cuz we're Financial discipline and focus on the Permian Basin.

And with that I would like to open it up for questions Sarah.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the key to withdraw your question, please press start and to at this time. We will pause momentarily to assemble our roster.

My first question comes from Divina with Raymond James, please go ahead. Hey, good morning guys. I hope everything's okay. Otherwise, I guess I had a question. Maybe if you can give us a little bit more color on on the number of cruise maybe that are working today or would you have line of sight to or any color you can give us obviously it's a fluid situation and so not home, but just maybe any color you can give on on activity today.

Yes.

Praveen this is this is Sam. Obviously, that's you're you're exactly right. It's a very fluid situation and and it tends to change on a daily basis and sometimes multiple times within a single day. I can't tell you from from an effective utilization standpoint. We did we did enter the first the first quarter right around 20 ft long and and we and we exited we're looks like we're exiting March just under 17 fleets 16 fleets. Sorry from a from a monthly average wage. We we do think it goes lower from there. Like I said it it's changing on a on a daily basis almost but that's kind of the the trend that we saw throughout first quarter with with the last couple of weeks of March taking a taking a significant step down.

So that that that's helpful. And then I guess maybe can you talk about the thresholds on cash flow or even up or Fleet? Did you guys are seeing is necessary to keep a flea bath and and and how what do you seeing from your competitors as your customers or or asking for what seems like pretty steep pricing requests off.

Yeah, I mean it's hard. It's hard to see what what the what the competitive environment is in general right now because of how quickly things are changing and how quickly most of our customers are re-evaluating their plans. We can't tell you our our our goal moving forward is is is to remain cash positive right? There might there might be some more more Extreme Measures that that were willing to go to from a pricing standpoint that we haven't gone gone to in the past but not knowing the longevity of this downturn and and just really known not being able to have very much visibility across our customer base. We're we're we're going to do whatever we can to remain cash positive and and and keep as many members of our team through through keeping as much activity as we can in this environment.

Thank you very much, Miss.

Our next question comes from Shaun Meachem with JPMorgan, please go ahead.

Thank you. Good morning morning.

Can we maybe put some more parameters around expectations for your cost reduction targets? And so if we talk through variable vs. Fixed costs just trying to get a little more of a handle of how you think that progresses as we go through twenty $20. I think right now as we look at that, obviously we cut out capex new technology capex re-evaluating maintenance capex as you're probably well aware of our overhead is extremely low. So not a lot of money to be stripped out there. We've got our vendors working in coordination with us on lowering prices of certain equipment and services. We've got we've eliminated a lot of the

work we Outsource to

Bringing that in-house. So there are a number of levers were pulling right now at this time. And and again we're we're very concentrated wage were able to react quickly to the environment. We're in and we've got a plan that looks at the activity at various levels in in the various levers we can pull. Yeah, and and I I think I'll I'll I will add to that is that it it is both variable and fixed in terms of savings. We are seeking or we've already executed on Thursday. Just just as we were very effective and in years like two thousand Seventeen and eighteen scaling-up. We think we think that experience across our operating team is very helpful in in an interesting way and scaling down as well. We are dead.

Our our operating team is is very effective right-sizing the operation or whatever activity level that we are experiencing. So we're we're reacting quickly as we can. And and we're CP we're seeking savings across the entire value chain. Okay fair enough. I appreciate that feedback. And then could you maybe just reaffirm the contracts with Pioneer as well as for the three durust in Fleet. So those as firm as they were three or six months ago is anything else you can elaborate on with respect to the context of around those contracts.

Yeah, I'll I'll I'll speak to the the Pioneer contract quickly and might let Philip talk about the extent of options really really at the heart of the of our grew up with Pioneer was was to make our business maybe a little more structural in a little less cyclical into plan for times of loose both looseness and fighting this within the market that that contract is has has been functioning as we hoped it would to this point to allow Pioneers to adjust their activity as they see fit. So we feel we feel good about working with Pioneer through this time. We think we've got a great relationship there and took both sides are willing to be is uh-huh collaborative as possible.

As it relates to understand, you know working with a a great partner with a f Global they've been very responsive to our concern needs as your you will recall. I think the first there are stem fleet was deployed later than we expected. So we didn't get the amount of time. We wanted to evaluate it. They were they recognize that and told us they would be willing to think about extending a option periods given the month the time we needed talk to him again last week given the current pricing environment and the macro picture right now and oil change. I understand. The issue is Rose Capital is pretty much cut out and right now you're down to

maintenance

And they told me that they would push options out and work with us so that we both ended up in the in a place that that works for both of us, but they're very Cooperative with us to understand the situation and they're working with us closely on it. Well, thanks Phil just to clarify my questions really more directed with the customers for the three committed sleeps. I I would say this where were deployed now given the environment we're in and the reduction in that customers particular the number of fleets. They were running and what they're running now. I think it's a big tribute to durust em that they agreed with us that they wanted that Fleet on location. They believe in the technology. They believe that going forward we're going to be in the lower price World. They need new technology. It's more efficient less and people less cost to run and they're willing to to let us bring it out and continue age.

So we we are now deployed for the second time. So as far as the other commitments, I don't have enough knowledge. I don't know if they were ever firm commitments. But at this point we've got extensions on the three options and one and one in service and we'll see where it goes from there.

Our next question comes from Tommy mole with Stephen, please go ahead. Good morning, and thanks for taking my questions.

I just wanted to follow up with one more understand. So for what you have paid for and taken delivery of versus what you've got options on are there three fleets that you've already got paid for or is it just the one and then you've referenced the options a few times with any detail? You could give us on how many that that applies to would be helpful. Thank you. Yeah, we've essentially paid for the 3 during completes we committed for virtually all of that Capital has been paid as far as the options. It is for three additional interest in units. And as I mentioned earlier those options were due to play out through this year when we've got an understanding with a global that we can push those options out which we will do dead.

Got it. That that's that's exactly what I was expecting you'd say and that's helpful and on the power genocide. Obviously, you've got one set off that you've taken possession of it or deploying in the field. Do you own the power Ghent for the other two dures template that you already have or is that a team Adam just based on demand at some point in the future. I would say it's a TBD item. There is a a dialogue going on rather who's going to own that power. Is it going to be the operator long? Is it going to be the customer to your specific question? We have the one turbine that is currently an operation on the pad wear order simply it is and we have another turbine. That is June 4th that's available. But where we go from here on Powell I think is still an open question.

and whether it's going to be a

turban or another power source Still Remains to be seen

Yeah, Tommy I'll just add to that. We're seeing we're seeing some pre rapid Innovation on the mobile power side of many different types. So I think I think we're all you know us us in our in our customers that are interested in durres them are just fine kind of letting a little bit of this play out to see that if a if a if a more, you know, creative cost-effective solution comes to Market here over over the coming months. So that's that's obviously something we're watching very closely. But there's there's a lot of innovation going on in that Arena that that is that is only going to make those systems better. Yep, that makes sense of pivoting off to another topic here dedicated agreements.

For the customers that you've really got the close relationships with or have had historically under the dedicated type Arrangements.

How much visibility do you have on in terms of the the type of work that they're going to have for you even at a much reduced utilization which we all involved and you've indicated as much today just in terms of the fleet that you've laid down. But for those where you do expect us to have work, let's just say in the second quarter or even one month ahead if that's all you have. Is it still a dedicated type of arrangement where you've got pretty good insight? And what pads how efficient you can be all that or is it really just like you said earlier Sam evolving on a daily basis and hard to really predict.

Tommy this is Adam. I would I would say the relationships we have in the fleet that we currently still have deployed are definitely of that dedicated model. It's still with clubs that have been with us for long periods of time and showed commitment from you know, from the operation field level to the office level like set up and sandwich saying this this is a real fluid time. We live in and things are changing day by day. Sometimes multiple times a day. Like Sam said so visibility is really tough to judge right now, like, you know, just like that's our operators are being asked to fly with a seat of their pants, I guess and just operate as well as they can and home environment that we're living in and and basically keep focused on data day-by-day operation.

I think events are moving so quickly that you know.

There's there's talk of proration. There's talk of orange oil storage filling up that seems to be the general consensus. I have not sure that our operators know that they're but they're activity Thursday is going to be so at this point. I think it's amazing how much the world has changed in 30 days and I think at one point we thought we had something pretty good idea of visibility into the activity and had some confidence around it. But I'd have to say in the last two weeks things are evolving so quickly that it is very difficult to anticipate what activity level any operator is going to be going have going forward just given what's going on on the macro level.

All right. Thank you guys. I'll turn it back.

Our next question comes from Scott Gruber with Citigroup, please go ahead. Yes. Good morning.

I wanted to touch on maintenance capex. I assume with lower utilization. You can defer some external purchases and there should be some deflation on Parts as well. How should we think about maintaining a fleet going forward?

Yeah, Scott. That's a that's a great question. We had we had some learnings from from the fourth quarter of last year when we when we saw our utilization come down off of 1% We we used a lot of that extra equipment to to kind of redeploy it to the active fleets. We saw efficiencies go up down time go down and that's that's basically what we think produce those profitability numbers for us. And and in the fourth quarter. We also think that using that wage equipment to say increase the size of the active fleets is only going to prolong equipment life for a component items that fall into our maintenance capex engines flute ins power ends Transmissions. So we think that that will have a lot of opportunities with with some wage

Your equipment to manage the manage the purfleet maintenance capex spend down. I think I think our most recent guidance, uh in 2019 was when we're when we're very active we expect to spend about seven million dollars per crew per year in maintenance capex. We we think we can take a pretty good cut to that number. We don't we're still working through internally what what we think that number might be but there's there's there's no reason why that number shouldn't come down pretty significantly as long as our activity comes down.

It's still it's still in essence is a is a is an activity-based spend right? Because we will minimize if not, totally cut maintenance capex page on equipment that is parked and only spend maintenance capex dollars on equipment that is supporting the operation.

But it is safe to assume that you'd be able to defer some external purchases and maybe cannibalizing some parts on what's inactive and in addition to some education as well. And then it's on on the decision potential. Yeah. I think I think things like cannibalization are are kind of a last resort. We we wouldn't want to do that unless we had to walk but you're you're right. If we if we use this excess equipment on our active fleets prolong prolong the occult prolong the life of these large components, then we are in essence deferring maintenance indirectly by prolonging equipment life.

Just circling back on understand just to clarify assuming the first Thurston Fleet hits. The required Milestones are the customers committed to taking fruits two and three at this point or or is that at their discretion?

No, we don't we don't have any hard commitments for those Scott. But I mean just just the market in general right now.

There's there's just not visibility for for anything. Right? And I don't know if it matters what type of equipment you have off right now activity is declining so rapidly and I think the economics are our our customers economics are so threatened that it it's worth it. It's just might not matter. Are we still very encouraged by durston and do we still believe that it's going to take a different type of equipment to to play the game play? Yes. Well we keep searching for those tools no doubt about it. But but right now it's it is it's it's much more of a fight.

If I can just click one more and and sorry if I missed this earlier, but what's a reasonable adjustment you get that perfect for for 1 Q on the eighteen point six axis bank. It'll really all we can say right now is is because we haven't seen data for for March is that it is down. It is a good step down off of Q4 levels. And that's that's about all we can say at this point. Okay, appreciate it will turn it back.

Our next question comes from Georgia Larry with T P H & Company, please go ahead.

1 guys just wanted to piggyback on on Scott's question to make sure I'm understanding the kind of Maintenance question correctly. So, I wonder if you could frame maybe that same size of your active fleets you no point in time today or in in March, um and then sounds like as you beef up the fleet's with some of the idle equipment that you guys are maybe just going to run more pumps but pump at lower rates to defer that maintenance. Is there any that horsepower that's also being used is rotational or backup horsepower on the badger. Just kind of Wonder understand all those moving parts.

Yeah, George, this is Adam currently, I mean if you're talking current Fleet out there, we're probably at the 50,000 horsepower hydraulic horsepower perfectly don't location which already allows us the additional equipment to be able to operate at a more efficient and with less wear and tear on the equipment attached to your question you out with them are working closely with our maintenance Division and the rest of the operations team as far as developing per se you can call it a like a a leapfrog system with the spare equipment that wage to have here at the yard and I think Sam Led Led to this on the last question, but to kind of extend the calendar life of this equipment by rotating it from both the pad on the active leads and reducing the amount of where that each piece of equipment vendors on a job to job basis.

Okay, that's very helpful Adam.

And then you guys mentioned you want to stay cash positive if things get kind of as as bloody as it seems they might and this against this macro backdrop. So does that mean I am in y'all size is that keeping annualized even above wherever that maintenance capex level settles out or do you think about that through a different strategic lens? Just curious you think about cash flow positive? Yeah, George when I think I think when you hear us say cash positive that's that's Eva. - maintenance capex at the at the fleet level. We obviously have you know overhead to account for outside of the fleet level as well. You know, we're doing we're doing our best to to account for that kind of more fixed cost yet as activity fluctuates. That's that that calculation continues to be a bit of a moving Target. But in essence the end goal is to remain cash positive, right? We don't

We don't have much interest in in burning cash just to keep equipment to work. And I mean that that said we think that in times like these it'll be the more efficient pressure Pumpers that will really show the best because efficiency on location gives you the same opportunity to make even in there for make cash with the fleet. So we come from a from a pretty good starting point on a relative basis across across across peer group and we're trying to take advantage of that right now to not only allow ourselves to produce a positive return at the fleet level. But to let's stay active in two thousand and two

You know pose a very strong value proposition to the customers that that are going to stay active.

All right. Hope all sneak one more in if I could you guys have, you know, your point of blue-chip customer base, but also give me access to public and private operators is customers is just curious if there any notable differences in Behavior between the public customer base versus the private customer base, or are we just all kind of in the same boat at this point all on the same boat rowing Upstream, they figured that was the answer, but I thought I'd ask. Anyway. Thanks a lot. Thank you.

Our next question comes from Chris Valley with Wells Fargo, please go ahead.

Thanks. Good morning.

Morning, so just to kind of follow up on some of the Activity questions, you know, totally understand the lack of ability, but I'm sure you're you know, tracking your customers announcement connectivity issue and having conversations. I'm sure you're aware some incremental costs are likely to come if you're to only add up the incremental Fleet drop that you do have visibility for can you give a sense of how much that might be the 16th?

the your

Think about what what else do we have visibility for that might drop? Yeah. Yeah goes on, you know, their public announcements that have customers are our conversations you have. Yeah. It's just it's just two floors quantify that right now. We it is there's there's significant downside to the 16 number. I can I can tell you that but but quantifying that is is fairly difficult time. So several of them have come out with multiple press releases on Capital reduction. So it kind of gives you an idea of just how fluid it is and how long it's sediments are changing, you know, if not weekly getting to be daily right now. So it's very hard to get visibility especially the stories fills up that could change their whole outlook again, so

Sure. And then on the pricing side, so obviously the doctor Fleet and whether you can cover your task process a function of efficiency as well and you got you know, generally it's a high-end autistic Spectrum. But if we just think about the price level itself, can you give some color on where Leading Edge is evolving to change cord of a quarter or where it stands compared to 2016 levels?

It's a it's a pretty wide range. As you know, Chris. We we do our best to to treat every customer on an individual basis. So given that we had a range of surprising and profitability within our own customer group to start with. You know, I'd hate I hate to to just send over simplify and stick an average on it off. I mean everything is is definitely moving down. I can tell you from from just say I mean, we've taken a few steps and pricing here we had we had some small shops and 2 four of nineteen down and we had some some a couple more small steps and in q1 of this year down. So it's it's a it's a as we've said before it's a very fluid situation and and you know, we we continue to work those numbers on a daily basis as we as we continue to alter our call log.

Structure and pass as much of that along as possible to our customers.

Okay, and one more at least trying to call you mentioned, you're boring dates will probably be adversely impacted partly blue to a receivables Quantified wage package. Is there a range?

The borrowing base is just basically tied to receivable, you know, roughly 85% of receivables and there's activity goes down to you know, the the bar on the borrowing base will fall of that. So

Yeah, it's it's it's going to be a direct function of activity Chris. I mean, you know, we're going to work with our lenders as best we can in this process.

All right, that's it for now. Thank you.

Our next question comes from Chase Millville with Bank of America Securities, please go ahead. Hey, good morning. I guess maybe follow up a few questions. We've kind of had about, you know, the current environment, you know, we've seen some press releases from a few emps about you know, basically halting completions, you know for a month or some through the end of the year off. So, I don't know if you could maybe just kind of characterized what you're seeing from your customer base about the potential for them to Halt completions. Do you think that these are more one-offs it's going to be more widespread just your general thoughts because you are having conversations TPMS away or not.

Literally seeing probably all the above. Obviously. One of our customers is out with a press release talking about a holiday on wage activity and that's changed more than once. We are getting signals that given that the pipelines are now starting to get a signal and maybe oil isn't going to flow that.

It would be likely the completion activity would continue to go down. So but it's all over the map right now. One thing you can say money is a general everybody's activities down who's going to go lower or who's going to stop is is just not a no way to determine at this point.

Okay. All right, appreciate the color. They're coming back to the dearest in Fleet. I guess, you know when you when you took the wonderous didn't Fleet, you know out in 1 q and did some modifications were the modifications related more to cost a missions or efficiency. Like what were you trying to improve?

This is this is Adam Chase. It's primarily on increasing the efficiency of how efficient the equipment ran on location more. So like adjustments the big one was adjustments to the software and how efficient it calls the pumping mechanisms or or each cylinder to pump on location on location. There was also some minor mechanical changes to the the units as far as helping that unit perform and and achieve its maximum performance and Chase all the national added that

You know aside from you know, Perpetual is global and our and our customer. They're working extremely well together up Upstream of the pumping units themselves, right? If you work back Upstream from from the pump trailers to the electric motors to the you know, electrical distribution equipment the turbine things that Philip mentioned in his in his in his remarks, we saw outstanding performance in that area of the system. There were some minor tweaks that we had to make along the way uh, but just just the electrical system itself performed very well.

Okay.

Right and one quick follow-up on on the system, you know, there was one of your competitors put out a you know, a paper and and talked about, you know, electric crack versus Teenage GB and kind of argued that the emissions profile for tier 4 GB was better with the elected greenhouse gas emissions. I guess maybe you you this is the first public conference call that we've really had. We, you know heard from anybody with electric Fleet since that's come out. So I don't know if you have any comments about, you know, tear 4GB vs. Electric and welcome you're looking at converting any to your poor dbgt, you know down the road or you're going to you know, just go home electric, you know.

Yeah, I mean and there there there is something to that here for d g b conversation and and I think everything in that paperwork factually, correct. And and is that something that we're looking at as well? Yes, and we we think you're going to need multiple tools because at the end of the day, we're we are both are providing a service to a customer and and most of our equipment decisions today have been fairly customer LED or demand-driven month. So if that if if if something like a tear for is is something that's that's asked of us by customers that we have a good working relationship and no doubt. That'll be something that we will work towards our our move with Dura stem and mainly electric was very was very customer-driven in itself and we think as as dead.

Benefits and it's in its own way. Yeah. I don't think I would link.

A turban as the power source for durust em, that was just our election at that point for that power source is as I appreciate am Global will soon have a power generation system that will actually have a emissions profile equivalent to or lower than the office or for dual-fuel. So there are multiple options to generate power. But I think that paper was probably referring to the turbine generating the power pack independent of the dura stem product.

Got it. Okay. All righty makes sense. I'll turn it back over make sure.

Our next question comes from Steven John with stifel, please go ahead. Thanks a good morning gentlemen.

Two things. I want to just touch on and the first rightly or wrongly. I think a lot of investors sort of think about propetro and think about Dale and the relationships in the market etcetera as you go forward your how do you manage the relationships and how the customer discussions Kong this point? And can you can you give us some color and comfort around that?

Yeah.

I'll take that and and Adam might have something to add. You know, we we contacted all of our customers the day of the release about Dale. The one thing I can say about Dale as he he found it a great company that great people and then put him to work with some great customers and through that process the interaction with our customers happens at multiple levels right now. And while while Dell was integral in getting the customer keeping the job has been off the efficiency and the effectiveness of the petrol employees on site known location. You can only get a job and keep it if you're performing so I think a customer for very sad and disappointed to see Del leave had great relationships with them, but first and foremost, they focus on the business and they're they see no dead.

Change in terms of morale attitude and execution Adam. I don't know if you have anything else. I mean, I think you hit it on the the head right there Philip. We definitely did all of the agriculture here propetro that continues to survive even even through these tough times, but I would just second with Philip and mention the relationships are up and throughout every customer we have at the field at the field side as well as in the offices and and at the higher level so the safety and the operational efficiencies that our cruise perform up there just been keyed at the end of the keep those customer relations strong and moving forward.

Great now thank you. I appreciate the color and I guess as a follow-up, how are you managing the the Personnel in the field? I mean obviously activities coming down your your work and keep it cost structure low, but but it does seem like the efficiency of the cruise is tied to the experienced employee base and they think if I remember correctly direct your attention racer are very very hi. How're you managing that process?

Yeah, I mean Steven, it's tough. Right. I mean we we we truly believe that our biggest assets are are people right we can all at the at the end of the day all the pressure Pumpers we can I find the same type of equipment if we want to but it is the people on location at the Well site that that make us different on a daily basis so long as activity changes, you know our our focus on who those key players are within our operating teams almost intensifies, right? So if you are if our Personnel offering has to shrink with activity, it's not as simple as as the crew that parts that those people that does people aren't need anymore. There's there's there's a constant analysis across the entire company of who are who are our best teammates birth.

You know who helps us?

Protect our culture and our operation and it's it's a it's an ongoing iterative process as we learn more and more about our activity levels.

Great now thank you for the for the answers. I appreciate.

Our next question comes from Kurt with RBC, please go ahead. Good morning, everyone good morning and welcome to the conference call and I hope everybody as well and healthy, excuse me for my home, of course this morning. I just had a couple of questions here. So, you know in the context of the Dynamics of play in the market, we all know that it's very difficult to predict exactly what's going to happen with activity. But if we were to say, let's say practically declined by 50% on a year-on-year basis in the Permian. Is there any is there any superpowers that punk as to to offset that kind of the car?

Just their outstanding efficiency on the location. You know, I think it's activity goes down. You're looking for the most efficient Pumpers. We're not the cheapest and we're still working. So I think people look at the full value stream and not just price appreciate what we're doing and we can do it with fewer people and fewer fleets. So I think we we do have a differential Advantage there. So,

Yeah, and and I mean Kurt just add to that you mentioned superpowers. Nope. Nobody in this environment has superpowers what what what we've developed from an operational efficiency standpoint as a total Testament to our operating team and our people that that is that is harder and and we're going to be leaning on that hard to to to try and you know, Iraq posed great is greater value as we can to our customers.

Okay, thanks for that second second follow up with you talked about some pricing pressure and that obviously you're not the cheapest in the marketplace. We're aware of these letters that have been sent around by varying peacock is asking for 25% discount. So I'm assuming that you had received those letters as well. So is that the kind of magnitude of pricing pressure you guys are facing?

I mean that's those are those are the type of asks. Yes. I mean those those those rumors and those letters are are true. You know, they're looking for Collective savings across projects. I think so to say that there's a lot of pressure Pumpers out there that are even were even making 25% margins coming into this is quite the stretch. All right. So we're we we plan to stay at this point as possible to stay cash positive. Like we've said multiple times earlier how low we will get where where where we will go with individual customers kind of remains to be seen in the still bit of a moving Target.

gotcha, and

I know you guys mentioned you're very lean on overhead. But we've seen a number of companies, you know furlough employees and and we've seen Executives take take pay cuts off and so forth. So what kind of what kind of flexibility do you have on sg&a?

All the above and we're talking about all of it will be implementing measures. I'm sure in the near-term but everything's on the table the first and foremost, we've got a size correctly with with the activity that we think we're facing and we need to anticipate various activity levels should be ready to respond think that's the one of the unique attributes. We don't have to figure out what district to close down what facilities to shut down what's employees to move around 5 will be we've got it. All right here we can respond very quickly. We've been thoughtful about how we've done it and you'll probably see more activity in the future as things continue to evolve.

But everything's on the table. That's great. I have I have one more it's going to maintenance capex Sam you mentioned historically about seven million dollars a month for active crew per year and you're looking to to reduce that to what magnitude do you think you can reduce that maintenance capex as a 20% 25% Can you give us some general senses kind of or where you're looking at Target? I mean, I think I think 20% would be the starting point. We think we think there's some things we can do to do that near-term and we're wage goes from there will be you know, we'll have to dig a Little Deeper maybe get a little more creative to to go from there. But I think I think your number you quoted there. I think 20% is a good starting point.

And then cash positive that adjusted ebitda less maintenance capex, or is that the even when you account for the fluid ends minus capex, it's it'd be adjusted wage minus maintenance capex. I mean fluid ends are in the maintenance capex. So it's kind of it be you'd be getting to the same number kind of either way. Gotcha. Okay. Thanks for that. Appreciate your answers. No problem.

Our next question comes from car side with Ulta Corp Capitol, please. Go ahead. Thank you and a couple of questions here. One of the turbine that you ran for the First Fleet we're using field gas, or was it seeing G or LNG?

Yes, this is Adam. Yeah, the first year she was actually supplied by Flair capture with the with a customer. We have it out there with compressed into CNG and discipline to location. Okay, great. Secondly of your Fleet active, please. Let's say around February how many of them were off the the but doing 100% off your meeting hundred percent of your customers pumping needs.

So small, it was a pretty small number. Obviously. We're we're sold provider to Pioneer and it's it's, you know, maybe two or three other fleets with small customers.

Okay, and then what was the q1 capex?

We don't I don't I don't have that number in front of me right now with car we can we can follow up on that later. We'll have that number for you and another six weeks or so. Okay. And what is your current or last number of men friends that you had?

How many fleets down are we I mean, I think I just think that the only number I quoted that we were comfortable quoting was that the exit rate for q1 March wage was was in the ballpark of Sixteen fleets average, right? Oh, it was it was already it was already below that at the end of March if enough but is the number of men fleets and number of higher wage is fully utilized number or it's supposed to be same. We're we're right sizing in real time. So hard to say, okay fair enough and how many active cementing units do you have today?

I think in q1.

Sometime in February. We were around 25 totaled.

Okay, is the cementing units going to follow the the recount pretty closely as well or is there something unique about you know on the same side as well? I think you'll see you'll see that that that run in parallel with the Permian recount.

Okay, that's all I have think sir.

Our next question comes from Blake Gendron with wolf research, please. Go ahead.

Hey, thanks for squeezing you in here wanted to Circle back. I'm working capital. It was a source of cash and fifteen and sixteen wondering if you expect that this year and then do you anticipate any you know major collection issues or potentially, you know bad debt risk as you move forward here. Just giving your customer base.

Yeah, I just say with the blue-chip customer base. Yeah, I think that takes our our bad debt risk down to a relatively low level and you know, as long as we do move through through this period of time and you know work, you know, managing are working capital smartly will be definitely something one of the tools in our in our kit off.

Got it. So if we assume that, you know operating cash flow doesn't go to zero here the leveraging is that the primary focus of this point.

So yeah, I mean, I mean, I think you'll you'll find it. Our debt balance will go down.

To maintain and stay with them, you know to stay within our borrowing days. We're going to try to

Not not like the capitalist part of our agreement. So yeah, we will use cash to pay down debt to to a certain level to stay within the borrowing base wage. Okay, and I know you're taking the capex question offline. I would assume there's some growth capex that was in the first quarter. Do you have a target for twenty twenty four for total Pro scat packs of this point total growth gross. Sorry, gross writes a lot of its variable because of the maintenance aspect of it. So that would that would be hard to pinpoint.

Okay, just to save this here. He might well, I mean, I mean probably by the time we we we host another call on the lake we'll we'll have we'll have some hard fast growth affects numbers and we'll have a better estimation than the capex at that point too. It's just it's just our like right now down down significantly is all we can say at this point.

I got you. Okay, just to finish up some pretty interesting commentary on on you know, the workforce moving around I would imagine your Workforce reductions most recently you're having a mix and match maybe some of the the the Legacy cruise. I was wondering if you could give us a breakdown of how much of your field crew is is Legacy propetro versus Pioneer and then maybe some of the considerations with respect to how you're approaching Workforce reductions moving forward. Are you you know trying to keep cruise together as best you can or you trying to mix and match just given that you know, potentially on the upswing it'll be easier to attract some some money back. Also, you know with your agreement with Pioneers there a certain, you know specific crew members or or crew configuration that you have to maintain to keep working with those guys.

Blake no, I would just say that like Sam mentioned earlier in the car were keeping the the Personnel that best fits our organization the culture that provide the best providing a service to our customers out there in the field. Whether that's Pioneer or Legacy propetro guys. I mean, I would say it's a mixture of both. We've got a lot of great people that work for us off and but no, I don't think there's any

number you could say for each one. That one's higher than the other.

Got it. Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Philip go for any closing remarks. Okay everybody. Thanks for calling in sick. But I'd like to end the call with the thought that we are very differentially positioned. We start with the people many of these people started with the company when it began. They know how to scale-up. They know how to scale down. We've got concentration which is working for us in terms of like a quick to react we don't have to do a lot of evaluation of different operating areas and what's going to survive and what's not likely to make it and walk in the Permian Basin and while it may be going down it'll probably continue to be the most active Basin and when things come back, it's probably the Basin that's going to respond the fastest a phone number.

We're going to be for the position to take advantage of.

So thank you everybody and we'll look forward to the next quarter call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.