Q4 2020 ProPetro Holding Corp Earnings Call
Good day and welcome to the perpetual holding Corp, fourth quarter, 'twenty and 'twenty conference call on.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on <unk> touched on phone to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Sam Sledge Chief strategy and administrative officer. Please go ahead.
Thank you and good morning, everyone welcome to perpetual holding.
Perpetual holding fourth quarter and full year 2020 earnings conference call.
Currently all participants are in a listen only mode question and answer session will follow management's prepared remarks, if and.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder, conferences being reported.
Thank you and good morning, we appreciate your participation on today's call with me today is Chief Executive Officer, Philip Cove, Chief Financial Officer, David <unk>, and Chief Operating Officer, Adam and Yes yesterday afternoon, We released our earnings announcement for the <unk>.
Fourth quarter and full year 2020. 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.
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 and we advise listeners to review our earnings release and risk factors discussed in our filings with the SEC.
Also during today's call, we 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 finally, after our prepared remarks, we'll hold and answer a question and answer session with that I'd like to turn the call over to Philip.
Right, Thanks, Sam and good morning, everyone.
Well after successfully navigating the onset of the pandemic and the oil price collapse in 2020 and.
And seeing and hopeful signs of economic recovery 2021, and starting to look a lot brighter.
As the year began activity picked up oil prices, we're approaching pre pandemic levels and the vaccine rollouts and started well it could possibly go wrong.
And then last week and have to cold spell put a deep freeze across a large swath of the country severely impacting people's health and safety as well as the ability to conduct operations, particularly in the Permian basin.
It was not exactly the start to the year, we had hoped for.
However, some things never change like first responders answering the call for help.
And the resiliency of our employees to stand ready to work with our partners and customers to respond to the needs of our community and the continued need to supply energy to our larger community.
We're thankful for their dedication.
Oh and also like to once again, thank all of our employees for their continued efforts and following health guidelines to promote a safe work environment not only for themselves, but also for our customers supply chain partners and other stakeholders we.
We appreciate our medical workers and first responders here and the Permian basin for their selfless sacrifices they make day in and day out to ensure our wellbeing.
Turning our attention to the fourth quarter, we benefited from a continued steady increase and customer activity levels during the period.
We were also pleased to set new operating efficiency records for pumping hours per day and downtime.
Our ability to quickly redeploy high performing crews combined with further efficiency enhancement made a significant difference and our sequential financial results for the fourth quarter and we expect activity levels to continue to increase as we move through 2021.
Additionally, the team continues to focus on disciplined deployment of our assets to ensure we only pursue profitable work it is cash flow positive.
While we continue to have excess equipment availability for deployment.
We will not reactivate equipment without adequate pricing.
Patiency targets and expected operating margins. This discipline is critical to the success of the oilfield service industry.
Our best in class operational and safety performance was on full display yet again, and the fourth quarter and I want to thank all of our team members for their relentless focus on executing at the wellhead.
Operational efficiency is the most important differentiator and oilfield services and.
And customers, who remain focused on utilizing the highest quality crews with the most reliable.
Available and the industry.
Our proven track record of quickly and effectively responding to the needs of our customers continues to differentiate pro Petro and the marketplace.
Our customer focus culture has allowed us to maintain market share at consistent levels throughout 2020.
Which we expect to continue into 2021, while also remaining cash flow positive.
As the macro environment improves through the remainder of this year remain fully committed to improving margins and creating shareholder value.
Third and fourth quarter, we were pleased to generate free cash flow once again.
Outgrow, our cash position to almost $70 million at year end and more than 25% increase from the end of the third quarter.
Looking back at the past year I'm extremely proud of our team came together to work even closer with our customers and as we manage through one of the most difficult times and the history of the energy business.
We quickly adapted to a new environment by lowering our costs to ensure that our customers continue to operate and the financial level that it was appropriate for them.
E&P customers benefit from service partners that share and their interest and pulling through the downturns together as well as well as making investments for a more efficient and sustainable supply chain.
But the downturn now transitioning to more of a recovery the impending reinvestment cycle further separate winners and losers and the U S pressure pumping and industry with only the highest quality service providers and able to invest and next generation lower emission equipment as a result of their customer focus and mutual.
Beneficial relationships and.
Additionally, our debt free balance sheet allowed the company and remained strong during the COVID-19, and oil price crisis of 2020.
Our conservative balance sheet and capital discipline served the company, well and 2020 and disposition pro petrol to consent continue to seed and this ever changing energy industry landscape.
With that I'll turn the call over to David to discuss our performance.
Financial performance, David Thank you Philip and good morning, everyone.
And now moving to our financial results, we were pleased to post higher revenue and adjusted EBITDA sequentially and generate free cash flow for the fourth quarter more.
More specifically total revenue in Q4, 'twenty and 'twenty was $154 million versus the $134 million for the third quarter and increase of 15%, which was primarily attributable to increased activity levels.
Effective utilization for the fourth quarter was nine six fleets compared to eight and a half fleets.
And the third quarter of this year.
Due to unprecedented extreme winter weather and our region recently, we are now expecting first quarter effective utilization.
<unk> nine and a half 211 fleets down from our January guidance of 10, and a half 211 and a half fleets.
And this single event caused more weather related downtime than we've seen and the company's history.
Our team our customers and our supply chain partners are working hard and have reestablished our work cadence prior to the snow storms and as of this morning, we are at pre storm levels with 11 fleets working.
Cost of services, excluding depreciation and amortization for the fourth quarter was $116 million versus 100 million and the third quarter.
With the increase driven by higher activity levels and the fourth quarter.
We've been able to continue to reduce our cost through innovation and technology working in concert with our supply chain partners.
For example, we are utilizing our real time data analytics with advanced condition monitoring with our global engine manufacturer.
This leverages their global expertise to help us reduce failures.
Many of these initiatives utilize cloud based real time data acquisition and analytics of our mission critical supply chain partners that have deep expertise and resources well beyond hours to invest and the latest and most innovative solutions for our benefit.
Our team sweat the details and our results benefit from this focus.
Fourth quarter general and administrative expense was $20 million compared to $22 million for the third quarter.
Excluding nonrecurring and noncash stock based compensation and both periods G&A decreased 12% from $17 million and the third quarter to 15 million and the fourth quarter.
Our net loss for the fourth quarter was $44 million or 44 net loss per diluted share versus the third quarter net loss of $29 million or 29 net loss per diluted share.
And Q4, we incurred an impairment expense of $21 million related to the retirement of approximately 150000 hydraulic horsepower of tier two conventional diesel pumping equipment that we announced in January 2021.
Finally, adjusted EBITDA was 24 million for the fourth quarter compared to $17 million for the third quarter, a sequential increase of 37% with incremental adjusted EBITDA margins at 31% highlighting our operating leverage coming off the third quarter.
Adjusted EBITDA margins improved almost 250 basis points and these improvements resulted from continuous improvements and maintenance practices reductions and nonproductive time on site high pumping times per day by our fleet and supply chain and logistical efficiencies.
Additionally, discipline on the deployment of our assets and our lean and G&A profile also contributed to our improved earnings and cash flow.
Yeah.
As Phil noted earlier, our team understands that we cannot deploy assets without generating adequate returns.
This discipline is what enables us to remain cash flow positive during what remains a highly competitive environment.
Other oilfield service companies have chosen the path of deploying assets without adequate returns, which is unsustainable and our views.
While our top line may not increase as dramatically as the industry. We are willing to sacrifice short term revenues for more durable profitability.
Our customers understand that in order for us to deliver industry, leading performance, which yields top tier completions efficiencies for their operations. We must also deliver returns to our shareholders and be able to reinvest and equipment that delivers lower emissions completion solutions.
Regarding capital expenditures, we incurred $21 million and capex during the fourth quarter.
Mostly related to maintenance of equipment.
Capital expenditures incurred during 2020 totaled $81 million, including $11 million spent on growth projects, primarily in the first half of the year.
We achieved our previously stated guidance for full year 2020 capital spending below $85 million.
Actual cash used in investing activities for capital expenditures was $101 million and differs from our incurred capex due to timing differences of some capex incurred in 2019 that was paid in 2020.
Cash proceeds from the sale of assets was $6 million and net cash used in investing activities during the year was $94 million.
Our capital investment plan for 'twenty, and 'twenty, one will be heavily weighted toward conversion of our fleet to lower admissions equipment.
Total capex for 'twenty and 'twenty, one is expected to be between $115 million and $130 million with approximately 37 million allocated to tier four DGB dual fuel equipment and the remainder largely related to maintenance capex and subject to fleet utilization levels.
And <unk>.
As we stated in our January press release, we have purchased 20, Newbuild tier four DGB dual fuel pumping units for approximately $20 million, which we expect to receive during the first half of 2021 and have allocated an additional $17 million for conversions of existing tier two pumping units to <unk>.
And are four DGB units.
These investments will add lower emissions equipment to our fleet and enhance our offerings to customers.
Moving to the about the strength of our balance sheet.
At year, and we had total cash of $69 million as compared to 54 million at the end of the prior quarter.
At the end of the fourth quarter, we remained debt free and had liquidity of $121 million, including cash on hand, plus 52 million of available capacity on our revolving credit facility.
Finally, I would note that our total liquidity as of January 31 remained strong and approximately 109 million comprising of $62 million and cash and 47 million of available capacity on our revolving credit facility.
Working capital increased slightly from 61 million to $64 million at year end.
And as Phil mentioned in his opening comments the strength of our balance sheet and capital discipline is critical to our success and we are firmly committed to ensuring we maintain a solid financial position that provides maximum flexibility.
Being debt free and generating free cash flow is a key differentiator and differentiator for pro Petro and especially in this environment.
We look forward to further leveraging our operating scale and concentration in the marketplace. As we continue to provide our customers unsurpassed quality and service and the Permian basin. The most prolific producing region and onshore U S oil production.
As we evaluate the strategic actions of our customers and other leading E&P operators. We are mindful of their most recent transactions and the Permian basin totaling over 60 billion since 2018, essentially and pro Petros backyard.
The market is coming our way and we are excited about the opportunities that those investments could present for us and are focused on continuing to be the leader and completions efficiencies and performance at the wellhead and.
With that I'll turn it back to Philip Alright, Thanks, David.
Pleased to see a steady recovery and activity throughout the second half of 2020 and.
And barring work disruptions like we saw last week due to the weather or other external issues and we look forward to a continued improvement and oilfield activity as we move through 2021.
Supporting our view as a much improved crude price environment and the consensus that crude demand should increase significantly once and increasing number of Americans have been vaccinated and began to commute more for war travel and entertainment.
This return to more of a normal backdrop well.
Further support will further support the price of crude oil, which will provide e&ps visibility to increase their development activities.
As we navigate and navigate our course and until that time, we will remain focused on what we can control.
Over the years, we have taken pride and running a lean organization and we'll continue to do exactly that.
Faced with the onset of the pandemic and the first half of the year, we escalated our efforts to ensure that we not only survived but also positioned ourselves to thrive as activity levels improved over time.
And the rate recovery continues in 2021 gross Petro is uniquely position to outperform competitors with bulky operating models and complex logistics needs spread across the country.
Our business model works, especially well during periods of increasing activity levels, which we expect for the balance of this year and into 2022.
Consistent with the past, we will remain maintain close communication with our customers as they plan for their development programs.
This allows us to better anticipate their needs and improve our technical operating offerings and advance.
Which helps minimize later potential problems at the well side.
Of course once on site, we will continue to provide unsurpassed industry, leading execution and can.
Holding driving increased efficiencies and improve both ours and our customers' bottom lines.
As we have discussed in the past pressure pumping services and the equipment used to execute those services must continue to evolve if we want the industry to remain globally competitive.
Because of the recent uptick and crude prices, we expect increased demand for further improvements and process efficiencies and we will continue to work closely with our customers to develop cost effective solutions and support of our mutual long term success.
For example, this year, we have been writing simultaneous operations for two different customers, which are very pleased with their operational success.
As we showed last year and are showing again this year.
On a valuable resource for our customers to lower their completion cost and.
Additionally, we intend to work with our customers to bring next generation technology to the market.
Regardless of the price environment, our customers expect further minimization of environmental impact well side operations through reduced emissions and other considerations as.
As evidence of our commitment we have made a significant investment endorsed and electric fleet technology and dual gas burning and equipment.
Adrian and us in an effort to employee cleaner burning fuel sources.
During the fourth quarter and in January we continue to test and develop the doorstep technology alongside our partner they have global and plan to be back and the field with a larger deployment and the coming months.
I would note that our blue chip customers base remains extremely interested and excited about the prospects of <unk> and.
And we are currently targeting to be and the market with a full electric nurse Stim fleet offering and 2021.
We also believe our strategy of being very disciplined about deploying additional assets and pricing levels that support positive free cash flow is the single most important operational discipline needed for a return of healthy earnings for industry participants.
Combination of pricing discipline, and E&P consolidation will be a net positive for pro petrol given our Permian centric focus and clear reputation for providing unsurpassed execution at the well site.
With that I'd like to turn it over to the operator for questions.
And we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
And thank the speakerphone, please pick up your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Yeah.
The first question comes from Scott Gruber with Citigroup. Please go ahead.
Yes, good morning.
On it.
And so yeah Unfortunately to.
And the experiences the storm last week glad to hear you guys are back up and running.
But just your thoughts around the cadence of.
Covered here given.
And where crude prices stand and your kind of early thoughts on on and what are your fleet count could go and the second quarter and then your early thoughts on where it could go in the second half.
Yeah.
This is Sam.
And I can't say that debt our outlook is terribly different maybe than it was at the end of last year beginning of this year.
Given the customer portfolio that debt.
We've been working with consistently over the last few years and theres quite a bit of planning and advance.
And our close relationships there allow us to participate and a lot of that forward planning.
Youre right. The crude backdrop has improved and and we're hoping that that trickles down and through other parts of our business and our industry.
But I can't say that it has significantly changed and decision making process yet.
Amongst our customer group like like David mentioned, we are working 11 fleets today and.
And we gave guidance for the first quarter that we think.
Into account.
The effects of the storm last week.
That said, we think activity does have a chance to go marginally higher from here.
But we're still we're still hesitant on there being.
And any significant activity adds beyond.
Where we are today.
Unless this this this commodity backdrop persists for for some time on.
Got you.
And then maybe just a little bit of color on how to think about revenues.
And EBITDA and one Q.
On your fleet guidance incorporates the storm impact, but how should we think about the revenue generation per fleet and then I'll.
The EBITDA generation or Incrementals.
And with extra cost.
Associated with the store and they're going to weigh on the incremental kind of how do we think about both the debt.
Revenue line and the EBITDA per fleet here and when do you.
Scott This is David I think that while we came out.
From year end with a pretty positive month in January actually exceeding our plan.
February is definitely going to be impacted by some cost that are.
You know not absorbed by revenue activity dropping off for some period of day. So I think that that's definitely something that will.
It will impact us and February March.
We're hopeful that we don't see the same type of weather events and and.
And can potentially pick back up some of that lost work, but certainly.
Gonna have a period of days in February that are are going to have some unabsorbed costs, we're working with supply chain partners and vendors to mitigate that as best we can but definitely.
Only something that could impact a quarter.
And is it just too early to tell.
And EBITDA per fleet expands or potentially compresses at this point.
And <unk>.
I think it's a little early to tell because we've got a full month to go and and you know when customers get working and supply chains work together.
Things can happen pretty quickly but.
But we've definitely got some ground to make up given last week.
And then just one last one you know we've been hearing about some supply chain constraints and even.
Before the storm just some color on sand.
Sand availability and and other supply chain.
Issues and how Elsevier are they have a pervasive.
Some color there would be great too.
Yes.
Scott This is Adam as of right now of.
Of course, the winter impact did impact some of those supply chain and their abilities to get products to location, but.
And as of today, and we work as mentioned earlier on the call we're up and running again there are customers that are self sorting and self sourcing a lot of those products are up and running again so.
We don't see any major impact going forward from a supply chain perspective, if you'd asked that question last year and we.
And we're sourcing.
A lot of the say and our answer would have been quite a bit different but that mix has changed dramatically and that.
And that seems to be the bottleneck right now and people getting back up and running and Stan.
Scott. This is Sam again, the only thing I'll add to that is from from from my perspective.
And is very much a just in time product. So the health of the mines and their ability to mine and clean and produce and regionally is very important.
Most of the mines that were working with are our customers are working with today have recovered nicely.
With all the other products that we source our think our team has done a great job planning ahead.
And and keeping enough stock on hand.
Other consumables like like chemicals, and parts and supplies that are going to allow us to continue.
Continue to play on the long term effects of the storm from a supply chain disruption or yet to be seen but here near term I think our team's done a great job planning ahead to get us back to work.
Great I appreciate the color. Thank you.
The next question comes from Sean Meakin with J P. Morgan. Please go ahead.
Thank you and good morning.
Good morning.
And I was thinking about margin progression and you know a lot of moving parts and.
And presumably you'll have some operating leverage on better volumes through the year.
On pricing on a per lateral foot basis may not be changing.
But then I you know could you elaborate on how you see your fleet mix shifting towards DGB as you go through 'twenty, one and as the impact of Cymer Frac fleets.
And then there's of course, the Dura and fleet in the back half of the year, so as you're putting all that together how should we think about.
Fleet mix and.
And your ability to make progress on revenue and EBITDA per fleet, if we assume the underlying base rate is flat.
Well I think that as we've mentioned we are beginning to see the conditions there.
Net are conducive to price increases the crude environment is definitely materially better than it was even at year end and we're beginning to see.
Impacts of the vaccine on.
On global markets, so as that continues to sustain itself.
We do believe that we'll be in a situation where fleet counts will need to rise and pricing.
Pricing opportunities will will play out and and we've had some of those comments even from customers at this point that there is some willingness there.
In terms of the mix of equipment.
And we've still got some work to do in terms of confirming delivery dates for those and how those will ultimately impact on margins.
We believe that there's opportunities to.
And improve efficiencies and reduce costs at the well site.
And some cases, but we've got a lot more work to do to really validate that going forward. So I think right now.
We're focusing on.
And just the overall activity levels.
Continuing to improve and seeing the operating leverage.
Play out as we did see from quarter to quarter.
From Q4 to Q3 to Q4 and that playing out into the year is as we see our fleet counts improve.
Okay fair enough.
And then maybe a little more and just how the market can be tightening and the near term. So you noticed.
Noted your willingness to stay.
And stay disciplined on the type of work youre going to bid for and focusing on higher calorie opportunities.
So can we just maybe get a little more context on what youre seeing in terms of tendering and the market.
So recognizing.
The way and what you operate there's an emphasis on the long term relationships of course.
But thinking about visibility on.
And how many how many.
Fleets are bidding for jobs today versus maybe.
Beginning of the year a quarter ago, just some context and.
And help us understand.
To what extent, you're seeing tightening and the market.
And the first part of 'twenty one.
Yes, Sean this is Adam.
As far as the bidding question that you had I think we're still seeing a lot of the same players are bidding on.
Work coming up and the Permian.
What we have seen is some of those numbers coming up and and getting closer to kind of where we feel it needs to kind of be as far as the competitive range.
And you still have your outliers there at our offering lower.
Sure pricing, but.
I think we have seen some improvement there were companies are starting to move price up a little bit too.
To improve their bottom.
Bottom line that they haven't been seen in the past but.
As far as pricing and the future on I'd say timing.
Still the question.
But I would say, we're a lot closer than we have been in the past where at least having conversations with a couple of our customers as far as.
Pricing improvement and you know go on go on a going on throughout the <unk>.
The year as commodity prices stabilize and.
If they continue to increase at the levels we've seen.
If.
As I looked over the reports if you look at all the top line growth from pressure pumping hours and how that trickling down.
Not much of that is making it to the bottom line. So.
I think the way we're pricing as we're saying, you'll probably hear people say pricing is going up.
They are probably just trying to get probably to about the point, where we're at so I wouldn't expect us to move at the same pace that you may hear others.
But then again.
I would tend to focus on the free cash flow generation and the EBITDA margins on the revenue that debt.
They are projecting so.
We've lost some jobs and it wasn't just a little bit so there's still people out there willing to.
Take it low and if they need to get the work, we're not we're not chase and activity.
And it really chase and.
Margin and free cash flow.
I think that's one of the positive things that we have seen is that if we are missing work.
And we're missing it at a lower differential.
The competition. So they are finally, beginning to walk up to levels.
Where we've been holding and hopefully that that will continue and.
And it will start picking up.
Profitable work.
Yeah, I think that's really great context, so progress made but so now you see more fleets put to work and the Permian. Thanks a lot.
Thanks, Sean.
Okay.
The next question is from Ian Macpherson with Simmons. Please go ahead.
Thanks, Good morning, and glad to hear everyone's doing okay. After our last week, which was no fun for everyone.
So it sounds like I'm guessing.
Not for last week.
Probably would have been inclined to nudge.
Your Q1 activity guidance.
Got to up as opposed to down a tick from from what you said last quarter and <unk>.
You're back at 11 fleets today.
You have visibility to exit March above 11%.
This is Sam I'm hesitant to say that we have we do have visibility to add another fleet. The short answer is yes.
The more.
Detailed timing on that is is it makes me hesitant to confirm confirm that exactly but yes, we do have visibility to additional additional work and the near term.
Okay.
And just kind of circling back on this topic.
You know your efficiency gains that are that are showing up and your especially on your Q4 comps on revenue and EBITDA per fleet. It sounds like that was.
Mostly if not entirely efficiency and not.
Pricing and I think that we understand that your idle payments were down slightly Q on Q as well so.
My question is how much more room is there to run a part from you know.
Time will frac on mix and that sort of thing, but just in terms of your ability to.
And to optimize your operations on a comparable basis are you do you feel like there there is and on.
Determined peak here.
So racing towards or do you think that you have.
So to close to a plateau at this point in terms of.
And the efficiency of a top tier pumper like perpetual.
And this is Sam again, I I mean on <unk>.
Oh and you asked that question because I think there is.
Theres only 24 hours and a day, we're not we're not going to get 25 and $26.
So the short answer is theres, probably a threshold, but the longer answer is every time, we don't think we can grind efficiencies higher we do and.
And you're exactly right fourth quarter is an example of many of those operational metrics on a per crew basis grinding higher therefore, enabling us to.
Add incremental margin like like David mentioned in his and his prepared remarks.
So yes, the rate of change will be slower but.
But when you do think about the prospects of something like Simon <unk> of which we are now.
And a healthy participant in.
As of the last couple of months there there could be another leg now early days to see what the what the profitability impact is for us individually, but but we like what we see operationally with Simon from <unk>.
And.
And if there if there is more of that type of work to come then that could be the next.
Efficiency enabler for not only us, but our sector as.
And as well so.
More to.
More to come there hopefully in coming quarters.
Okay, and just to add.
Debt Ian.
David.
We also benefit greatly.
And through our efficiencies if we have higher efficiencies at the job site the customer benefits greatly as do we.
And we.
We should note that not all customers have the same level of efficiency. So one of the things that we're working on is <unk>.
Working with our customers to bring them up to speed and improve their efficiencies if they're not in.
The higher levels that we think are are able to be achieved so we.
And we think that there's a potential to improve that as we go forward. We think that's a value add that we provide for customers that work with pro Petra and we're going to make that a big focus for 2021.
So not only Simon that debt.
And that Sam mentioned, but also just improving efficiencies within our mix of customers.
Super Thank you everyone.
The next question comes from Chris Weber with Wells Fargo. Please go ahead.
Thanks. Good morning, just curious as I think about our capex guidance and capex versus investments and tier four DGB, how do we handicap the odds of additional investment later in the year or are you committed to not investing more or is there a chance that customer and customer poll drives incremental investment on that.
Well this is David Chris regarding Capex and.
Cash flows.
We have performance metrics that we have set in place.
Related to capital discipline. This is a theme that we want and make sure that investors understand that it's very important we communicate this internally with the team and.
So as its debt sits.
Sets today under the current.
Expectations for this year, we're going to stick to our investment plan.
And as the as the year unfolds.
Could there be a potential to increase that and increase the level of conversions.
Potentially but we're gonna be very very careful about what we do on the capital spending side and we're going to be very disciplined in terms of how we deploy capital.
And Chris This is Sam I'll, just add on to that maybe to zoom out.
A little bit and and talk about investment at a at a sector level for the pressure pumping space.
We have pro Petro are avid believers that equipment.
Needs to evolve.
And we need we need more efficient equipment, and we made equipment that has a lower cost profile and we need that equipment to have.
On a smaller environmental footprint.
So if as a sector we need.
Our equipment offering to evolved and our sector needs to find a way to make more investments.
We've announced recently that debt.
And that we're making some dual gas investments, we've obviously made some electric investments via <unk>.
And.
It's just so vital for companies like us and our peers to make a return. So we can push the evolution of this equipment. So we are happy.
Happy to be on the forefront right now of taking those steps and are hopeful that our entire sector can get and a place where we can push this evolution forward as a group. So we can all better serve our customers and our communities.
Yeah, and and good just getting back to capital discipline and you know if we see pricing move up if we see margins improve and cash flow improves and certainly those are conditions that we would we would consider that.
Okay. Thanks, and then for my second question, just thinking about efficiency a little bit can.
Can you characterize how you mentioned record efficiency and in the fourth quarter, how did the calendar look compared to stages per day, I think we've seen a huge increase and the amount of work most fleets and the industry can do and a day, but for at least a lot of companies. The calendars haven't been that type if you compare them to 2019 levels.
Fourth quarter, and and maybe the first quarter, excluding the debt.
And whether in February or are they tracking pretty well on a calendar basis compared to 2019 or is there still some some daffiness there.
Yeah, I mean, the short answer there is yes, there is.
We are we work with our customers to only deploy equipment and crews.
To the high calorie calendar dense opportunities.
And we're really not interested and gaps.
Because as we've said time and time again and <unk>.
Prior quarters and today.
We have to earn a return when we deploy this equipment and a huge huge part of that is keeping a full calendar.
Great. Thank you.
The next question is from Stephen <unk> with Stifel. Please go ahead.
Thanks, Good morning, gentlemen.
Two things one on the time of Frac side can you just talk about a little.
More as far as what constitutes a fleet because it's my understanding and do you kind of one and a half ish times the horsepower.
And and how do you how do you think about the allocation of horsepower and.
And what you're doing these simulcast <unk>.
Yes, Stephen this is Adam.
Yes.
You want and a half times is probably inaccurate number although no different customers have different approaches to the subtle frac.
Not all are considered equal depending on whether it's a two well pad or a four or six well pad.
The amount of equipment can.
Change there as well as the target rate debt each customer wants to achieve down each well.
And if there whether they bad debt write down and want to continue with the same type of rate that they are accustomed to on a traditional <unk>.
Is it for design and a horizontal design.
Okay.
Thank you and then the second question is you talk more about the.
The move to some of the tier four equipment and the lower Michigan assets.
What are you seeing and the market where are you seeing a utilization change.
And kind of pull for those assets only or do you are you seeing any price benefit yet and and how do you think that evolves.
And as 2021 sort of plays out and and.
And as far as the pricing dynamic behind.
And a low emission assets versus traditional assets.
But the demand is definitely there.
And you want it doesn't make it happen really and.
All of our customers want it and.
And I can put them into buckets and say there are people focused on emissions and their people.
<unk> focus on emissions, but their focus is burning their NAV.
Natural gas supply so it's about a cost issue and emission issue.
Everybody wants the lightest low emissions technology.
I believe it is all currently deployed so we.
We don't see any pricing differential between the tier four DGB and our tier two debt.
<unk>, but that could change as customers ramp up their demands because theres only so much out equipment and right now I just don't see a lot of.
Companies able to make that kind of investment and let's say get some type of price and support our contractual commitment and bring it to market.
I understand so when you're on.
You are putting dollars to work.
On upgrading these assets you're expecting to get a better.
Price to justify the investment from a return on perspective is that fair.
Well I wouldn't say that's necessarily accurate it would be lovely if we could.
And I think eventually we will but I think right now our expectation is we will convert that equipment.
And deploy that equipment and ended up and the same pricing regime. We're in right now if we find that customers are willing to pay more obviously, we will shift equipment around.
And go to the highest margin opportunity with it.
Okay, great. Thank you for the color.
And so as a reminder, if you have a question. Please press star then one to be joined into the queue.
The next question is from Waqar Syed with ATB capital markets. Please go ahead.
Good morning.
Our first question is.
And how many cementing clues do you have currently.
Deployed are active.
We currently have 19 that are active are there following 19 rigs right. Yeah, Waqar, it's a little it's a little bit of a fluid number.
And given given the type of rigs were chasing but we're right around the 19 rig number today I think at the peak we were.
Peak activity 2019, we were following almost 40 rigs yes.
Okay and is the revenue.
And according to a quota in cementing tracking the rig count changes in the Permian.
I'd say generally it is.
And we've seen our share actually.
Pick up a little bit as compared to the total Permian moving and rigs.
Okay.
Okay, Great and then what's the maintenance Capex per fleet that you're thinking of for 2021.
Yes.
Sure. This is David we have guided in the past $6 million to $8 million per fleet of maintenance Capex. We think that that number is probably going to be closer to the upper end of that range as we're converting.
A good amount of equipment. This year I think once that plays out for those fleets.
That number probably ends up being on the lower end of that guidance, but.
We're currently and in a cycle with our fleet overall, where it will be towards the higher end and.
Also to add onto that you have.
Have some nominal dollars via fleet reactivation is as we get into.
Some of the.
Equipment and it is that has been parked.
That might need a little bit of and attention via some more investment. So that's what we keep us towards the high end.
That range as well I also have to have to make the comment debt.
Although we're laser focused on.
Minimizing our maintenance capex impacts and definitely we'd like to minimize or maintenance capex spend.
We continue to work more and more hours per day and have more throughput through our operation.
And much of these large components that fall into our maintenance capex categories are very time, driven so the more the longer they work and the more hours per day they work.
The more often they need to be replaced.
<unk> maintenance capex and in some form or fashion is a product of your own efficiencies as well.
Fair enough and so what is what.
Are you planning for fluid and costs.
Embedded in that maintenance Capex number.
For the year.
And 50% yeah, Yeah, it's about 50% of the maintenance Capex.
Okay.
And then just finally, what was the idle revenue.
From pioneer.
Our contracts and in the fourth quarter.
It was $6 2 million and the fourth quarter.
And.
Thank you Sir that's all I have.
Thanks Carl.
This concludes our question and answer session.
I'd like to turn the conference back over to Philip Golf.
<unk> Executive officer for any closing remarks.
Alright, thanks, everybody for joining us today, and just want to leave you with the pro Petro story, which I think is a very simple one.
We have the best people and the business.
Working for a very high quality customer base, and the best basin, and the United States and arguably the world with a focus on capital discipline and reputation for safe operations delivery.
In addition, we have and enviable balance sheet with no debt and ample liquidity to respond on the needs of our customers now and.
And the future.
And look forward to sharing more of our story as the year progresses, and we will speak with you on the next earning calls we hope everyone has a great day. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
[music].