Q1 2021 ProPetro Holding Corp Earnings Call
Good morning, and welcome to the pro Petro Holdings' first quarter, 2020 one earnings call.
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Please note. This event is being recorded I would now like to turn the conference over to Sam Sledge President. Please go ahead.
Thank you and good morning, everyone. We appreciate your participation in today's call.
With me today is Chief Executive Officer, Filip <unk>, Chief Financial Officer, David <unk> and.
Chief operating officer, Adam Munoz.
Yesterday afternoon, we released our earnings announcement for the first quarter of 2021.
Please note that any comments, we make on today's call 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.
These risks and uncertainties and cause actual results to differ materially from our current expectations. We.
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.
<unk> 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 a question and answer session with that I'd like to turn the call over to Phillip Thanks, Sam and good morning, everyone.
We were pleased to see a continued steady increase and customer activity levels. During the first quarter as global oil demand continue to recover and support of an improving economic backdrop.
We expect relative oil price stability by COVID-19 1919 vaccines rollout.
Further, allowing more people to be able to resume the types of activities. They were accustomed to prior to the onset of the pandemic.
And on that note I want to once again, thank the health care workers and first responders here and the Permian basin for.
And their tireless efforts over the past 14 months and help ensure the health and safety of the communities and the region.
Partially offsetting the increase in customer activity levels. We saw during the first quarter was the impact of the severe winter storm in February.
The result was eight days of lost revenue and certain costs. So we're unable to pass through to customers for our fleets where island.
Additionally, we incurred costs and expenditures related to fleet reactivation and earlier than previously expected.
While David will discuss the financial impact of the winter storm and more detail in his prepared comments I want to commend the pro petrol team for remaining nimble and quickly and effectively responding to our customers' needs and for.
Protecting our competitiveness and the market place despite the challenges we faced.
Operational efficiency and equipment readiness remain key differentiators and the oilfield services as customers focus on utilizing the highest quality crews with the most reliable equipment available and the industry.
Our proven track record and quickly and effectively responding to the needs of our customers, albeit in a mutually beneficial manner continues to differentiate pro Petro and the marketplace.
During the first quarter, our best in class execution at the wellhead was on full display as we drove our efficiencies to new heights for.
Close collaboration with our customers and other service providers.
And we increased our fleet count during the first quarter two on average of 10.3 effectively utilized fleets from an average of 9.6 effective utilized fleet for the fourth quarter of 2020.
Impact from the February extreme weather negatively impacted our effective or utilization by approximately one fleet.
Today, we have 13 fleets working in the field of which two are engaged and simultaneously.
So I am a practice and exciting completion technique that requires significant operating competencies and infrastructure planning.
To make final frac attractive to and operator, the operator need sufficient well inventory comprised of large multi well pads with four well pads, providing the best opportunity for Maxim completion efficiencies.
The operator needs and incredible degree of alignment between and supply chain partners with seamless delivery of sand and water and a coordinated effort between wireline and pressure pumping.
And he's just in time manufacturing techniques are required to achieve maximum efficiencies and using the sample frac technique.
With these considerations in mind simultaneous represents another exciting opportunity for the energy industry to further reduce the marginal cost of a barrel of American crude.
That said, we preserve we perceive the rate at which this technique is adopted to be measured due to the complexity and size of these operations.
As we move forward our team will remain focused on disciplined deployment of our assets to ensure we only pursue profitable work as.
As we've discussed in the past, we will not reactivate equipment without adequate pricing long term visibility to a consistent work schedule and expectations of high efficiency targets, so as to deliver solid operating margins.
This kind of discipline is critical to the success of our company and to the oilfield service industry as a whole.
We also continue to focus our efforts on working with customers that have a substantial presence and the Permian basin and are looking to further expand their footprint of operations and the region.
As you have recently seen theres been significant E&P consolidation and investment and the Permian reinforcing our Permian focus.
Through close collaboration with our Blue chip customer base, we're able to develop a longer view of their development plans, which allows us to plan for and invest in our business and necessary technologies.
This in turn helps drive a more efficient and sustainable supply chain that results and improve margins and for other generation of free cash flow for the long term benefit of our shareholders.
With that I'd like to turn the call over to David to discuss our first quarter financial performance David.
Thank you Philip and good morning, everyone, we generated $161 million of revenue during the first quarter, a 5% increase from the 154 million of revenue generated in the fourth quarter.
The sequential quarterly increase was primarily attributable to increased activity levels.
And as Philip mentioned effective utilization.
10.3 fleets versus nine six fleets for the fourth quarter of 2020.
Our effective fleet utilization for the first quarter would have been higher had we not incurred the approximately eight days of downtime due to the extreme winter weather event in February and.
In summary, we estimate that our sequential revenue growth could have been closer to 15% or approximately 177 million for Q1 had we not experienced a severe weather interruptions.
We currently have 13 fleets working two of which are some on frac and our guidance for second quarter. Our average effective fleet utilization is 12 to 13 fleets up from 10, three and Q1, which implies a 20% increase at the midpoint of our range driven by anticipated highly.
Efficient pumping activity and simultaneous operations.
Cost of services, excluding depreciation and amortization for the first quarter was 123 million versus $116 million and the fourth quarter with the increase driven by higher activity levels and the first quarter as well as certain cost of services, including labor and other fixed operational costs.
And that were not passed through to customers, primarily as a result of downtime from the winter storm and the accelerated pace of fleet reactivation.
First quarter general and administrative expense of $20 million was flat with the fourth quarter.
Excluding nonrecurring and noncash stock based compensation.
First quarter G&A increased to $18 million from 15 million and the fourth quarter.
Contributing to the increase was higher insurance and payroll taxes and other expenses.
Depreciation was $33 million for the first quarter as compared to 35 million and Q4.
Other income of $1 8 million included a one time state tax refund of $2 1 million from periods during 2015 through 2018.
Our net loss for the first quarter was $20 million or a 20 cent loss per diluted share compared to a fourth quarter net loss of 44 million or <unk> 44 cents loss per diluted share.
As a reminder, and the fourth quarter of 2020, we incurred impairment expense of $21 million related to the retirement of approximately 150000 of hydraulic horsepower of tier two diesel pumping equipment.
Finally, adjusted EBITDA was $20 million for the first quarter compared to $24 million for the fourth quarter.
The sequential decrease was primarily attributable to lost profitability during the winter storm and accelerated fleet reactivation costs.
We believe extreme weather impacts and fleet reactivation costs adversely impacted adjusted EBITDA by approximately $5 million.
Fleet and reactivation and the first quarter did meet our reinvestment criteria for reactivation and were deployed to existing customers with whom we have visibility to strong utilization efficiencies and pricing adequate you generate positive free cash flow.
Moving forward our team is focused on capital discipline, and delivering lower emission solutions, which is an ongoing challenge given current market conditions and limited capital availability.
Our customers recognize that a mutually beneficial economic relationship is critical to long term success.
Taking a partnership approach over time should provide us with the ability to reinvest and equipment and technology that delivers more efficient and lower emissions completion solutions for the benefit of all stakeholders.
However, this migration from today to an environment with better reinvestment rate economics will require improved pricing and the future along with more efficient solutions and we continue to incorporate this reality and our conversations with our partners.
Turning to capital expenditures, we incurred $32 million of spending during the first quarter, which included $18 million for maintenance of which less than 50% was for fluid ends.
Capex for tier four DGB dual fuel purchases and conversions was approximately $12 million.
And our customers are now incorporating these units into their operations.
Actual cash used in investing activities as shown on the statement of cash flows for capital expenditures and the first quarter was 22 million with negative cash flow of 5 million largely related to our Q1 investments and lower emissions equipment.
However, we continue to expect to generate free cash flow for the full year 2021.
Our outlook for full year, Capex spending remains $115 million to $130 million, including approximately $37 million for tier four DGB dual fuel equipment.
With the remainder related to maintenance.
Looking at the balance sheet on March 31, we had total cash of 56 million and remained debt free.
Total liquidity was $114 million, including cash and $58 million of availability under the company's revolving credit facility.
As a further update on may 3rd our total liquidity was $111 million comprised of $51 million and cash and $60 million of availability.
As Philip mentioned in his opening comments the strength of our balance sheet and commitment to capital discipline is critical to our success.
And we are firmly committed to ensuring we maintain a solid financial position that provides maximum flexibility, while we deliver and strive to deliver lower emission solutions to the market while remaining our customer's most trusted option for high productivity completions.
Being debt free and generating free cash flow is a key differentiator for perpetual and.
And we will continue to serve us well in this very competitive environment.
With that I'll turn the call back to Philip Alright, Thanks, David.
And as we've mentioned on today's call our customer activity levels have continued to modestly increase given the improved commodity price environment.
Assuming no other disruptions like we saw in February and do the severe weather or other external issues. We expect this level of activity to be consistent.
While the outlook for customer activity levels remain healthy and it remains challenging and to increase pricing for our surface services given the level of excess pressure pumping equipment capacity currently in the marketplace.
During the first quarter, we experienced isolated shortages and our supply chain, although our team is able to efficiently minimized operational disruptions.
Moving board as we've done in the past and will work with all of our customers to mitigate cost inflation that may come from supply chain tightness.
We do expect expect true pricing service pricing and increases in the future. Although the timing remains uncertain as we are and the early innings of what we view as a multi year recovery.
In short for our customers recognize the clear benefit of our industry, leading service offering our entire sector is on average pricing their work and unsustainable levels.
And this environment remains squarely focused on working with customers that are interested in partnering with a service provider.
Best understand their needs and develop creative solutions for their requirements at the well site.
And this collaboration drives for critical efficiencies to maximize their return on investment.
And so part of the needs of our Blue chip customer base and committed to substantial future operations and the Permian basin.
We'll continue to make targeted investments that promote our collective future success.
Most importantly, this includes analyzing and investing in technologies that best position pro petrol for the impending equipment and transitioned to gas burning power sources to drive lower emissions with equipment, such as tier four DGB and electric pumping units.
We are fully committed to evolving our equipment offering to be more environmentally friendly and relevant to our customers demands and remain convinced that pressure pumping equipment needs to evolve for the jobs of today and.
And the future.
Given our industry, leading and execution and strong financial footing. We believe we are and our leadership position to participate and this transition.
Will benefit all of our stakeholders, including our shareholders.
We know that there'll be changes from today's market conditions, but one constant we will continue to be the need for innovation.
Our team leaves no stone unturned and pursuit of creative answers to the challenges presented to the demands of our customer.
And so part of these efforts we continue to work with I F Global as we take steps to improve the performance of neural stem equipment.
Our customers remain interested and tourist and electric offering and we continue to exploit and expect to deploy a full day or a stem fleet and the second half of this year.
As mentioned numerous times and pressure pumping services must continue to evolve and we.
We expect increased demand for further improvements and process efficiencies.
We discussed on our last call that we committed two of our fleets to Sima Frac operations.
While it is still early to tell what effect. This could picked it could potentially have for us from a financial perspective.
The overall wealth side performance Osama Frac is promising and.
I want to congratulate our operations team for effectively planning and executing along two of our strategic customers.
As we discussed on our last call with the downturn of 2020 now transitioning to a recovery.
We believe the impending reinvestment cycle will further separate winners and losers and the U S pressure pumping industry.
We believe that not only the highest quality service providers working with the most efficient operators will be able to reinvest and next generation equipment lower emissions equipment as well.
Our debt free balance sheet ample liquidity and rigorous capital discipline service well through the unprecedented challenges our industry faced and 2020.
And places us they've been and even stronger position for success as the market continues to steadily improve well into 2022 and beyond.
Our obligation to remain discipline is not limited to flow to the fleet deployments.
The culture and our shop requires disciplines on every member of the team to deliver on our commitments to each other our community and our customers.
Commitment to safety is a responsibility we all share and we encourage every employee to be a safety person.
That ethos has built person by person day by day over the long run.
Our teammates have ground to expect a strong safety culture and enthusiastic community involvement and operational excellence when they come to work and it shows and their performance on location and and the shop.
Cycles are implicit in the energy business.
And we serve all stakeholders by making responsible financial decisions.
Commitment to sustainability is another collective responsibility that our team undertakes for the benefit of our broader prep Petro family.
We're making good on our commitments by investing and lower emissions technology and vigorously evaluating sustainable solutions for the benefit of all stakeholders.
Just as a lean cost structure underpins the prospect of a pressure pumper, our commitment to improving the environment societal issues and government governance is essential for long term success.
In conclusion, we will continue to rely on key attributes and strategies that have historically positioned our company is on.
Through the cycle preferred oil service provider in the Permian Basin.
This includes close collaboration with customers to provide creative solutions to meet their current and long term needs.
Important will remain squarely focused on acquiring developing and retaining the best team and the industry.
Our team oriented culture is core to our DNA our employees have been and will continue to be the key to our future success.
With that I'd like to turn it over to the operator for questions.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing.
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.
Our first question comes from George O'leary with T P H and company.
Please go ahead.
Good morning, guys.
Good morning.
I think you all alluded to discussions with customers the duration of the work they are willing to discuss with you extending it and I thought that was an interesting point that need a day to touch on and so can you talk about me and maybe six months ago, how far our customers are willing to look out versus over the last quarter, even last few weeks how.
Far out there willing to look on the calendar.
George This is Sam I think I think that more forward planning began late last year.
And obviously in 2020 and everyone's plan was significantly disrupted.
Disrupted on on both sides of the table and and as the recovery began late last year, Oh, I believe that the theme of capital discipline, and just operational discipline and general.
Started to show as as we started to go back to work with many of our customers. They they began that more long term planning.
Probably late last year and that has persisted into the into the first part of this year I think I think it's a healthy sign for not only us but.
But that the entire space to be able to think a little bit more on advance.
And George I would add to that.
That's not really new for this year, that's that's been going on for some time, where we've had a longer view of.
Many of the.
Operators that we work for it in terms of their development plans and I'd say even in the downturn.
One other things it became pretty clear I think was operators start worrying about quality of crews coming back to work and the quality of the equipment. So.
So we saw a number of customers engage us for you know Corp program at least for a year.
Provided we can provide the crews that they were used to having so I don't think it's new and it may sound and do but.
We've had that long range of customer's planes for a while.
Great and then just an extension of that question.
Yeah, and its customer dialogue has increased and you guys have got busier.
If you think out about about the back half of the year one of the big thing investors seem to be wrestling with as you know.
<unk> activity cadence are we plateauing at these levels that seems to be what you.
And one of the biggest questions investors have so just curious how you think activity progresses. It's broadly you know not looking for any specific guidance for.
For for pressure pumper and completions activity and the back half of the year Q3, Q4 are we putting out here or is there more work on the horizon.
I I think it's I think it's hard to say anything definitive across the board there there will be opportunity.
For activity adds and the back half for the year, but I think they will be a bit more isolated.
And they happened and the first half for the year I think you've seen on.
Most everybody across the board and the E&P space participate and the activity recovery up to this point this year.
I think any any activity adds probably more measured in the back half for the year and isolated to specific.
Cut.
Customers that maybe have specific plans or economics that are allowing them to make those ads.
Yes, I think I would also add that you know as that.
The strip price moves forward.
Writers see their cash flow this increase.
If they don't have balance sheet issues, where they need to turn that cash to repair the balance sheet.
The amount of money that they're going to reinvest will grow along with you know even though they are going to only invest 70% to 80% of the cash flow that numbers getting bigger with with prices as they move forward. So you know I would think that.
Activity would modestly continue to increase.
Of course, a lot depends on.
India, Europe, and all the other external factors that play into the price going forward.
Okay I'll just sneak in one more if I could just on that final point that you hit that fell the.
The pricing discussion at least qualitatively feels like it's improving it just feels less combative I realized prices are rising at this point, which makes sense given the supply demand picture.
And and calling timing on when prices rise and it's always challenging but can you just talk about the nature of discussions with customers and whether that's become truly has become less combative.
How are those discussions going and what's the receptivity when you broached the topic of pricing increases with with your customers.
Yeah, George this is Adam.
I think as we continue to communicate that with our customers and partners.
We're just continuing to stay and constant communication as far as like how our cost structures are looking and.
And maybe short term or long term type of inflation that we're seeing on our cost structure.
And then letting them know that.
Certain things are are impacting the industry, whether it's you know trucking rates or.
Supply chain and other supply chain as far as chemicals or asset or anything like that are increasing on our side and then as well as communicating with them. You know, what you know and reminding them as far as us to be able to continue to invest and the new technology and next gen equipment that they are.
Enquiring about and as more of these bids are coming out requesting pricing for them I think we've just.
It's been pretty consistent on the communication that pricing will have to change and and and I think we've been focused more on just getting activity back on the on the first part of this year and probably will begin for.
Begin to focus more on the second half for the year as far as.
Price increases and George I would say I would sum it up and one word.
Inevitable.
You know they see the allocation of cement they see the inflationary pressures <unk> seen the disruptions.
So I would say now there's more resignation that pricing is going to.
Improve the question is how much and how fast and that's what we can't really answer.
Got it thank you for the color.
Yeah.
Okay.
Our next question comes from Stephen <unk> with Stifel. Please go ahead.
Thanks, Good morning, gentlemen.
Good morning.
I think you mentioned.
On the call debt.
The economics were supportive of bringing fleets back and I.
I assume you're talking on a.
On a on a fleet level profitability.
Measure is that how you think about.
And the deployment and then maybe as a follow on when you think about your current fleet size.
And at what point and in deployment of idle assets.
You start to see the the costs rise materially to reactivate.
Yeah. Stephen This is David I think what I wanted to do there is just really differentiate the cost of reactivating a fleet and and I think we're at that point, where we we believe we can recover those costs and a fairly short period of time.
As compared to reinvestment or new.
Newbuild pricing, we're really not at that level and and we've got some way to go there.
So so that's kind of how we're thinking about the reactivation and we want to make sure that that cost, which there just can be some expense there theres going be some capex there.
We.
And have visibility and that reactivation that it's going to recover pricing and.
In terms of.
How we look at that too.
To us.
<unk>.
The additional cost as we put each incremental fleet back.
Will gradually increase and so there's a limitation there as well. So those are those are definitely things that we're considering and are evaluating as we look at reinvesting in the fleet.
Thank you and then do you I'm not sure. If you mentioned this did you mentioned idle fees and the quarter and and where do they stand going forward.
We did not but we had about four and a half million of idle fees during the quarter.
Okay, Great and then just one other follow up.
To that is as you think about your.
Thank you.
Your EBITDA per fleet has been running probably 10 to 11 and the last couple of quarters, excluding total fees.
Uh huh.
Do you think.
On utilization and that number can get back to the mid teens or do you think you need some some pricing behind it to get yourself back there.
And so I'm, assuming maybe sometime next year.
Well keep in mind the quarter was significantly impacted by the weather event, we had eight eight days of.
Near zero revenue and.
And when you're running a 11 fleets per.
Free freeze event.
Going to zero for for a couple of weeks for little over a week.
It's a significant and Pat impacts so I think that you got to consider that for the quarter.
And I think that as we exited the quarter, we were back at a good level.
We mentioned, we've got 13 fleets operating today, two of which are simultaneously and so.
We'll be continuing to evaluate that performance but.
We should see some operating leverage play out given that we would expect as is normal better weather conditions and the second quarter.
Stephen This is Sam I'll, just add on to that I don't.
I don't perceive the effective efficiencies.
Daily throughput on location to be.
As big of a contributor to increased profitability as much as pricing and offer on operating leverage.
Moving forward probably are so you you you mentioned the mid teens annualized EBITDA per fleet number we think we can get there we're not sure when exactly but pricing.
Definitely helps and that aspect of which are you know Philip alluded to the fact that we believe it's inevitable.
And we'll treat that on a customer by customer basis, and the timing will be very calculated depending on economics.
And it seems like if you add back for 5 million Bucks Youre kind of a 12 and a half range already so that was so you're right right. So so so 12 and a half to say 15 and call. It mid teens as we don't think there's too much of a jump we think pricing is.
Probably the biggest contributor to get us there.
Great. Thank you for the color gentlemen.
Yeah.
Our next question comes from Ian Macpherson with Simmons.
Please go ahead. Thanks.
Thanks, and good morning, I was frankly surprised that the.
The weather impact was and was only 5 million are given.
The concentration of your exposure there to the weather for whatever it was 10 days, so but but.
And it seems like you have at a minimum debt plus and help incrementals on.
The organic.
Activity growth from Q1 into Q2, so I just wanted to sanity check my thinking on EBITDA and EBITDA walk from Q1, and Q2 should probably be.
Healthy incremental margin on on the 20 per cent top line as well as.
Some or all of the recovery of that 5 million is that a is that a fair way to think about it.
Yeah, I think I think that's fair and I don't think that there's anything magic changing and our cost structure or anything like that.
We talked about the fact that we're.
Collaborating up and down the value chain to try and mitigate cost pressures that have presented themselves.
Within within our cost structure.
But kind of going back to our most recent comments around.
Operating leverage and.
And just the near term Q1 to Q2, then there there is some modest upside to.
To say the EBITDA margin because of that.
Okay, and then on on free cash generation and again, if we are if we add back $5 million of.
Weather impact in Q1, and you would have been free cash flow neutral and the first quarter and with <unk>.
Rising EBITDA and.
Like you were kind of level set on your Capex cadence.
Flat to positive free cash flow for the rest of the year does that Jive with your modeling.
Yes, that's riding on this David.
We believe we'll be free cash flow positive.
For the year.
Excellent and then last one for me and you say you're at two simultaneous out of 13 total fleets today. So about 15 per cent of your activity do you think that that's indicative of the broader Permian.
Penetration.
On them.
Yes.
How do you see that total penetration rate plateau and over the next few quarters.
Yeah, and this is Sami broke up there at the end, but I think you're asking around how maybe how much time will frac. There is out there and the market right now I think our most recent gas was.
And the 10% ballpark, if there's like 100 fleets working in the Permian and today, we believe and maybe Ken.
Possibly 15, but somewhere somewhere in that range.
We don't see that number changing significantly near term, but going into next year you could.
Can see that and shop is as it is more operators begin to plan for these type of operations.
Yeah, the one thing I'll mention and as Philip.
Just talking to a couple of operators is.
Simple frac.
Seemed like the way to go but I think you know at least two customers.
Customers, we've talked to are not convinced that's necessarily getting the savings that they think that they expected to get out of it so.
And I think it'll take a little bit longer for it to shake out to see if it's going to be.
You know and expanding part of the service offering or it's going to kind of stay at the low.
20% or less of the operations, we'll see but.
And just kind of very contradictory when you talk to the different operators on how some of Frac works for them.
Yes, certainly very idiosyncratic for sure.
Well. Thank you I appreciate all the insights today.
Thanks <unk>.
The next question comes from Chris Boy with Wells Fargo. Please go ahead.
Thanks, Good morning.
Maybe first on on.
And of the ESG fleet market. So it sounds like they're mostly sold out across all the bumpers.
And as additional tier for fleets come to market, how do you handicap the risk of customers switching away from your offerings to take those suites and and you think youre going to have to invest in addition to your current capex guidance if that starts to happen.
Yes, Chris that's a that's a great question.
I think our entire sector is in.
And in an interesting place right now and and trying to make sense of adding more of this type of equipment to the market facing economics that don't support.
Those investment decisions.
We did it it is a demand we've seen a good strong demand on things like dual gas equipment.
Evidenced by our investments this year, if economics continue to improve I think you could very easily see us continue to go.
Go down the path of converting more of our tier two equipment to tier four.
But but but right now at any any more accelerated rate and you're already seeing us reinvest is tough and it goes back to.
Some of the some of the pricing conversations we've talked about earlier and the continued improvement and we need to see around.
And our profitability overall.
Two to continue to make these investments.
Also mentioned that.
And it's Philip mentioned, a couple of different places and his scripted remarks that.
Efficiencies on location and the ability to keep costs low for our customers and value Hy Vee.
Via those efficiencies still remains the utmost priority for us and our customers definitely our customers. So.
They're they're they're could across the sector be some movement of assets for.
For customers that are placing a higher priority.
On this lower emission equipment, but we see today still leading the way as efficiencies and throughput at the well site, we think that were.
Very well positioned if not best positioned in the Permian basin to provide that.
So so we think will remain very competitive and and and we'll we'll pick our spots.
To make investments to continue to evolve our equipment offering and.
Yes, Chris This is David just to add on to what Sam said.
We've brought on.
Some new customers this quarter.
And we have other existing customers and when we look at the comparison of the competition, we believe that theyre getting a significant productivity differential with perpetual.
And so when when customers are talking about different fleet options and and emissions. They have to think about what theyre getting and give up if they move away from perpetual in terms of overall productivity.
So what we're trying to do is execute a strategy that is capital discipline.
And and continue to build those relationships with our customers deliver that operational top tier performance, while also making some moves to award.
Integrating tier four DGB and other equipment into our product offering over time, but doing it on a gradual and disciplined basis.
Okay that makes sense, thanks and for my follow up.
I guess, we've been talking around it on a per fleet basis, but maybe I can shortcut debt its run rate activity.
From April continues for the remainder of the quarter do you think consensus and $35 million EBITDA is achievable.
Yeah.
I think it's achievable, Chris I think we're still.
Gonna be measured and and how much this operating leverage that we've spoken of brings us and the next quarter, we're not expecting pricing to move.
And in the second quarter, that's probably a second half for the year.
So I'd say, it's achievable, but we would we would probably like to remain a little conservative.
Okay. Thank you.
As a reminder, if you have a question. Please press star then one to be joining for the Q.
The next question comes from Sean Mitchell with Daniel Energy Partners. Please go ahead.
Good morning, guys. Thanks for taking my question just to kind of a quick one for me and we've heard a lot of issues I guess and the field over the conference call season here about labor issues in North America, you mentioned trucking earlier being tight or are there and any other areas, where you guys are seeing labor issues and your.
The operation.
Yes, Sean this is Adam labor.
Labor is always tough.
<unk>, especially as activity ramps up coming on and even more so coming out of the downturn when we hit.
Certainly.
Labor and labor forces.
Exit.
Energy sector altogether, and you know forever and then some are just waiting for.
And maybe rates and pricing to get back to where it needs to be and to attract that talent pool back to the low.
Oilfield sector, but as of right now we're not seeing.
Seeing anything as far as.
Labour entirely on our side being able to provide our customers and our partners with you.
High performing and highly efficient personnel on location.
So I would say the trucking is probably been the one that has.
Has been hit the hardest just because it's a combination of things.
It's a really heavily owner operator tight busy.
Business. So you know.
And those type of drivers are demanding better rates for their equipment as well as with.
With the increase the inflation of diesel prices going up.
Theyre just wanted to.
I think that's where you're seeing most of the tightening happened.
And Sean I'll add to that I think I think our art, our position or our competitive position being very single basin Permian focused.
And our history with the customer base that we continue to serve provide.
<unk> provides a lot of comfort to not only our own employee base, but to other supply chain partners. We work with so consistency and that aspect comes at a very high value, which which.
I don't think solves all the problems for us and the labor market, but but it makes us a lot more competitive when you're trying to source that next employee or that next supply chain partner to help you execute a day. They know it debt working with pro Petro is going to come with increased consistency and predictability.
Which is which is very helpful. As we as we sourced that additional person up and down the value chain.
That's helpful. Maybe one more for me just we think about we've heard and if we read a lot you've heard a lot about steel cost inflation and when you go back to thinking what some of the guys have hit on the tier four DGB upgrades, if you upgrade a tier two to tier four.
Any any idea where that cost is today versus say six months ago as steel prices have really ramp higher I mean.
Where are we and on the cost side of upgrading our fleet here from tier two and a tier four.
I think it's safe to say, it's going up.
We're we're trying to keep track of that and on a real time basis the economics.
Debt that we got with the approximately 90000 horsepower that we've either built new or converted.
Are probably not sustainable.
Which is why you hear us continuing to go back to needing to see our R.
Our profitability continued to improve because the cost for those items specifically engines.
And other <unk>.
<unk> that are very.
Steel based.
We perceive will continue to.
And to grind higher throughout the year.
Got it thank you.
This concludes our question and answer session I would like to turn the conference back over to Philip Gould for any closing remarks.
Okay. Thank you everyone for joining us on today's call.
Although we're in early stage of a multiyear recovery the American entrepreneurial spirit is alive, and well and Midland Texas.
For presently we're bring in a safe alternative to hydrochloric acid on location for a new partnership and deploying and evaluating next generation equipment, but the diligent work continues as we progress on our sustainability journey for a proud to play a part and innovative industry and <unk>.
Look forward to the exciting improvements that will come from the unique experience we've gained in the past year.
Thank you again, everyone and we'll look forward to talking with you on the second quarter.
Yes.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.