Q4 2021 Liberty Oilfield Services Inc Earnings Call

[music].

Speaker 1: Good morning and welcome to Liberty Oil Field Services fourth quarter and full year 2021 Army Conference call.

Good morning, and welcome to the Liberty oilfield services fourth quarter and full.

Year 2021 earnings conference call.

All participants will be in listen only mode.

Speaker 1: For any assistance, please signal conference specialists by pressing the Spark key followed by zero. After today's presentation, there will be an opportunity to ask questions.

If you need assistance. Please signal conference specialist by pressing this sparky followed by zero.

After todays presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

Speaker 1: Some of our comments today may include forward-looking statements reflecting the company's views about future prospects, revenues, expenses, or prospects.

Some of our comments today may include forward looking statements, reflecting the company's view about future prospects revenues expenses or profits.

Speaker 1: These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking state.

These matters involve risks and uncertainties that could cause actual results to differ materially from our forward looking statements.

These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties are detailed on the company's army and other public filings.

Speaker 1: like the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in the company's earning lease and other public value.

Speaker 1: Our comments today also include non-GAAP financial and operational matters.

Our comments today also include non-GAAP financial and operational measures.

Speaker 1: not GAAP measures , including EBITDA, adjusted EBITDA, and pre-tax return on capital employed in or not a substitute for GAAP measures , and may not be comparable to similar measures of other.

non-GAAP measures, including you at all adjusted EBITDA and pretax return on capital employed and are not a substitute for GAAP measures.

Not be comparable to similar measures of other companies.

Speaker 1: a reconciliation of net income to EBITDA and just to EBITDA. The calculation of pre-tax return on capital employed has the cost on this call are presented in the company's army's release which is

A reconciliation of net income to EBITDA and adjusted EBITDA.

Calculation of pretax return on capital of employee has the cost on this call are presented in the company's earnings release, which is available on its website.

Speaker 1: I'd now like to turn the conference over to Liberty CEO Chris Wright. Please go ahead.

I would like to turn the conference over to Liberty's CEO , Chris Wright. Please go ahead.

Okay.

Speaker 1: Good morning everyone and thank you for joining us today to discuss our 4th quarter and full year 2021 operational and financial results.

Good morning, everyone and thank you for joining us today to discuss our fourth quarter and full year 2021 operational and financial results.

Speaker 1: In 2021, we focused on the integration of One SIM and its customers into Liberty.

In 2021, we focused on the integration of <unk> and its customers in delivery.

Speaker 2: In the recent downturn, we acquired OneSim to strengthen our platform and technology portfolio, which positions us well for today's rising tide and all future cycles.

In the recent downturn, we acquired was to strengthen our platform and technology portfolio, which positions us well for today's rising tide and all future cycles.

Speaker 2: In our 11 year history, we have seen two deep downturns, 2015 through 2016, and the recent COVID collapse.

Net in your history, we have seen too deep downturns 2015 through 2016.

Recent Kobe collapse, and we are executing transformative transactions during both of them.

Speaker 2: and we have executed transformative transactions during both...

Speaker 2: In 2016, at the bottom of the downturn, we invested...

In 2016.

With the downturn.

First it aggressively both in acquiring stand yield assets and in upgrading them to liberty quality.

Speaker 2: both in acquiring Sandgill's assets and in upgrading them to Liberty quality. We also launched our breakthrough Quiet Fleet technology in 2016. These investments set the stage for the outsized returns that we reached in the years ahead. The decisions at Liberty are always made with a long-term time horizon.

We also launched our breakthrough quiet fleet technology in 2016. These investments set the stage for the outsized returns that we reached in the years ahead investment decisions at Liberty.

Are always made with a long term time horizon.

Speaker 2: Business integrations are always challenging, and this time is exacerbated by COVID impacted supply chain and difficult labor challenges.

Business integrations are always challenging and this time was exacerbated by COVID-19 impacted supply chain and difficult labor challenges. However, one same prize was large and our team worked in overdrive to bring nearly 2000, new members in the Liberty, while continuing to deliver superior.

Speaker 2: However, the one thin prize was large and our team worked in overdrive to bring nearly 2,000 new members into Liberty while continuing to deliver superior service performance to all of our customers, both legacy and new.

Service performance to all of our customers both legacy and new.

Speaker 2: Our top priorities in 2021 were our customers, our team members, and the safety of everyone that touches Liberty.

Our top priorities in 2021, where our customers our team members and the safety of everyone that touches liberty.

Speaker 2: 2021 was a record year for livery work performed, whether measured by revenues, crack stages, pounds of sand pumps, etc. We also set many operational records during 2021.

2021 was a record year for Liberty work performed whether measured by revenues frac stages pounds of sand pumps et cetera, we.

We also said many operational records during 2021.

Speaker 2: Record sand pumpkin of day by a single week was raised several times, including again in January of 2022.

Record sand pumped in day by a single fleet was raised several times, including again in January of 2022.

Speaker 2: zero OSHA recordable incidents in our waterline.

Zero Osha recordable incidents in our wireline business and 75 hours of continuous pumping on a plug in per pack. All of this was achieved in challenging times and executed with our best safety performance ever.

Speaker 2: and 75 hours of continuous pumping on a plug-and-purr pad. All of this was achieved in challenging times and executed with our best safety performance ever.

Speaker 2: We're only going to do this integration once, and we're going to do it right to the best of our ability.

We are only going to do this integration once and we are going to do it right to the best of our ability.

Speaker 2: we were simply not willing to sacrifice customer service, employee satisfaction, and safety, each of which is critical to long-term financial success for the sake of short-term financial results.

We were simply not willing to sacrifice customer service employee satisfaction and safety each of which is critical to long term financial success.

For the sake of short term financial results.

Speaker 2: Integration related costs are still with us today, impacting our bottom line results.

Integration related costs are still with us today impacting our bottom line results.

Speaker 2: However, January was a very significant turning point in moving these cost pressures behind us. We very much like where we sit today.

However January was a very significant turning point in moving these cost pressures behind us, we very much like where we sit today.

Speaker 2: 2021 revenue grew to $2.5 billion and EBITDA was $121 million, both a more than doubling of our 2020 results, but still representative of early cycle conditions.

2021 revenue grew to $2 5 billion.

But it was 121 million Boe, a more than doubling of our 2020 results.

Still representative of early cycle conditions.

Speaker 2: Fourth quarter revenue was $684 million, a 5% sequential increase over third quarter, a robust activity offsetting weather and holiday seasonality.

Fourth quarter revenue was $684 million.

5% sequential increase over third quarter of robust activity offsetting weather and holiday seasonality.

Speaker 2: Fourth quarter adjusted EBITDA was 21 million, pushed down by over 20 million of continued integration costs that will soon be behind.

Fourth quarter adjusted EBITDA was 21.

Pushed down by over $20 million of continued integration costs that will soon be behind us.

Speaker 2: Michael will provide more color on the magnitude and nature of these integration costs.

Michael will provide more color on the magnitude and nature of these integration costs.

Speaker 2: The transformative work our team accomplished in 2021 positions us well as our industry begins an upcycle driven by rapidly tightening markets for oil and gas.

The transformative work our team accomplished in 2021 positions us well as our industry begins an up cycle driven by rapidly tightening markets for oil and gas segment.

Speaker 2: Seven years of subdued global investment in upstream oil and gas production is now colliding with record global demand for natural gas and natural gas liquids and likely record global demand for oil sometime later this year.

Seven years of subdued global investment in upstream oil and gas production is now colliding with record global demand for natural gas and natural gas liquids and likely record global demand for oil sometime later this year.

Speaker 2: Oiling gas are central to the global economy, which is well along the way recovering from the global pandemic.

Oil and gas are central to the global economy.

As well along the way of recovering from the global pandemic.

Speaker 2: A severe energy crisis that has racked Europe over the last several months demonstrates the danger of under investment in our industry.

A severe energy crisis.

<unk> Europe over the last several months demonstrates the danger of unrest underinvestment in our industry.

Speaker 2: E. and P. customers are responding to the oil and gas price.

E&P customers are responding to the oil and gas price cycles.

Speaker 2: The publics are maintaining tight discipline and will show only very modest production growth this year.

Our publics are maintaining tight discipline and will show only very modest production growth this year.

Speaker 2: The privates, on the other hand, are reacting more robustly to strong commodity prices.

On the other hand are reacting more robustly to strong commodity prices.

Speaker 2: Within the frac market, two years of supply attrition and cannibalization, plus limitations from labor shortages and a secular shift towards next generation frac fleet technologies have led to tightness in the frac market.

We did in the Frac market two years of supply attrition in cannibalization plus limitations from labor shortages and a secular shift towards next generation Frac fleet technologies.

The tightness in the Frac space.

Speaker 2: Liberty has focused on finding the right long-term partnerships for the coming years, and we have been very disciplined in holding our practically count steady until returns are strong.

Liberty is focused on finding the right long term partnerships for the coming years.

We have been very disciplined in holding our Frac fleet count steady until returns are strong.

Speaker 2: We are, however, investing to build truly differential competitive advantages in frac fleet technology, digital systems, and logistics optimization, all to enable Liberty to continue our historical track record of well above S&P 500 average returns on capital invested. It's a Profile Landscape a

We are however impacting to build truly differential competitive advantages and Frac fleet technology digital systems and logistics optimization all to enable liberty to continue our historical track record of well above S&P 500 average returns on capital.

Investing.

Competitive advantage is the name of that game.

Speaker 2: We expect that our investments today will lead to strong returns in the coming years.

We expect that our investments today will lead to strong returns in the coming years, let.

Speaker 2: Let me elaborate a little more about the areas where we are investing today.

Let me elaborate a little more about the areas, where we're investing today.

Speaker 2: Frankly, technology we talk about quite regularly, so I will be brief on that.

Frankly technology, we talked about quite regularly so I will be brief on that one.

Speaker 2: Liberty's focus is to bring the two best technologies available, Tier 4 DGB with automated controls to maximize gas substitution for diesel, and Liberty's DigiFrac that will set a new industry bar combining the lowest emissions in the marketplace, together with superior pump performance, reliability and cost efficiency.

Liberty's focus is to bring the two best technologies available tier four DGB with automated controls to maximize cash substitution for diesel and Liberty DG Frac that will set a new industry bar combining the lowest emissions in the marketplace together with superior pump performance.

Reliability and cost efficiency.

Speaker 2: the modularity of our high thermal efficiency natural gas reset power production system.

The modularity of our high thermal efficiency natural gas <unk> power production systems allow the phased deployment of DG frac fleets and they are 100% compatible with our existing fleets did you frac pumps and gas recess, we will start deploying into our practice lease early.

Speaker 2: allows a phased deployment of Digi-Brack fleets, and they are 100% compatible with our existing

Speaker 2: Digi-brack pumps and gas reships will start deploying into our Brack leaks early in Q2.

In Q2.

Speaker 2: We plan to have at least two complete Digiprac fleets operational this year.

Glad to have at least two complete DG Frac fleet operational this year.

Speaker 2: We displayed Digifrag at the SBE Frac Conference in Houston last week, and industry interest remains exceptionally high.

We displayed AG frac at the SPE Frac conference in Houston last week.

Industry interest remains exceptionally high.

Speaker 2: Repairs and maintenance for fracked leaks are both a very large cost driver and absolutely critical to delivering safe high-efficiency fracked service.

Repairs and maintenance for Frac fleets are both a very large cost driver is absolutely critical to delivering safe high efficiency Frac services.

Speaker 2: Liberty has been a leader in this area. However, integrating new team members from OneStim who were using different maintenance systems and procedures led to significant inefficiencies during integration.

Liberty has been a leader in this area.

Integrating new team members from one steel who were using different different maintenance systems and procedures led to significant inefficiencies during the integration.

Speaker 2: The downsides of this are readily apparent in our compressed margins in the second half of 2021.

The downside of this are readily apparent in our compressed margins in the second half of 2021.

Speaker 2: But this is also an area for huge improvement going forward.

It is also an area for a huge improvement going forward.

Speaker 2: Bringing together legacy Liberty technologies with one sense, plus the combined team's ongoing development efforts will dramatically improve our performance.

Bringing together legacy Liberty technologies with <unk>, plus the combined teams ongoing development efforts will dramatically improve our performance.

Speaker 2: The early stages of that are already visible in January's results.

The early stages of that are already visible in january's results.

Speaker 2: Success in R&M is controlled by teamwork across operators, supervisors, and mechanics, and also by processes, technology, and parts.

<unk> already.

Is controlled by teamwork across operators supervisors, and mechanics, and also buying processes technology and parts.

Speaker 2: We have enhanced our continuous equipment monitoring program with additional sensors to help reduce premature failures and guide optimal preventative maintenance.

We have enhanced our continuous equipment monitoring program with additional centers to help reduce premature failures and guide optimal preventative maintenance.

Speaker 2: We are just introducing a virtual equipment digital twin model for each frac pump that helps drive minimum cost of ownership for each and every pump.

Jeff introducing a virtual virtual equipment digital twin model for each frac pump and helps drive minimal cost of ownership for each and every pump.

Speaker 2: Increased data and reporting across all Liberty crews is empowering everyone to take ownership of their work. We've already seen meaningful improvements in the last few weeks.

Increased data and reporting across all Liberty cruise is empowering everyone to take ownership of their work we've already seen meaningful improvements.

Speaker 2: Although we are not back to our historical rates yet, of course, our goal is to perform across the whole company at levels well above our historical level.

Although we are not back to our historical rates yet of course, our goal is to perform across the whole company at levels well above our historical level.

Speaker 2: We are also launching an in-house logistics management center that is built around large-scale upgrades to our current profit planning execution model.

We are also launching an in house logistics management et cetera.

Built around large scale upgrades to our current profit planning execution model the.

Speaker 2: The recent sand bottleneck challenges in the Permian Basin, both of sand availability and last mile transportation, highlight the importance of this initiative.

The recent Sam bottleneck challenges in the Permian basin, both of sand availability and last mile transportation highlight the importance of this initiative we have.

Speaker 2: We've already begun the integration of our PropX PropConnect software into our Oracle Transportation Management System to further modernize last mile delivery, enable our driver quick pay initiative, and bring significant improvement to route optimization.

Already begun the integration of our prospects cross connect software into our Oracle Transportation management system.

Further modernized last mile delivery enable our driver quick pay initiatives and brings significant improvement to route optimization.

Repairs and maintenance.

Speaker 2: sand and logistics represent both a large spend and critical link in the chain of operational efficiency and safety.

Sand and logistics represent both a large spend and critical link in the chain of operational efficiency and safety Liberty.

Speaker 2: Liberty's expanded team and technologies with the addition of Prop-X should drive large improvements in efficiency, safety, and cost. Our forecasting prowess and quick pay initiatives should help attract the best trucking partners and long-term loyalty.

Liberty's expanded team and technologies with the addition of prospects should drive large improvements in efficiency safety and cost are forecasting progress and quick pay initiatives should help attract the best trucking partners and long term loyalty.

Speaker 2: Liberty's legacy is developing and deploying technologies that help maximize returns for our customers and hence mutually beneficial long-term partnerships.

Liberty legacy is developing and deploying technologies that help maximize returns for our customers and hence mutually beneficial long term partnerships.

Speaker 2: Wet sand handling is at the forefront of disruptive technology in the processing and delivery of sand, and we're excited about the work we are doing at Prop-X.

Sand handling is at the forefront of disruptive technology, and the processing and delivery of sand and we're excited about the work we are doing and prospects.

Speaker 2: This ESG-friendly solution removes the need to dry sand at the mine, thereby removing the highest emitting step in the processing of sand.

This ESG friendly solution removes the need to dry sand at the mine, thereby removing the highest emitting step in the processing of sand.

Speaker 2: It further enables smaller scale, localized wet sand mines to carry a smaller footprint by moving mining operations closer to the wellhead.

It further enables smaller scale localized wet sand mines to carry a smaller footprint by moving mining operations closer to the wellhead.

Speaker 2: Prop-X already has multiple active contracts in 2022 to support mini-mines that lower the total delivered cost of sand and meaningfully reduce environmental impact by eliminating the drying process and perhaps biggest of all, reducing trucking costs.

Opex already has multiple active contracts in 2022 to support many mines that lowered the total delivered cost of sand and meaningfully reduce environmental impact by eliminating the drying process.

And perhaps the biggest of all reducing trucking needs.

Speaker 2: We estimate that a 10 mile distance from a local line to the pad could reduce trucking requirements by over 70% when compared to an 80 mile haul. This is game changing in T-basins.

We estimate that a 10 mile distance from our local lines in the past could reduce trucking requirements by over 70% when compared to an 80 mile haul.

This is game changing in key basins.

Let me touch on our outlook.

Speaker 2: We expect high single digit revenue growth sequentially in the first quarter and significant growth in our margins as integration costs start to fade away.

We expect high single digit revenue growth sequentially in the first quarter and significant growth in our margins as integration costs start to fade away we.

Speaker 2: We are benefiting from increased pricing in 2022, driven by a passive of inflationary costs and higher net service prices.

We are benefiting from increased pricing in 2022, driven by a pass through of inflationary costs and higher net service pricing.

Speaker 2: We expect continued rises in BRAC pricing in subsequent quarters.

We expect continued rises in frac pricing in subsequent quarters. We also expect margin growth as our new strategic efforts begin to pay dividends and lowering our cost of operations and increasing efficiency.

Speaker 2: We also expect margin growth as our new strategic efforts begin to pay dividends in lowering our cost of operations and increasing efficiency.

Speaker 2: We are excited about the opportunity ahead. We have a macro tailwind together with high quality customers eager to improve their operations and ESG profiles. Every day we ask ourselves, how can we deliver a value proposition that is compelling for our shareholders and customers through commodity cycles.

We are excited about the opportunity ahead, we've a macro tailwind tailwind together with high quality customers eager to improve their operations and ESG profiles everyday and we asked ourselves how can we deliver a value proposition that is compelling for our shareholders and customers.

Through commodity cycles.

Speaker 2: With that, I'll turn the call over to Michael to discuss our financial results in more detail.

With that I'll turn the call over to Michael to discuss our financial results in more detail.

Good morning.

Speaker 3: As we discuss our results in detail and look to the future, I find that it's always good to view them through the lens of how we manage the need to focus on shareholder returns through the site.

As we discuss our results in detail and look to the future I find that is always good to view them through the lens of having manageability focus on shareholder returns through the cycle.

Speaker 3: At the bottom of the cycle, we look for the opportunity to invest, to create maximum benefits from a longer runway to capture return.

At the bottom of the cycle, we look for the opportunity to invest to create maximum benefit from a longer runway to capture to liberty.

Speaker 3: Liberty at its core is an organic growth company, but we are always looking at potential opportunistic acquisitions, especially with a technology benefit that increases our competitive advantage. And the COVID downturn...

At its core is an organic growth company, but we are always looking at potential opportunistic acquisitions, especially with the technology benefits increases that competitive advantage.

And the closer down to within two unique opportunities with the acquisitions of <unk> and properties.

Speaker 3: OneSim, Bell distance becoming the second largest completion service provider with a scale and breadth of technology. The position does to navigate.

Wants them to be.

And the second largest completions has provided us with the scale and breadth.

That positioned us to navigate through the next decade.

Speaker 3: first year with one sim revenue increased 156 percent to 2.5 billion from 966 million...

And our first year with <unk> revenue increased 156% to $5 billion from 966 22020.

Speaker 3: We added new basins and complementary sand and wildlife.

Added new basins and complementary stained and wireline businesses, we expanded on liberty's already strong customer relationships and added historical once the customers to the family.

Speaker 3: expanded on Liberty's already strong customer relationships, and added historical Winston customers to the family, introducing name to the Liberty Devil.

Introducing name because of any difference.

Speaker 3: This expansion and integration was executed during a pandemic and unprecedented supply chain disruptions.

This expansion of integration with execution during a pandemic and increasing agent supply chain disruptions.

It cost to build this platform will be used to expand longtime shareholder since that has negative effects from the 2021 financial results.

Speaker 3: to expand long-term shareholders that had a negative effect on the 2021 financial results.

Speaker 3: Their loss for the year totaled $187 million or $1.03 per fully deleted share. Full year adjusted EVDA was $121 million in page with adjusted EVDA was $121 million.

The loss for the year totaled $197 million or $1.03 per fully diluted share.

Full year, adjusted EBITDA was $121 million debates with adjusted EBITDA of $58 2020.

Speaker 3: The cost of integration of 1-2 businesses that we acquired at the start of the year was amplified by supply chain and labour constraints and the impact of Legacy 1-Stim fixed customer contracts.

Cost of integrations once the businesses that we acquired to study it was amplified by supply chain and labor constraints and the impact of legacy one fixed customer contracts fixed.

Speaker 3: fixed price customer contracts that were detrimental to margins in inflationary environments.

Fixed price customer contracts there with <unk>.

Currently gross margins been inflationary environment.

We estimate higher.

Speaker 3: High equipment costs, legacy costs from third party management of sand mines and carrying costs of iron equipment negatively impact 40 years old by 150 to 200 bases.

Higher equipment cost legacy customers defining management same mines and carrying cost of idle equipment negatively impacted full year results by 150 to 200 basis.

Speaker 3: We also moved all of our legacy once improved to a 2 and 2 schedule, an initiative that truly supports the Liberty culture and employee engagement and advances our premium service offering over the long term.

We also moved all of our legacy once improves to tune to schedule and initiatives that truly supports liberty culture.

Our employee engagement and advances at premium citizen offering over the long term.

Speaker 3: but was completed at a time when we were managing through a week price of rhinurons, unfavourable legacy contracts and integrations.

That was completed at a time when we were managing through a weak price environment unfavorable legacy contracts and integration efficiencies.

Speaker 3: In the fourth quarter of 2021, revenue was 684 million, a 5% increase of 654 million due to the pandemic.

In the fourth quarter of 2021, Ricky was 684 billion, a 5% increase from 654 million.

Speaker 3: What stands out here is that we grew our top line despite seasonal weather and what they...

What stands out here. So we grew our top line despite seasonal with us the impacts almost every basin sort of uptick in business at cruise achieved a high level of efficiency offsetting seasonal agents increased with that team's ability to grow the businesses.

Speaker 3: almost every base in Soar and Arctic in business has had crews achieved a high level of efficiency offsetting seasonal headwinds. I'm impressed with that team.

Speaker 3: their crews for keeping our operations efficient while handling these great

Net cruise for keeping our operating efficiency.

With the integration.

Speaker 3: Net loss after tax was $57 million in the fourth quarter compared to a $39 million loss in the third quarter. Bully Duluth net loss per share was 31 cents in the fourth quarter compared to 22 cent loss in the third quarter.

Net loss after tax was $57 million in the fourth quarter compared to $39 million last year.

Fully diluted net loss per share was <unk> <unk>.

In page 22 samples.

Results included $2 6 billion of nonrecurring expenses, including transaction severance and other costs of $3 million.

Speaker 3: transactions, severance and other costs of $3 million dollars, fleet startup lay down costs of $2.8 million. At a loss of disposal, at a loss of money, at a loss of money, at

<unk> startup lay down cost of $2 8 million and a loss on disposal of assets.

Your line.

Speaker 3: General and administrative expenses totaled $35 million including non-cash stock-based compensation of $3.6

General and administrative expenses totaled 35 million, including noncash stock based compensation of $3 6 million net.

Speaker 3: Net interest and other associated fees, so 4.1 billion.

Net interest and other associated fees totalled $4 1 billion.

Fourth quarter, adjusted EBITDA was $26 million compared to $32 million.

Speaker 3: 20.6 million compared to 32 million in the third quarter, reflecting the full weight of integration, supply chain constraints, cost inflation, and moving our operations.

Reflecting the full base integration supply chain supply chain changes.

Cost inflation and moving our operations to attune to schedule.

Speaker 3: In the fourth quarter, we estimate integration costs, including elevated parts replacements, primary and legacy 1-Sim equipment, reduced margins by over 200 baht.

In the fourth quarter, we estimate integration costs, including elevated patch replacements, primarily on the legacy <unk> equipment reduced margins by over 200 basis points.

Speaker 3: The good news is that we instituted measures in October that Chris described earlier that already showed improvement in December and continued further into January .

The good news is we instituted measures and I'll cover that Chris described earlier.

We showed improvement in December and continued into January .

We also moved our final crews into schedule, which similarly impacted EBITDA by adding an additional shift to legacy wants to Frac and wireline.

Speaker 3: which similarly impacted EBITDA by adding an additional shift to legacy once in a fresh while

Speaker 3: These two dynamics work hand in hand. By fostering a better word-of-life balance, this drives the increased level of engagement and pride translated to greater efficiency, better care for our customers and our equipment.

These two dynamics with hand in hand by fostering a bit of worldwide balance this drive the increased level of engagement.

Translates into greater efficiency.

For our customers.

Equivalents.

Speaker 3: The returns of our historical superior efficiency utilization levels in 2022 will support the returns on the investment moving. Regain the actual republic of cheshire in the spring

Which is we had historical superior efficiency and utilization levels in 2022 will support through to on the investments moving.

So that would be scheduled.

Speaker 3: Over the past few months we have also put out contracts under the lens to assist opportunities for improvements for us and our customers.

Over the past few months, we've also got contracts in place to assess opportunities for improvements.

And our customers, we inherited some contracts with largely fixed price contract fixed pricing, which in a rising inflationary environment represented a drag on margins and in some cases were generating losses on that one line.

Speaker 3: We inherited some contracts with largely fixed pricing, which in a rising inflationary environment represented a drag on margins. In some cases, we're generating losses on that bottom line as it progressed. For instance, one customer accounted for a $5 million EBITDA drag in the fourth quarter due to a legacy one-stim contract that did not reset the underlying inflation or the additional cost of higher pressure designs on air equipment.

For instance, one customer accounted for a $5 million EBITDA drag in the fourth.

Due to our legacy <unk> contracts that did not receive the underlying inflation and additional cost of high appreciate designed financed equipment right.

Speaker 3: However, it's been a great opportunity for both us and our customers to have a collaborative, engaged dialogue on how we can all do things better.

However, it's been a great opportunity for both us and our customers to have a collaborative you saw how we.

All of these things Peter.

Speaker 3: our sales, engineering, operations, supply chain and finance teams together to work alongside our customers finding ways to recalibrate operations that will ultimately lead to a win-win for both us.

Sales engineering operations supply chain and finance teams together to work alongside our customers to find ways to recalibrate operations.

But really to a win win for both parties.

Yes.

Speaker 3: At the end of the year with a cash balance of $20 million, at the end of year two. At year end we had $18 million of borrowings on the AVL credit card.

We ended the year with a cash balance of $20 million and <unk> of 102 at year end, we had $80 million of borrowings on the ABL credit facility.

Speaker 3: Total liquidity, including availability of the credit facilities, was $269.

Total liquidity for the availability of the credit facility was $269 million.

Speaker 3: Net capital expenditures totaled 174 million on a gap basis in 2021.

Net capital expenditures totaled $174 million and get basis in 2021.

Speaker 3: partially offset our capital investment and next generation equipment for the upcoming cycle with the planned sale of air-

To partially obviously that capital investment in these generation equipment for the upcoming cycle with the planned sale of assets.

Speaker 3: We were able to capture 25 million in synergies from asset sales, primarily related to monetizing of legacy ones to asset sales that would not cause better operations.

We were able to catch a $25 million synergies from asset sales primarily related to the monetizing of Vegas. He wants to make it to the core of our operations gross capital expenditures were $199 million, consisting of $140 million maintenance capex approximately $20 million in sensation and approximately $40 million tier four DGB.

Speaker 3: Gross capital expenditures were $199 million consisting of $140 million of maintenance capex, approximately $20 million of digitization and approximately $40 million of PFO DGP upgrades, DigiFrank and other innovations and technologies.

Upgrade did you Frank.

Pieces of technology.

Speaker 3: But the majority of the heavy lifting of integration behind us are excited by the opportunity.

But the majority of the heavy lifting of integration behind US we're excited about the opportunity.

Speaker 3: In the first quarter of 2022, we're expecting strong sequential improvement on higher service prices and activity.

The first quarter of 2022, we're expecting strong sequential improvement in <unk> prices and activity.

Lower integration related costs.

Speaker 3: Prag service prices have been increasing meaningfully and with much of the change you hear evidence became ACC.

<unk> prices have been increasing meaningfully and was of much of the changes in dividend in January .

Speaker 3: Our customers are understanding that the fast-paced and stationary environments coupled with the roll-off of pandemic discounts we receive from our vendors require higher service prices to meet those costs and more importantly restore reasonable returns.

Our customers are understanding that the phosphates inflationary environment, coupled with the roll off of pandemic discounts. We received from Athene is required highest as prices to meet those costs and more importantly, we're still reasonable returns at citizens.

Speaker 3: Pricing is still below pre-pandemic levels, but moving at the right direction.

Pricing is still below pre pandemic levels, but moving in the right direction.

Speaker 3: We also anticipate better utilization in Q1, following the fourth quarter seasonality.

We also anticipate utilization in Q1.

Fourth quarter seasonality effects lastly, the combination of maintenance logistics actions, we've taken will provide a tailwind to the months ahead.

Speaker 3: Lastly, the combination of maintenance and logistics actions we've taken will provide tailwind to the month.

Speaker 3: We see 2022 as an ideal opportunity to reinvest in the early part of the cycle, to maximise free cash flow over the next few months.

We see 2022 is an ideal opportunity in marine based community.

Maximize free cash flow side.

Speaker 3: In 2022, capital expenses are targeted to be in the range of $300 to $350 million, with the optionality to adjust at the year of holdings. At the midpoint of this range, it includes maintenance capital of approximately $130 million for fracked water and sand.

In 2022 capital expenditures are targeted to be in the range of 300 to 300.

With the Optionality to adjust as the year.

At the midpoint of this range that includes maintenance capital of approximately $180 million for Frac sand.

Speaker 3: Next generation technology investment, including DigiFrac with power generation systems, customer demand driven TF4 DTP upgrade, wet sand handling technology and other margin generating investments is projected to be approximately $225 million. This is off state by approximately $30 million.

Generation technology investments, including <unk> with pet generation systems customer demand driven tier four DGB upgrades with St handling technology and other margin generating investments is predicted to be approximately 225.

This was offset by approximately $30 million synergies rationalizing out equipment footprint legacy pumps and passives.

Speaker 3: We have significant flexibility in adjusting our capital spending targets depending on customer demand.

We have significant felix ability and adjusting our capital spending targets depending on customer demand.

Speaker 3: and returns expectations. And we plan to be free cash flow positive in 2022 while522 eviction in a long-term base.

Ericsson's expectations, and we plan to be free cash flow positive in 2022.

<unk> long term competitive advantage.

<unk>.

Speaker 3: Looking forward, we're excited for the coming years as we move forward into a robust fight.

Looking forward, we're excited for the coming years as we move forward a robust site.

Speaker 3: We enter 2022 with a sustained focus on technology innovation and investing to build a truly differentiated business with a competitively advantageable policy.

We enter 2022 with a sustained focus on technology innovation and investing to build a truly differentiated business with a competitively advantaged.

Speaker 3: This is foundational to our commitment to a value proposition designed to reward shareholders and stakeholders alike through the cycles. I'll hand the call back to Chris.

This is foundational to that commitment to our value proposition designed to reward shareholders and stakeholders alike through the cycles.

I hand, the call back to Chris for closing remarks, we will take questions.

Speaker 2: The underinvestment in oil and gas over the last seven years is starting to bite.

The underinvestment in oil and gas over the last seven years is starting to fight.

Speaker 2: Most prominently, we see this via the energy crisis in Europe that is also making for significant challenges in Asia.

Most prominently we see this be the energy crisis in Europe and it is also making for significant challenges in Asia.

Speaker 2: Global LNG prices are so high right now that many fertilizer plants sit idle.

Global LNG prices are so high right now that many fertilizer plants sit idle.

Speaker 2: This is not good. Fertilizer prices are elevated and this spring we will see many fields with reduced fertilization, which inevitably leads to reduced crop yields and further pressure on basic food stuff later this year.

It's not good.

<unk> prices are elevated and this spring we will see many fields with reduced fertilization, we can negatively leaks to reduce crop yields and further pressure on basic foodstuffs. Later this year society cannot thrive without a robust energy supply.

Speaker 2: Society cannot thrive without a robust energy supply.

Speaker 2: Yes, the last decade has seen a disproportionate amount of the shale revolution gains going to energy consumed.

Yes, the last decade has seen a disproportionate amount of the shale revolution gains going to energy consumers.

Speaker 2: We can and should be proud of the benefits global consumers have reached, but our industry...

We can and should be proud of the benefits global consumers have REIT, but our industry the.

Speaker 2: the last 10 years have brought more pain than gain. But that pendulum is swinging hard now. The industry is poised for years of strong returns, especially for the leaders and those that remain focused on winning in the long term. Operator, we are now ready to take questions. Well now begin the question and answer session. To ask a question, you may press star than one on your touch tone phone.

In the last 10 years and brought more pain than gain but that pendulum is swinging hard now the industry is poised for years of strong returns, especially with the leaders and those that remain focus on winning in the long term.

Operator, we are now ready to take questions.

We will now begin the question and answer session.

Just a quick question you May Press Star then one on your Touchtone phone.

We are using a speakerphone please pick up your handset before pressing the keys.

Your question. Please press Star then two.

At this time, we will pause momentarily to assemble the roster.

Speaker 1: First question comes from Aaron Jerriman from JPMorgan Chase. Please go ahead.

First question comes from Iron German from Jpmorgan Chase. Please go ahead.

Speaker 2: Yeah, good morning. My first question is I wanted to see if we could walk through how you think the margin progression will be in 2022. If we add back some of the integration expenses that you outlined in the press release.

Yeah good morning.

My first question is I wanted to see if we could.

Walk through how you think the margin progression will be.

In 2022.

If we add back some of the integration expenses that you outlined in the press release.

Speaker 1: Your 4Q EBITDA margins would have been in the 6% range.

<unk> EBITDA margins would've been in the 6% range.

Speaker 1: And some of your peers who've provided color on 4Q are probably in the low double-digit range. I know you're still dealing with some integration things. But I was just wondering if you could help us think about how you think your EBITDA margins could trend this year and maybe give us a little bit of color of the turn you saw in January .

And not to.

And some of your peers, who provided color on <unk> or probably in the low double digit range. I know you are still dealing with some integration things, but I was wondering if you could help us think about.

How do you think your EBITDA margins could trend this year and maybe give us a little bit of color of the turn you saw in January .

Speaker 3: Definitely a ruin. I mean, as we move forward, we will see a roll off of the integration costs through Q1. They'll be sort of relatively low by the way we expect by the early part of Q2. So we will see margins improve as we step in through Q1, Q2, and there's more price increases as we go into the second half. Yeah, I expect the margins to get back to sort of what we consider a step through and increase as we go through Q1.

Right.

As we move forward, we will see a roll off of the integration costs.

Through Q1, there'll be sort of relatively followed by the state by the early part of Q2. So we will see margins improve as we receive them through Q1 Q2, and some more price increases as we go into the second half. So, yes, I'd say that the module makers.

The.

State through increase as we go through the year.

Speaker 1: In any more color, Michael, on just thoughts on percentages, do you expect to be in the double digits as an EBITDA margin this year?

And any more color, Michael and just thoughts on percentages do you expect to be in the double digits.

The EBITDA margin this year.

Yes.

Speaker 1: Okay, okay, fair enough. And then just my follow up on capital.

Okay, Okay fair enough.

And then just my follow up.

On capital.

Speaker 1: You guys released an updated view of 300 to 350 million for capital. I think I heard there's 225 million of growth.

You guys released.

The updated view of $300 million to $350 million for capital I think I heard used $225 million of growth and 130 silver maintenance can you provide us a little bit more details on the growth Capex I assume that.

Speaker 1: and 130 or so over maintenance. Can you provide us a little bit more details on the growth capex? I assume that some of that is the DigiFrac fleets. But just give us a little bit of a color on your growth capex flames this year.

All of that is the did you frac fleets, but just give us a little bit of a color on your growth Capex plans this year.

Speaker 3: Correct, the largest side of that is the DigiFrax legs that are under contract for customers. We have some completions in the first half of this year which is going to be tier 4 DigiV upgrades.

Correct the largest by far the largest side of that is the <unk>.

Any frac fleets that are under contract with customers.

We have some completions in the first half of this year, which is going to be tier four DGB uprights numbers of those customers within our upgrades for incremental margins in <unk>. They will provide the cabinet itself on the growth side is going to be front end weighted.

Speaker 3: numbers of those customers that are upgrading to tier 4 with those incremental margins and returns that they will provide. The cabbage itself on the growth side is going to be front end weighted.

Speaker 3: If you're looking to model that, I would say you're probably significantly frontier weighted on the ear. And we'll adjust as we go through for returns and look at clients.

If you look into bottlenecks I would say is hopefully you'll see politically frankly at waste on the Es and we will adjust as we go through and look at clients.

Speaker 2: and returns for any additional commitments that DigiFrame, they want to make. And when we say growth, this is an incremental practice.

And returns.

Commitments any additional commitments to digi.

If we say growth is it incremental frac fleets. This is this is really growth in margin. These are incremental upgraded products things that drive better efficiency things that command a premium from customers. So if growth does it mean, new frac fleets. It means new technology to build our competitive advantage.

Speaker 2: This is really growth in margin. These are incremental, upgraded products, things that drive better efficiency, things that command a premium from customers. So growth doesn't mean new practically. It means new technology to build our competitive advantage.

Great. Thanks for clarifying appreciate it.

Speaker 2: Thank you. Our next question comes from Ian MacPherson of Piper Sandler. Please go ahead.

Thank you our next.

Question comes from Ian Macpherson of Piper Sandler. Please go ahead.

Thanks, Good morning, Chris and Michael.

Good morning.

Speaker 4: If we're solving for full year EBITDA from your free cash flow and CapEx.

If we're solving for full year EBITDA from your free cash flow and Capex guide.

Speaker 4: guidance and other pieces on the edges. Do you get to that level of EBITDA growth on what kind of activity expansion? We did see that you had some fleet startup costs itemized in Q4, which I know you had a pretty flat fleet cadence throughout most of last year.

Guidance another pieces on the edges.

Do you get to that level of EBITDA growth on on what kind of activity expansion. We did see that you had some fleet startup cost itemized in Q4, which I know you had a pretty flat fleet cadence throughout most of last year.

Speaker 4: Is the plan to ramp up into the mid or exit the year in the high 30s of active fleets? Or could you talk to that as a component of the outlook?

Is that is the plan to ramp up into the mid or exited the year in the high <unk> of active fleets or could you talk to that as a component of the outlook.

Speaker 3: The two-floor startup costs was actually reactivating one fleet in the satellite camp, so that was that one addition. At the moment, the plan is to still stay relatively modest on fleet additions, with the upgrades and driving, the idea being to drive significant extra margin.

The Q4 startup cost was actually reactivating reactivating one fleet in the satellite camp.

That was that was that one addition at the moment. The plan is to assume still staying relatively modest on fleet additions with the upright and driving the <unk>.

<unk> drive significant extra module.

Okay.

At this present point in time.

Speaker 4: Okay, so the framework you've guided does not really assume a great degree of net fleet growth activity year over year. Is that – do I hear that correctly? That is correct. That is not the base framework for the year. But obviously – Okay. So, we've changed the market, we've adjusted the market and cut –

Okay. So the framework that you've guided does not really assume or.

Degree of net fleet growth activity year over year is that is it did I hear that correctly.

That is correct that it's off the base framework for the year.

Chinese market, we adjusted the market customers are willing to commit.

Speaker 4: Okay, that's helpful. Thanks. My other question, we're hearing from everywhere that the pricing surge in FRAC has become broader and it's encompassing the full spectrum of assets, even conventional tier two pricing is moving along with everything else.

Okay. That's helpful. Thanks, My other question.

We're hearing from everywhere that the pricing surge in frac as it has become broader in its encompassing the full spectrum of assets, even conventional tier two pricing is moving along with everything else given that.

Speaker 4: Given that, I assume there's also probably a surge in customer appetite to engage in longer-term contract agreements.

I assume there's also probably a surge in customer appetite to engage in longer term contract agreements can you speak to your appetite.

Speaker 4: Can you speak to your appetite on that side of the commercial framework? And if you're getting to the point now on leading edge pricing, we're willing to lock in longer term agreement apart from what you're doing on DigiFrac.

That side of the commercial.

Framework and if you're at the getting to the point now on leading edge pricing, we're willing to lock in longer term agreements apart from what Youre doing on did you frac.

Speaker 2: That is Chris, and that is true. The customer demand today is strong, and with the attrition of supply over the last two years, even at the start of this year, we have a pretty tight BRAC mark.

That is correct and that is true customer demand today's is strong and we say attrition of supply over the last two years, even at the start of this year, we have a pretty tight frac market. So for us it's.

Speaker 2: So for us, contracts matter, but it's far more than just contracts, right? Counterparty matters hugely. Who is your partner? Who are you committing long-term to a partnership with?

Contracts matter.

Far more than just contract counterparty matters hugely who is your partner who are you committed long term to a partnership with <unk>.

Speaker 2: But your point is absolutely correct. There are people that are keen to make sure their needs are met, keen to have the right partner, and we are entering into some longer term contracts.

But your point is absolutely correct there are people back.

Our team to make sure their needs are met keen to have the right partner and we are entering into some longer term contracts.

Speaker 2: And some of those, as you implied as well, are not for next generation equipment.

And some of those as you implied as well are not for next generation equipment.

Interesting. Thank you, Chris I'll pass it over.

You bet. Thank you. Thank you.

Speaker 2: Thank you, and our next question comes from Neil Maddow of Goldman Sachs.

Okay.

Thank you and our next question comes from Neil Mehta with Goldman Sachs. Please go ahead.

Speaker 5: Good morning team and thanks for the comments. The first question is really on the expense side and can you help us understand?

Hey, good morning team and thanks for the comments that the first question is really on the expense side and how can you help us understand.

Speaker 5: what happened in the quarter and what the $20 million was specifically used for, as you talk about integration costs, I'm guessing a lot of that was about securing and compensating labor. And how much of that carries forward versus is one time in nature because it's been a couple quarters now where we've seen costs surprise us to the upper.

No.

What happened in the quarter and what the $20 million was specifically used for it as you talk about integration costs I'm guessing a lot of that was about.

Securing compensating labor and how how much of that carries forward versus <unk>.

One time in nature, because it's been a couple of quarters now where we've seen.

Cost surprised us to the upside.

Speaker 3: Yeah, no problem. Of that 20 million that you're discussing in Q4, actually probably about three quarters of it was related around...

Yes.

Yes, I think you'll know comps of 820.

$20 billion that you're discussing in Q4 actually probably about three quarters of it was related around equipment.

Speaker 3: If we step back a little bit, through the beginning of the integration, we moved the OneStim team in under the full of the umbrella in Q2.

If we step back a little bit through the beginning of the integration we moved once containment.

Under this formula the umbrella in Q2.

Speaker 3: And then that's where we got some integration issues, which is changing the maintenance systems, changing systems and how everybody works together. And integration side of the problem.

And then that's where we got some integration issues, which is changing the maintenance systems changing systems had equity works together and interventional signs of problem.

Speaker 3: The cost of that generally turns up about six months later and you cost of running equipment, right? So if you're not changing valves or seats quick enough and you get some of that care in a historical way that you've done business.

Cost of that generally tends up about six months later the cost of running equipment right. So you're not changing six quick enough.

Some of that here in the historical <unk> business. So the slug of those costs really start tuning up.

Speaker 3: So the swipe of those costs really started turning up in the kind of September , October and November timeframe.

Can you kind of timber frame and tightened September October November timeframe, and as we go through the summer and integration.

Speaker 3: And as we got through the summer and integration got smoother, we're starting to see those numbers roll off in December and January . So I think that slug of equipment cost was a good chunk of that. There is also a significant amount of the cost for the two and two schedule over and above.

We're starting to see those numbers roll off in the same regime right. So I think that's slightly that slug of equipment cost, but a good chunk of that there is also a significant amount of the cost from the two new schedule over and above.

Speaker 3: that was running through Q4. Now that is definitely going to continue on into next year. But the difference with that is, now that those teams have all moved to two and two, and contracts are resetting and the efficiency and the way those teams are working together, they're getting back to more towards traditional limiting efficiency, and those customer contracts are resetting, we're going to get a return on that extra personality.

That was running through Q4.

He is deeply going to continue on into next year, but the difference is now that those teams are all moves to ensue and contracts are resetting and efficiency in the way. Those teams are working together are getting back to what was traditional liberty efficiency and those customer contracts are receiving we can get them soon on that extra boost.

Speaker 3: The actual personnel investment was a big drag for the second half year cost structure and then we'll provide the terms as we go through this year.

<unk> <unk> was a big drag on the second half year cost structure, and then will be will provide opportunities as we go through into this year. So yes, I think we'll see the full effect of OLED personnel costs in.

Speaker 3: So yeah, I think we'll see the full effect of all those personnel costs in...

Speaker 3: Most of it was in Q4 and now that becomes part of our current run rate. Contracts have regained efficiency.

Most of it was in Q4 now that becomes part of a current run rates, but contracts of receipt efficiently efficiency rate.

Speaker 3: support that. So I think that's where that is. We'll see that, we're starting to see the R&M, the slug of cost that relates to some of the longer, you know, the longer lived, you know, so the older slung tray equipment that was delivered to us and the way those equipment was run, which was a drag on cost structure in, especially the latter part of the fall.

So I think Thats, where there is we will see that we're starting to see the irony in the slides the cost that relates to some of the longer the longer lives.

It gives us the older fungi equivalent was delivered to us and the way those critical drawn which was a drag on cost structure in that.

Especially the latter part of the.

And daily Battle with them.

Speaker 5: It just says we calibrate our models. If we saw $20 million in the fourth quarter, is it fair to assume there's going to be minimal impact here in the first quarter as it relates to integration?

It just says we calibrate our models if we saw a $20 million in the fourth quarter is it fair to assume that there's going to be minimal impact here in the first quarter as it relates to integration.

Speaker 3: In regards to integration, we're still going to have some costs, as we see some of the impacts there, but some costs of some lease equipment that passed over from Sloane and Jada, there's no use that that will still stay on the lease costs. That'll be in the sort of one to $3 million a quarter range. And we'll still see some vestiges of that equipment cost run in Q1 as well. So that's where I sort of think you're going to see an incremental improvement in margins in Q1 and then another step change in Q2.

With regards to integration, we're still going to have some costs as we see some of the FX, Steve There's some cost of some leased equipment that passive from Schlumberger that there's no use that will still stay on the lease cost that will be in the sort of $1 million to $3 million per quarter range and we'll still see some.

<unk> of that equipment cost run in Q1 as well so yeah, that's where I said I think youre going to see incremental improvement in margins in Q1, and then another step change in Q2.

Speaker 5: Thanks, Michael. The follow-up is, and this is one that might be tough to opine on, but obviously, Schlumberger owns a substantial amount of the shares and we've seen them start to make movements around monetization. You guys have a really strong balance sheet recognizing there's some calls on free cash flow in the near term. Is there anything you can do to offset potential technical pressure to the extent that they do elect to monetize their position?

Thanks, Michael as a follow up is and this is one that might be tough to tell.

Opine on but obviously, a slumber J owns a substantial amount of the shares and we've seen them start to make movements around monetization you guys have a really strong balance sheet recognizing there's some calls on free cash flow in the near term is there anything you can do to.

To offset potential technical pressure to the extent that they do elect to monetize their position.

Speaker 2: Yeah, Neil, capital allocation is certainly a big issue and a central issue here, but we're always evaluating all the trade-offs and decisions made there and certainly, yeah, certainly won't provide any guidance or comment on it, but I certainly know what you're hinting at. And I should comment as well, look—

Yes Neil.

Capital allocation is certainly a big issue and a central issue here, but we're always evaluating all the tradeoffs and decisions made there and certainly yes, certainly we'll provide any guidance or comment on it but I certainly know what you're what you're hinting at.

And I should comment as well.

Speaker 2: We feel very comfortable about the decisions we've made in progressing through this integration and we're quite pleased with where we sit today.

We feel very comfortable about the decisions we've made in product progressing through this integration and we're quite pleased with where we sit today.

Speaker 2: Do we wish we had had a better crystal ball and been further ahead in seeing the cost impact of some of those decisions? Yes. Are we having gained the confidence in us over the last few months? Yes. Would we do anything different in this long-term decisions? No.

Do we wish we had to had a better crystal ball than been further ahead and seeing the cost impact of some of those decision. Yes, we have regained the confidence.

Over the last few months, yes would.

Would we do anything different in the long term decision no.

Yes.

Thanks, a lot Chris I appreciate it.

Thanks Neil.

Speaker 2: Thank you. Next question. Chase Mulvihill, Bank of America. Please go ahead. Good morning everybody.

Thank you next question Chase Mulvehill of Bank of America. Please go ahead.

Yes.

Hey, good morning, everybody.

So okay.

Speaker 6: Hey, I guess first question, you know, obviously you've got sand in the portfolio today.

I guess first question.

Obviously, you've got sand in the portfolio today.

Speaker 6: You know, we've heard of sand tightness in the fourth quarter and continue into this year. Sand prices are $40 a ton or so, is kind of what we're hearing in the Permian Basin. So I guess maybe can you talk to how much sand either you're selling externally or using internally, and the tightness of sand and how that's impacting your business.

We've heard of sand tightness in the fourth quarter and continuing into this year.

And prices.

Or $40, a ton or so kind of what we're hearing.

In the Permian Basin. So I guess, maybe can you talk to.

How much sand.

Either you're selling externally or using internally.

And the tightness of sand and how that's impacting your business.

Speaker 2: Hey, this is Ron. Yeah, I'll certainly delve into that a little bit. You know, I think from our standpoint.

Kate This is Ron yes.

Yes, ill certainly delve into that a little bit.

From our standpoint.

Speaker 2: We went into the sand business obviously recognizing there was some real benefit for Liberty and having those couple of mines available to us.

We went into the sand business, obviously, recognizing there was a real benefit for Liberty and having those couple of lines available to us and so yes. Some some amount of that capacity is dedicated specifically for liberty fleets and the support of our customers for whom we are working but some amount of that standup those mines still remains sold.

Speaker 2: And so yes, some amount of that capacity is dedicated specifically to Liberty Fleets and the support of our customers for whom we are working. But some amount of that sand out of those mines still remains sold directly to customers that...

Directly to.

So customers that.

Speaker 2: that may not have a liberty fleet working for them. So we have relationships on both sides of that and expect that to continue going forward. That said, having that capacity available to us has provided us maybe some additional support we might not have had in the past relying solely on third parties. So I think it's provided us a little more flexibility in terms of how we've been able to manage our supply chain through these challenges. We still have a number of great third parties working with us to ask questions or get them on board that we haven't talked about. I think sitting down with with with those group of colleagues that are of interest that haveLogic 37 and different partners in the world have some nice z Everything makes sense with socioeconomic

It may not have Liberty fleet working for them. So we have relationships on both sides of that and expect that to continue going forward.

And having that capacity available to us has provided us maybe some.

Additional support we might not have had in the past relying solely on third party. So I think it has provided us a little more flexibility in terms of how we've been able to manage our supply chain through these challenges we still have a number of great third party.

Speaker 2: providers, partners that have been partners of ours for a long, long time on the fan supply side and I don't expect that to change. Those strong relationships are critical to us. Multiple legs on a stool makes for the best stability so that's the way we continue to look at it.

Providers partners that have been partners of ours for a long long time on the sand supply side and I don't expect that to change those strong relationships are critical to us multiple legs on our stool makes for the best ability. So thats the way we continue to look at it.

Speaker 6: Okay, perfect. And follow up here, you know, I'm not sure that I'm going to get very far with this, but I'm going to try. You know, but if we look at the fleet level profitability, and look at and it's split the fleets between you know, one stem and legacy Liberty fleet.

Okay perfect.

And a follow up here I'm not sure that I'm going to get very far with this but I'm going to trough.

But if we look at the fleet level profitability.

And look at it split the fleets between one stand in legacy Liberty fleets.

Speaker 6: You know, I guess first is, is there a difference in profitability if you squint and look at the averages between the two? And if there is and one stem profitability is lower, can you tell us kind of, you know, what are the action items that you need to take to improve the one stem profitability?

I guess first is is there a difference in profitability if you squint and look at the averages between the two and if there is an <unk> and profitability is lower can you tell us kind of what the.

The action items that you need to take to improve the Wednesday on profitability.

Speaker 3: Yeah, Chas, I mean, I'll take this one on this one. Yeah, but I think if you look back to last year, yes, there was a difference. And really, a lot of that was legacy contracts.

Yes, I'll take this one on this.

Yes, but I think if you look back to last year's DC was a difference and really a lot of that was legacy contracts you've got to remember we closed this deal on December 31st right. So the bid season for this year Liberty aimed slumber J, we're bidding against each other the deal has been announced and so.

Speaker 3: You've got to remember we closed this deal on December 31st, right? So this season for this year, Liberty and Schlumberger were bidding against each other. The deal has been announced. And so you know, the Schlumberger team, you know, we sort of really, you know, had to fill up with with one hand tied behind their back, obviously, because sales couldn't talk. We couldn't, you know, we couldn't appear.

<unk> was sort of really had to fill up with with one hand tied behind their back obviously sales could talk we couldnt.

We couldnt compare notes right now obviously the customers view that they will.

Speaker 3: Right, and obviously the customers knew that they were being subsumed by liberty. So I think those contracts were the biggest drag, not necessarily the fleets themselves. Right, I think cost of operations due to the fact there's some deferred maintenance.

They are being subsumed by the so I think those contracts where the biggest drag.

Not necessarily the fleets themselves, whereas the cost of operations due to the fact as a deferred maintenance.

Speaker 3: ends up when we look back in the rearview mirror was higher on those legacy blue fleets fairly significantly. And I think part of that was the green tax status they came with, they came with high hours and high usage numbers, right? So I think between the capitalized maintenance and the cost of operations on maintenance was higher on blue versus red last year. I really don't... That's not something that we would expect going forward as we get through the middle part of this year and going forward. That's a slug of cost that relate to sort of the fact that there was a year and a half that they were for sales and deferred maintenance and it had to be green tag, but there's a level of where Liberty had done their historical maintenance and where we were having our fleets ready to go versus when you're transferring fleets into a new owner. So that was a cost drive drag as well for last year. So as we go forward though, now we don't expect to really see that.

And then when we look back in the rearview mirror with an eye on those legacy Blue slates.

I think part of that was the green tie excited they hang with Haywood, Hi, Hi, Alice and high usage numbers right. So I think the between the capitalized maintenance and the cost of operations on maintenance was higher on Blue. This is rate last year I really.

Not something that we would expect going forward as we get through the mid middle part of this year and going forward. Thanks, a lot of costs that relate to sort of the fact that he was at year and a half of those silos and deferred maintenance and tend to be green K, but.

There's a level of where liberty has done the historical maintenance, we were having that fleet is ready to go versus where you're transferring fleets into it into a new auditor.

Cost drive drag as well for last year. So as we go forward those no we don't expect to really see that guidance.

Speaker 3: They know the differences will be driven by taking all.

They don't need the data.

Differences.

Driven by technology.

Speaker 6: Got it. Got it. All makes sense. Thanks, Michael. Thanks, Ron. I'll turn it back over.

Got it got it all makes sense. Thanks, Michael Thanks, Ron I'll turn it back over.

Thanks, Jason.

Speaker 2: Thank you. And the next question, Scott Gruber of Citi. Please go ahead.

Thank you and our next question Scott Gruber of Citi. Please go ahead.

Yes, good morning.

One Scott.

Speaker 6: The question on the pricing traction, we're hearing similar anecdotes of broadening of pricing improvement. The rate of change on the legacy tier two equipment, is that now moving at a similar pace to what we've seen to date on the ESG friendly kit, or is that still lagging in terms of rate of change?

So a question on the pricing traction.

I mean, we're hearing similar anecdotes of.

A broadening of pricing improvement.

The rate of change on the legacy tier two equivalent does that now moving at a similar pace to what we've seen to date on the ESG friendly kit or is that still lagging in terms of the.

The rate of change.

Speaker 2: Now, I think a rate of change is moving at a similar pace. There's still that significant delta across the portfolio, but yes, all types of fleets have moved up meaning.

All right.

Change is moving at a similar pace there is still.

Significant delta across the portfolio, but yes, all types of fleet have moved up meaningfully.

Speaker 7: Gotcha. And then, you know, at the current pricing, what kind of payback would you expect on the DGB fleets?

Got you.

And then at the <unk>.

Current pricing.

What type of payback.

Would you expect on the DGB fleets.

Okay.

Speaker 2: relative is quick. I don't know if we want to give any more color than that. But you know, this word we have been about through our whole history win win deals, we can bring something better to our customers that achieves its objectives for them that they save money just from displacing diesel with natural gas, as well as getting lower emissions.

Relative is quick I don't know.

I don't know if we want to give any more color than that but.

We have been about through our whole history win win deals, we can bring something better to our customers that achieves the objectives for them.

<unk> money, just from displacing diesel with natural gas as well as getting lower emissions.

Speaker 2: And we deploy capital and we get strong returns on that deployed capital. And we also bring technology to that to get higher substitution rates and safer substitution of processing and burning gas on location.

And we we deploy capital and we get strong returns on that deploy capital and we also bring technology to that to get higher substitution rates, it's safer substitution of processing and burning gas on location.

Speaker 3: I'll have a little bit of that one, say we look at the lens of all of our investment.

Yes, I'll add a little bit to that let's say, we looked at billions of all of our investments. If you can look at historical results drive we've averaged better returns than the average of the S&P 500 and for cyclical industry you need to provide those returns to provide the value to shareholders and every new technology based on the look through that lens and I'm the same target.

Speaker 3: If you look at our historical results, right, we've averaged better returns than the average of the S&P 500. And for cyclical industry, you need to provide those returns to provide the value to shareholders. And every new technology investment, we look through that lens and aim at that same target or better of what we've historically done. So I think that's the key thing there. Whether it's a tier 4 DGB upgrade, a Digifrag, or an investment in a new version of ion control systems.

<unk> of what we've historically done so I think thats the key thing where if we there is a tier four DGB upgrades atg, Frank or an investment in a new vision and control systems et cetera. They all have they all go through the same liens of financial return matrix.

Speaker 3: They all go through the same lens of financial return metrics.

What I need to provide.

Speaker 7: Got it. And then just a quick one. Again, if you think about kind of the EBITDA to free cash conversion, anything to note on the working capital line, Michael.

Got it.

And then just a quick one again, if you think about kind of EBITDA to free cash conversion anything to note on the working capital line Michael.

Speaker 3: No, I think working capital as we go through, we're going to see growth, we're going to see growth in the top line and expansion of margins, but obviously with growth in the top line, that will be a slight edge when that will be a use of it.

No.

Working capital as we go through we are going to see growth because we see growth in the topline and expansion of volumes, but obviously with the top line that will be a slight headwind that will be a use it with again, yes, we will build receivables really I would've been cancelled generally moves in conjunction.

Speaker 3: and we'll build receivables. Really, working capital generally moves in conjunction with review top line.

With that review topline growth.

Speaker 7: Should we expect kind of static days or improvement in days?

Should we expect kind of a static days or improvement in days.

Speaker 3: Yeah, generally our days have been relatively similar for the last five years. But on a quarterly basis they can move around, depending on what customers are, but generally on a static day. The only other big mover there is probably the accrued capex number. Anything capex-wise that we receive at the end of a quarter can move your payables numbers per get, that gets reclassed with capex-lookout payables.

He doesn't know about Scott.

Only a days have been relatively similar for the last five years.

On a quarterly basis I can move around.

Depending on what customers out, but I think generally stayed days the other big movement here is probably be accrued capex something anything we anything capex wise that we received at the end of a quarter. It can move your payables numbers.

Thank you re classed from Capex forecast by looking at night.

Speaker 3: So that's when you read the balance sheet, that'll be that. So we received a large number of power generation equipment on the last week of March, that won't have been paid yet, and that'll be a sort of a bump up in the DPO day. So that can move around $30 to $40 million every quarter easily. So other than that, no real change for the actual business. Got it.

So thats when you read the balance sheet that'll be that'll be that we receive.

What a number of sort of cash generation equipment on the last week of March rather than pay gate and there'll be a sort of a bump up on the GPO day, so that can move.

Around $30 million to $40 million every quarter easily.

Other than that.

No real change.

April business.

Got it I appreciate the color. Thank you.

Thanks, Brian .

Speaker 2: Thank you. And the next question comes from Walker Zia, ATB Capital Markets. Please go ahead. Thank you for taking my question.

Thank you and the next question will come from Walker Ziad ATB capital markets. Please go ahead.

Thank you for taking my question.

Mike.

Speaker 8: In terms of the normalized margins, could you provide some guidance on the timing of that? When do you expect to achieve that? And given all the price increases that you're seeing and the strength in the market, do you see that timeline to achieve normalized margins move forward or is it still kind of at the same level as previous guidance?

Yeah in terms of the normalized margins.

Could you could you provide some some guidance on the timing of that when do you expect to achieve that.

And given all the.

Price increases that you're seeing in the stent in the market do you see that timeline to achieve normalized margins move forward or is it still kind of at the same same same level.

As previous guidance.

Speaker 3: It's similar through this guys, I think you're going to see the additional cost roll off in the first half of this year and getting back to more normalised margins as we get through the second half of the year. As I say, again, if you think about the integration as sort of an 18 month process, right, I think they will all be rung out of the system by 2018.

It's still a three week, Scott and I think you're going to see the additional costs roll off in the first half of this year and getting back to more normalized margins as we get through the second half of the year and say that.

Again. This is that if you think about the integrations of an 18 months process right I think they will be wrung out of the system, both bye bye to edge.

Speaker 8: Okay, and then just a broader macro question. Would you guys care to comment on the supply-demand dynamics? How many fleets are currently working in the US and Canada, and what do you see the demand is, and what do you expect the trend to be in the coming quarters in terms of demand?

Okay and then.

Just a broader macro question.

Would you guys care to comment on the supply demand dynamics, how many fleets that currently working in the U S and Canada and when do you see the demand is and what do you expect the trend to be in the coming quarters in terms of demand.

Speaker 2: Sure, I'll do that. So we have an internal bottom-up fractionate count. We haven't shared the detailed numbers of it yet, but it's been a great new thing for us to know what's going on across all the basins. And it's a trailing count up to today and also includes a projection for what customer dialogues are and what plans are.

Sure I'll do that.

Internal bottom up Frac fleet count, we haven't shared the detailed numbers of it yet but he is spending a great new thing for us to know what's going on across all the basins and it's a trailing count count up to today and also includes a projected for what customer dialogues are what players.

Speaker 2: So in ground numbers, I'll say frack fleets active right now is in the low 200s, but meaningfully over 200. At that frack fleet level of activity, that leads to production growth. Production growth in natural gas, production growth in oil, production growth in NGLs. Not monstrous, but meaningful. And from the plans we know of today.

So.

In round numbers Allstate Frac fleets.

Active right now we are in the low two hundreds but meaningfully over 200 at that Frac fleet level of activity that leads to production growth production growth in natural gas production growth in oil production growth in Ngls, not phosphorous, but meaningful and from the plants, we know of today.

Speaker 2: There's probably another 10% growth in active practically.

There is probably another 10% ish growth in active frac fleets from where we are today to where well late this year. So it's not huge upward pressure in frac fleets going to work, but it's meaningful and when you go into <unk>.

Speaker 2: from where we are today to where we'll, you know, late this year. So it's, it's not huge upward pressure in practice, new fleets going to work, but it's meaningful. And when you go into an already relatively tight market, the pricing impact of that will be...

Already relatively tight market.

Yes.

The pricing impact of that.

We will be.

Not insignificant.

Speaker 8: But the industry itself is adding some new capacity as well, including yourself. Do you think that delta incremental demand is being met by the internal incremental supply that's being added?

But but.

But the industry itself is adding some new capacity as well, including yourself do you think that that incremental demand is being met by then.

And commitment supply that's being added.

Speaker 2: So those are probably of similar magnitudes, but the offsetting thing is that no new fleets does not mean the fractionate fleet count is static. Even putting an optimistic liberty running of an asset, you know, maybe you've got a potentially tripleitcher that there are no Torres Roach fighters or you know stove nostalgic Downove-kin forgiveness and users of this

So those are probably of similar magnitudes, but the offsetting thing is that no new fleets does not mean that Frac fleet count is static.

Even putting an optimistic liberty running of an asset maybe you've got a 10 year asset so 10% of that capacity is going to disappear every year.

Speaker 2: So 10% of that capacity is going to disappear every year.

Speaker 2: So the Frack Fleet additions we have this year, they're probably of order offsetting the shrinkage of the Frack Fleet. Maybe not even offsetting, probably not even offsetting the shrinkage of the Frack Fleet. So you still have a late year where demand is higher than it is today and capacity is probably flat at best, maybe down a little.

So the Frac fleet additions we have this year. They are they are probably order offsetting the shrinkage of the frankly, making that EBIT offsetting probably not even offsetting the shrinkage of the Frac fleet. So you still have a late year, where demand is higher than it used to.

A day and capacity is probably flat at best maybe down a little bit.

Speaker 8: Interesting. And just one final thing. Any commentary on the Canadian market?

Interesting.

And just one final thing any commentary on the Canadian market.

Speaker 2: We love Canada and Canadians like Ron. But as Ron said, we're going to get closer to the other brand. I don't think anything dissimilar to what Chris's comments were from a broad scale standpoint. You know, I think we remain optimistic in the Canadian market as well. I think we're going to see growth in frack fleet demand up there and supportive market conditions. And I think you probably heard that from our peers up there as well. Yeah, we remain excited about the outlook north of the 49th as well.

We love, Canada, and Canadians like Ron.

Great.

Waqar I don't think anything dissimilar to what Christmas comments were from a from a broad scale standpoint, I think we remain optimistic on the <unk>.

Indian market as well I think we're going to see growth in Frac fleet demand up there.

And supportive market conditions, and I think you probably heard that from our peers up there as well so.

We remain excited about the outlook north of the 49th as well.

Speaker 8: Thank you very much. Thanks guys.

Thank you very much thanks, guys.

Thanks Luca.

Speaker 1: Thank you. Next question. Tyler Zarker, Tutor, Pickering, and Holt, please go ahead.

Thank you next question Tyler's Harker tutor Pickering Holt. Please go ahead.

Speaker 9: Hey, Chris and team, thanks for taking my question. My first one, I just wanted to circle back on the capex budget, specifically the the growth capital piece, I think you said 225 million. So as of today, you've got two full fleets of digifrac.

Hey, Chris and team. Thanks for taking my question. My first one I just wanted to circle back on the Capex budget specifically the.

The growth capital piece I think you said 225 million so as of today, you've got two full fleets of did you did you frac.

I guess long term contract secured already so clearly that's in the budget on the growth side for 2022, and just hoping you could give us.

Speaker 9: long-term contract secured already, so clearly that's in the budget on the gross side for 2022. And just hoping you could give us maybe some building blocks as it relates to building up to that 225 million. It feels to me like obviously you'll have some Tier 4 DGB, but maybe you have some more Digi-Frac budgeted in there. So just curious how you're thinking about the building blocks behind that 225 million dollar number.

Maybe some building blocks as it relates to building up to that 225 million feels to me like obviously youll have some tier four DGB, but maybe you have some more did you frac a budgeted in there. So just curious how you're thinking about the building blocks behind that $225 million number.

Speaker 3: Yeah, the largest portion of it, the largest, biggest portion is DigiFrat. Obviously, the next portion is the Tier 4 upgrades, upgrading them to the fleets of Tier 2 to Tier 4 and some work that other work that's being done moving those to Quire. And webcam technology, there's a significant chunk of that as we're supporting the growth of the profit expenses for our customers there, which is going to be great returns on that business. That's another chunk of what we're doing. There's a little bit there, more of probably $20 to $30 million.

Yes, a large portion of the device portion of the city Frank Obviously, the next portion is the tier four.

Price upgrading to fleets of tier two to tier four and move that out of the.

Being down moving those supplies.

And within technology that a significant chunk of that is we are supporting the growth of the profit expenses from that customer.

Are you going to be great, which is on that business. That's another chunk of what was on what we're doing is a little bit there more probably $20 million to $30 million.

Speaker 3: or whatever we can say, short-term management projects.

All we can say mod offshore to margin enhancement projects, which are key things.

Speaker 3: which are key things. Everything from model lines to flexibles to a number of other items that we're doing that have a very quick payback and short term effects on margins.

Everything from all lines to fixed moves to a number of other items that we had that were doing that to have a very quick payback and some short term effect on margins.

Does the guidance.

Okay got it and I just wanted to follow up on the anecdote you gave about a legacy one stem contracted from what I gleaned didn't didn't have inflationary escalator clauses and resulted in a $5 million negative impact in Q4, So just to clarify as we progress forward as that contract and sort of re.

Speaker 9: from what I gleaned didn't have inflationary escalator clauses and resulted in a $5 million negative impact in Q4. So just to clarify, as we progress forward, has that contract been sort of reset here in Q1 such that you are able to pass through some of these input costs?

Sat here in Q1, such that you are able to pass through some of these input costs.

Speaker 9: items onto the customer and as you look at your broad portfolio of contracts, whether Legacy Liberty or Legacy One Stem, do you have any more outstanding contract cases similar to that one that you called out where inflationary items might be an issue for you moving forward?

Items onto the customer and as you look at your broad portfolio of contracts, whether legacy Liberty or legacy <unk> do you have any more outstanding.

Contract cases, similar to that one that you called out were inflationary items might be an issue for you moving forward.

Speaker 3: No, we've got one there that's really going to be a little bit of a... That one will still be a little bit of a drag in Q1. We'll be fixed after that. And that really is the last one that was lit.

No. We don't want then it's really going to be a little bit is that while it will be still be a little bit of a drag in Q1, we fixed off of that and that really is the last one of those ways I think some of those the guy and I think some historical contracts the way they contracted probably okay in a down market and when things are going that they're ready to ramp.

Speaker 3: I think some of those, again, I think some historical contracts, the way they contracted were probably okay in a down market and when things were going down, they really turned around and became what it needed in an inflationary environment.

She became quite a knee hip and inflationary environments. So again give me liberty contracts historically have been makes a move on the others and we sort of work with customers on basically up and down cycles.

Speaker 3: So yeah, generally Liberty contracts historically have been a little more flexible on the openers and we sort of work with customers on basically up and down cycles. You know, as long as you say historically you had a couple more that were more fixed in nature and you know that was just something that had to be worked through over time.

Historically, you've had a couple more that were more fixed in nature and that was just something that etsy will improve over time.

Understood. Thanks, Michael.

Speaker 1: Thank you. Next question come from Tim Kern, Seaport Research Partners. Please go ahead.

Thank you next question will come from Tim current Seaport Research partners. Please go ahead.

Good morning.

Good morning, Ron.

Speaker 2: On project 1440, would you please update us on the active fleets average pumping time utilization? So, relative to that project starting point of 60%. Where did average pumping time come in for 4Q and what's your target level for 4Q of this year? Where would you like to exit the year at?

On project 14, 40 would you please update us on the active fleets average pumping time utilization so relative to that project, starting point or of 60% where did average pumping time come in for <unk> and what's your target level for <unk>. This year, where would you like to exit the year at.

Speaker 2: Look, I probably probably won't get into specifics there, but you did hear in our in Chris's comments. I think the latest of the record. So 75 hours of continuous pumping. We continue to make tremendous headway from an efficiency standpoint out in the field. And look forward to some additional progress there. We have a few other initiatives underway this year that will further contribute to that if we're successful getting them across the finish line.

Look I, probably we probably won't get into specifics there, but you did here in our Christmas comments I think the latest of the records. So 75 hours of continuous pumping we continue to make tremendous headway from an efficiency standpoint out in the field.

And look forward to some additional progress there we have a few other initiatives underway. This year that will further contribute to that if we're successful getting them across the finish line but.

Speaker 2: But we certainly did make progress last year. We see some more opportunities this year and know that it remains a focus of ours.

But we certainly didnt make progress last year, we see some more opportunities this year and know that it remains a focus of ours.

Okay.

Speaker 2: And then given the expected, you know, enduring tightness here in the shale labor market and its associated upward pressure on wages, are you seeing or do you expect any acceleration of spread automation initiatives, be it internally at Liberty or or perhaps elsewhere within industry or, you know, at a smart robotic startup that you're watching?

And then.

Given the expected endure.

Enduring tightness here in the shale labor market and its associated upward pressure on wages.

Are you seeing or do you expect any acceleration of spread automation initiatives be it internally at liberty or or perhaps elsewhere within the industry or at a smart robotics startup that you're.

Watching.

Speaker 2: Yeah, we will get me specific there, but absolutely automation, you know, for efficiency of labor use, for safety, for speed of operations is a focus at liberty.

Yes.

Any.

Yes specific there, but absolutely automation for efficiency of labor used for safety for speed of operation as a focus at Liberty.

Speaker 2: The only thing I would add to that maybe is it's certainly one of the things we're most excited about as we move towards Digi-Prac. Those opportunities are not insignificant in the diesel and dual fuel world. But the opportunities that come with moving to an electric fleet are another step forward yet so quite excited about the opportunity to get Digi-Prac out in the field and move forward with a level of automation that we could attain in that environment.

The only thing I would add to that maybe is certainly.

Certainly one of the things. We're most excited about is as we move towards <unk>.

These opportunities are not insignificant in the diesel and dual fuel world, but the opportunities that come with moving to an electric fleet are another step forward yet so quite excited about.

The opportunity to get <unk> ultimate fielding and move forward with a level of automation that we could attain in.

In that environment.

Speaker 2: Got it. So more of a e-frack transition technology development. OK. And then I'll just close it. It's a little but greatest upside in the e-frack thing. But it's across the board.

Got it so so.

More of a.

E E Frac transition.

Technology development Okay.

Okay.

Disclosing it.

But greatest upside in the practices, but it's across the portfolio.

Speaker 2: Got it. And then just two questions on the Permian. First, are you seeing any rivals starting to pull out or shrink the size of their footprint there?

Got it and then just two questions on the Permian first are you seeing any rival starting to pull out or shrink the size of their footprint there.

Speaker 2: perhaps by closing a district yard or two. And then, you know, we understand that a pioneer may soon be in the market looking to replace some of its spreads on contract.

<unk> by closing a district yard or two and then.

We understand that a pioneer.

May soon be in the market looking to replace some of it.

Spreads on contract.

Speaker 5: Do you expect to have a shot at those?

Do you expect to have a shot at those.

Speaker 10: I mean, those are detailed commercial things, so yeah, I'm not going to comment on those.

I mean those are those are detailed.

Commercial thing, so, yes, im not going to I'm not going to comment on those.

But deb.

Alright, well, thanks, I think I had to leave.

Yes.

You bet.

Speaker 10: I had to try. Thanks. Thanks for taking my question.

How did you track thanks, Thanks for taking my questions.

Speaker 1: Thank you. Our next question will come from John Daniels of Daniel Energy Partners.

Thank you. Our next question will come from John Daniels with annual Energy Partners. Please go ahead.

Hi, gentlemen, thanks for squeezing me in.

Speaker 1: Gentlemen, thanks for squeezing me in. Chris, earlier in your commentary you talked about many minds being game changers.

Chris earlier in your commentary you talked with many mines being thoughtful.

Speaker 1: Can you elaborate on how many you see and how you see that market develop?

Yeah.

Can you just elaborate on how many you see and how you see that market development.

Speaker 10: There's a few operating right now that are customers of ours, and there's certainly more opportunities for that. So it's not an explosion, it's a combination of needing mine technology and the transport and wet sand technology. So it's an evolution that we think has a good runway to bring differential costs and ESG advantages to customers willing to make that commitment and geographically.

So theres a few operating right now that are customers of ours and there is certainly more opportunities for that so it's not an explosion. Its a combination of meeting mining technology in the transport and Wednesday in technology. So it's a.

Evolution that we think has a good runway to bring differential cost in ESG advantages Ted customers willing to make that commitment and geographically.

Physician.

Speaker 1: Do you see yourself developing your own mini-minds or just let the others do that?

Do you see yourself developing your own many mines were just I'll, let the others do that.

Yes.

Speaker 10: We have the technology to move WEXAN and partnerships. We're going to enable the growth of mini-minds is maybe the best way to say it.

We have the technology to move west and partnerships.

We made we're going to enable the growth of many mines is maybe the best way to say that.

Speaker 1: Okay. And then in response to Ian's questions on, you cited the longer term contracts. Is that just on Digifrag or is that on traditional equipment?

Okay.

And then in response to <unk> questions on.

You cited the longer term.

Contract was not just on Gucci crackers that on traditional equipment.

It's on both.

Speaker 1: And is are any of the terms greater than 1 year on the traditional? Can you say.

And is any of that.

Terms greater than one year on the traditional.

Yes.

Speaker 1: Okay. And then the last one is called out and congratulations on the record safety performance, which has occurred given, you know, in light of a sharp ramp and activity, and also given that you did a major integration. So it's pretty impressive. I'm just curious if you would attribute that to any one specific initiative, like what, what allows you to do that in light of the two things that are described.

Okay.

And then the last one colm.

Calling out and congratulations on the record safety performance.

Rich.

Occurred driven.

In light of a sharp ramp in activity.

And also given that you've got a major grayson.

Pretty impressive I'm just curious if you would attribute that to any one specific niche.

What allowed you to do that in light of the trends.

Speaker 2: I don't know that there's 1 specific initiative we would call out John . I think that's a credit to 2 very strong teams of operational personnel that came together with a commitment to number 1, provide great services to our customers out there in the field and number 2, to do that as safely as possible.

I don't know that there's one specific initiative, we would call out John .

I think that's a credit to two very strong teams of operational personnel that came together with a commitment to number one provide great services to our customers out there in the field and number two to do that as safely as possible, we probably did benefit from the ability to return to some initiatives. We did have in place pre COVID-19 .

Speaker 2: We probably did benefit from the ability to return to some initiatives we did have in place pre-COVID. We had an initiative to put a safety trailer out there in the field to get out face to face with our teams on a regular basis and highlight opportunities for focus. We had, of course, had to put that on hiatus going through 2020, but initiatives like that, some of those things were able to come back last year. And so I think those things always helped, but I wouldn't call out any one thing that got us to that spot.

We had an initiative to put a safety trainers out there in the field to get old face to face with our our teams on a regular basis and highlight opportunities for focus we had we had of course had to put that on hiatus going through <unk>.

2020, but initiatives like that some of those things, we're able to come back last year and so.

I think those things always help but I wouldn't call out any one thing that got us to that spot.

Speaker 1: Okay, fair enough. Thank you for letting me ask you questions.

Fair enough. Thank you for letting me ask some questions.

Thanks, John .

Speaker 2: Thank you. Next question will be from Keith Maggie, RBC Capital Markets. Please go ahead.

Thank you next question will be from Keith Mackey RBC capital markets. Please go ahead.

Speaker 1: Hi, good morning and thanks for taking my questions. So you certainly have gone through a pretty big year of transformative M&A and bolted on the PropEx deal as well and talked about some of your internal initiatives with the Logistics Control Centre and that kind of stuff. Just curious if there's any other areas along the supply chain where you feel that you need to focus on as well, whether it be organic or inorganic.

Hi, good morning, and thanks for taking my questions.

So you certainly have gone through a pretty big year of transformative M&A and bolt it on the <unk> deal as well as <unk> talked about some of your internal initiatives with the logistics control center and that kind of stuff. Just curious if there is any any other areas of long supply chain, where you feel that you have.

You need to focus on as well, whether it be organic or inorganic.

Speaker 2: Yeah, I think probably our biggest focus this year will be, will still be in the pump vertical. So, specifically to our ST9 world, that has been a challenging part of the supply chain certainly over the last year, and so it'll be an area of focus going forward. It's obviously a huge part of our R&M spend, specifically the pump maintenance side of things, valve seats, fluid end, power ends, and so that'll be a big area of focus for us this year.

Yes, I think probably.

Our biggest focus this year will be will still be in the pump vertical so specifically to our to our <unk> nine world that is.

Has been a challenging part of the supply chain certainly over the last year and.

So it'll be an area of focus going forward is.

It's obviously a huge part of our R&M spend.

Typically the pump maintenance side of things balance sheets fluid and tolerant and so.

That'll be a big area of focus for us this year.

Yeah.

Speaker 1: Thanks Ron. Thank you for the CapEx guidance. Apologies if I missed it, but for the growth CapEx, how many DigiFrag fleets does that include and then how many will you have running at the end of the year assuming you put those into the field?

Got it thanks Ron.

And thank you for the Capex guidance and apologies if I missed it but for the the growth Capex. How many did you Frac fleet does that include and so and then how many will you have.

Running at the end of the year, assuming assuming you put those into the field.

Speaker 3: Yeah, we've got two under contract. So, yeah, the two that are kind of currently committed and then we're in discussions with customers about all of it.

It was good too on the contract.

Two that are kind of currently committed and then we are in discussions with customers about.

Okay. Thanks very much.

Safety.

Thank you next question will be banned cuts of Morgan Stanley . Please go ahead.

Speaker 11: Next question will be being cut of Morgan Stanley .

Hey, Thanks, good morning.

Speaker 1: So just a follow-up on pricing, and I wanted to ask if...

So just a follow up on pricing and I wanted to ask it.

Speaker 1: You guys are kind of seeing a range of customer receptivity to pricing increases or, you know, if customers have kind of largely been amenable to pushing, to you guys pushing net pricing, I guess, you know, have you guys had to kind of reposition your customer base, at least among customers at all to kind of drive the net pricing improvements that you're talking about?

You guys are kind of seen a range of customer receptivity to.

Pricing increases or.

Customers have kind of largely been a minimal too.

So pushing you guys pushing net pricing I guess have you guys had to kind of reposition your customer base your fleets among customers at all to see.

To kind of drive the net pricing improvements that you're talking about thanks.

Speaker 10: Look, you know, a nettable, I don't know if that's the right word, most everything we do with customers is quite synergistic. It's about getting operations more efficient, operations safe, operations planned, and strategic decisions about how to execute programs the best.

Look.

<unk> I don't know if thats the right word.

Everything we do with customers is quite synergistic it's about getting.

Operations more efficient operations safe operations planned Frac design strategic decisions about how to execute programs the VAT.

Speaker 10: You know, those are most of our dialogues are partnership dialogues, but, you know, prices.

Those are most of our dialogues are partnership dialogue with.

Speaker 10: Prices, one direction is good for one side, one direction is good for the other side. But I think people do get if you want a long term partnership, you know, in the COVID downturn, we did what it took to try to keep our customers going for work plans, we worked with them in that respect.

Prices prices at what direction is good for one side what direction is good for the other side.

People do get if you want a long term partnership.

Covid downturn, we did what it took to try and keep our customers going for work plans, we've worked with them in that respect so but now.

Speaker 10: So, but you know, now there's now things have shifted the other way. But yeah, customers want the right partners. Of course, everyone wants the right partner at the most economical price possible.

<unk> shifted the other way, but yes customers want the right partners of course, everyone wants the right partner at the most economical price possible.

Speaker 10: So for us it's, you know, there's efficiency drivers that we can do that help both of us, but price is a necessary part of returning our industry to health, and I think everyone gets that. So yes, it's an ongoing dialogue about the magnitude of the price and whether it's all in big ones love some or whether it's a more gradual step up and, you know, we've kind of...

So for us.

The efficiency drivers that we can do that help both of us but price is a necessary part of returning our industry to help and I think everyone gets back. So yes, it's an ongoing dialogue about the magnitude of the price and whether it's all in big one lump sum or whether it's a more gradual step up and we kind of critical.

Speaker 1: Yeah, it makes sense. Thanks. And then a question on, I guess, kind of following up on the next generation fleet transition scenarios that you guys had laid out at your investor day last year. I'm wondering if you can kind of help us think about now that we're through 2021 and you've kind of thought through your 2022 capital framework.

Got it makes sense. Thanks.

And then Ah.

A question on I guess kind of following up on the next generation fleet transition scenarios that you guys had laid out at your Investor Day last year I'm wondering if you can kind of help us think about now that we're through 2021 and you've kind of thought through your 2022 capital framework.

Speaker 1: How would you characterize where you're at in kind of the two, you know, the higher case faster next gen transition scenario versus the, you know, the slower.

How would you characterize where youre at and kind of the two.

Higher case faster nextgen transition scenario versus the.

The slower.

Speaker 1: transition scenarios that you laid out. Is it somewhere in between or is it kind of more tracking closer to one of those two scenarios?

Transition scenarios that you laid out is it somewhere in between or is it kind of more tracking closer to.

So one of those two scenarios.

Speaker 10: Today, I would say somewhere in between. It's a very active dialogue with a number of parties. You know, I think it's not.

I would say its somewhere in between it's a very active dialogue with a number of parties I think it's not if.

Speaker 10: If we're going to do something with them, it's how we win. But yeah, it's got to make sense. It's got to make sense for both parties. You know, for us, not just for returns, balance sheets, appropriate funding of it. For customers, it's got to make sense too. And we're not in a rush. You know, we're rolling out a new technology that frankly we think is going to be a pretty big deal. So it's...

If we're going to do something with them is how we win.

Yes.

Yes, it's got to make sense, it's got to make sense for both parties for us not just for returns balance sheet appropriate funding of it.

For customers, it's got to make sense to and we're not in a rush, we're rolling out a new technology that frankly, we think is going to be a pretty big deal. So.

It's.

Speaker 10: It's a balance of a lot of factors, but I would say things are going excellent.

It's <unk>.

Balance of a lot of factors.

I would say things are going as planned.

Great. Thanks for the color.

Thanks, Dave.

Speaker 11: Thank you. And again, if you have a question, please press star then 1.

Thank you and again if you have a question. Please press Star then one.

Speaker 11: Next question comes from Mark Benanti of Cohen. Please go ahead.

First question comes from Mark <unk> of Cowen. Please go ahead.

Speaker 12: Hey, hey, thanks. Good morning, guys. I wanted to ask about other cash items just building off of the CAPEX for this year. So if we're.

Hey, Thanks, good morning, guys.

I.

Wanted to ask about other cash items, just building off of the Capex for this year so far.

Speaker 12: 300 to 350. You mentioned the working cap earlier. I don't know if I assume 15 million or 50 million there. Maybe 15 million of interest. Based on the range here, it would appear you need to have kind of like high 300s to over 400 million of EBITDA just to kind of get to the free cash positive. Is there anything I'm missing in that bridge? Any extra cash coming in or other items that we should be considering?

300 to 350.

You mentioned the working cap earlier, I don't know, if I assume 15 million or 50 million there.

Maybe $15 million of interest based on the range here. It would appear you need to have kind of like high three hundreds to over $400 million of EBITDA just to kind of get to the free cash positive is there anything I'm missing in that bridge any any extra cash coming in or other items that we should be considering.

Speaker 3: I think you've really covered the majority of that. We think of working capital will either become a build or a use or a provider of cash. So when we think about the free cash flow numbers, really thinking about operational returns, right? Sort of even less capital and covering interest. When I speak about that, I don't really think about it. I don't really characterize the word capital building yet.

Yes, I think you've really covered really covered the majority of that and I think we think of working capital build related to come may become available.

A.

Is there a use or a provider of cash and when you think about the free cash flow numbers really thinking about operational or to drive instead of EBITDA.

And covering interest bye everyone.

Particularly I know that when you think about kind of.

Really characterize the Bluetooth capability.

But that's close.

Speaker 12: Okay, and from what it sounds like just based on the trajectory into the first quarter and first half here with the integration and stuff, you'd be below consensus as it stands right now in the first and the second quarter and probably above consensus just to get to those types of numbers we were talking about in the second half for the year. It's a pretty big ramp. I don't know if you disagree with that kind of trajectory, but

Okay and from what it sounds like just based on the trajectory into the first first quarter and first half year with the integration and stuff you'd you'd be below consensus.

As it stands right now in the first and the second quarter and probably above consensus just to get to those types of numbers, we're talking about in the second half for the year.

That's a pretty big ramp I don't know if you disagree with that kind of trajectory.

But.

Speaker 12: what investors may be skeptical of that type of ramp. I'm curious what you can tell them to get them more confident in the ability to get there. And will we see any evidence of that or are we just gonna have to wait till second half?

What.

Investors may be skeptical of that type of ramp and I'm curious what you can tell tell them to get them more confident in the ability to get there.

Will we see any evidence of that.

Or are we just have to wait until second half when you deliver on the results.

Speaker 3: Yeah, I'm not really going to comment on consensus, right? You know, I don't have a copy of your models and sort of how you guys are running, where those are. So yeah, I mean, I think we've sort of laid out what our expectations for the year are. And I think in general, we've had a long term history of delivery. But I think that's, as you say, I think we're going to see a ramp up as we roll off of integration costs. We'll see a second half when we roll the first half. And that's really the guidance that we get.

Yes.

Some of it coming from consensus right now again I don't have a copy of your models and sort of how you guys are running windows. So yes, I mean, I think we've sort of laid out what our expectations for the year up and I think generally we've had a long term history of delivering.

But I think Thats as you say I think we're going to see a ramp up as we roll off of integration cost we will see a pickup in the second half of your first half and that's really the guidance that we gave.

Speaker 12: Okay, super just one last one if I could the.

Okay Super just one last one if I could.

Speaker 12: it looks like the implied EBITDA per fleet is kind of improving from a mid single digit number annualized to mid double digits, mid teens or something by the second half. So call it $10 million of improvement throughout the year. I think you mentioned earlier there's a combination of pricing and throughput in there. Care to just...

It looks like the implied EBITDA per fleet is kind of improving from a mid single digit number annualized.

Mid double digits mid teens or something by the second half so call it $10 million of improvement throughout the year. I think you mentioned earlier, there's a combination of pricing and throughput in their care to just.

Speaker 12: decompose that a little bit more? Is it kind of half pricing, half throughput? How much of that pricing is sort of already set in contracts versus how much you kind of need to get from further improvement?

Decompose that a little bit more or is it kind of half pricing half throughput how.

How much of that pricing is sort of already setting contracts versus how much you kind of need to get from further improvement in the market.

Speaker 3: I'm pretty calm and confident on your map, but I'm not sure I agree with this. Even after fleet numbers, I'm not sure where you're getting those. I'm not sure where you're doing those, so we won't comment on that. But as I say, as we go through the year, it's going to be an increase in activity that's going to come and probably the biggest fall through is going to be the change in price when you look at year-over-year change. Great. Thanks so much.

Every time, you probably don't you, Matt, but I am not sure I agree with it all your EBITDA per fleet numbers are mostly getting goes I'm not sure where you're doing that so we won't comment on that.

But I'd say as we go through the year, it's going to be an increase in activity.

And to come and probably the biggest pull through is getting the changing price when you look year over year change.

Great. Thanks, so much Michael I'll turn it back.

Thanks.

Okay.

Speaker 11: That concludes our question and answer session. I'll turn the call back over to Mr. Brisswright for closing remarks. Please go ahead.

Concludes our question and answer session now I'll turn the call back over to Mr. Wright for closing remarks. Please go ahead.

Speaker 10: Thanks everyone for joining today and appreciate your interest. Understand the critical comments. We feel good about where we are. We appreciate your partnership. Everyone have a great day.

Thanks, everyone for joining today and I appreciate your interest understand critical comments, we feel good about where we are we appreciate your partnership everyone have a great day.

Okay.

Speaker 11: Thank you for attending today's presentation.

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