Q2 2022 ProPetro Holding Corp Earnings Call
Good morning, and welcome to the Pro Petro holding Corporation second quarter 2022 earnings Conference call.
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I would now like to turn the conference over to Matt Augustine Investor Relations. Please go ahead.
Thank you and good morning, we appreciate your participation in today's call with me today is Chief Executive Officer, Sam Sledge, Chief Financial Officer, David <unk>, President and Chief operating Officer, Adam Munoz.
Yesterday afternoon, we released our earnings announcement for the second quarter of 2022. Please note that any comments, we make on today's call regarding projections or expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act forward looking statements are subject to several risks and uncertainties.
Many of which are beyond our control these risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC.
Also during today's call, we will reference certain non-GAAP financial measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question and answer session with that I would like to turn the call over to Sam.
Thanks, Matt and good morning, everyone. We're excited to report another quarter of excellent operating and financial results generated by the pro Petro team.
Our margin over market share strategy continues to prove to be the prudent way to navigate this cycle as our financial performance continues to improve.
Thanks to the entire perpetual team for remaining focused and executing well during what is a dynamic time.
Before we go into our highlights for the second quarter I want to take a moment to provide our view on the state of the global energy industry in the North American pressure pumping market.
It is apparent that liquidity issues, coupled with higher risk free rates and concerns of a main street recession have caused recent weakness in the energy equity and commodity markets.
Spite these near term issues. Our forward view is that global crude oil market is structurally under supplied with short cycle energy investment in crude oil production, particularly in the Permian basin.
Less risk of recessionary impacts than in previous cycles.
Moreover, we believe energy markets are currently more at risk of a supply crisis than a demand side downturn.
We see clear evidence of that from the shape of the forward Debbie Ti crude curve, which is currently backward dated in an unprecedented manner.
It is important to acknowledge this given the shape of the Debbie Ti crude curve today differs materially from that if periods here.
Periods of prior weakness in the global economy.
Consequently, our confidence in the sustained crude oils upcycle remains high and we are planning our business accordingly.
As are the largest and most sophisticated producers in our area many of which pro Petro currently serves.
In the north.
Pressure pumping market, we see continued evidence of an effectively sold out market.
This is most obvious in the recent trajectory of spot pricing for vintage tier two equipment.
Where we see robust inquiries for future deployments.
Moreover, we see bifurcation in demand for pressure pumping services, where our ability to reduce risk and bring forward the present value of high priced oil production in a predictable manner.
Just at a premium.
Because of these variables and others our forward view of pricing for our services and for the oilfield service sector will field services sector remains positive.
Now moving onto the second quarter highlights.
I'm proud to report that our team achieved the highest level of fleet utilization utilization for a quarter since the pandemic.
Equally important we did this without marketing any additional capacity.
Our returns focused strategy has revived intentionality around internal optimization as we move forward in the cycle will continue to challenge our team and taking a holistic and inward approach to do more with less.
I'd like to thank our team and employees.
For their focus and efforts around optimization and striving to improve our business every day.
In the second quarter, our team continued to take delivery of more tier four DGB or do or dual fuel units and successfully converted a third tier two conventional fleet into a tier four dual fuel fleet at the end of the quarter.
We expect this transition to develop further over the next couple of quarters with four to five fleets expect it to be in operation by the end of this year.
Okay.
Including the additional units announced in our earnings release yesterday, we expect to have capacity of at least six tier tier four DGB fleets early in 2023.
Our ability to reduce greenhouse gas emissions and lower fuel costs with this technology is proving to be valuable to our customers and shareholders alike.
We're also delighted to report that mid cycle return levels were achieved in the quarter on a minor amount of repositioning and repricing.
The current operating environment, coupled with continued capital discipline in our industry.
Our team confidence in the sustainability of pricing that supports returns above reasonable investment hurdle rates.
This is a great time to be in our industry and we look forward to being able to support our customers in a mutually beneficial manner.
Lastly, I want to comment that the demand for electric solutions from efficient Frac providers is gaining.
No minimum and pro Petro plans to play a significant role in the electric future of the Permian Basin.
We have assessed multiple electric frac offerings with plans to deploy an electric solution in 2023, therefore, putting our team and our company in a position to participate directly in the electrification and industrialization of the Permian Basin oilfields.
With that I'd like to turn the call over to David to discuss our second quarter financial performance and capital resources David.
You Sam and good morning, everyone during.
During the second quarter, we generated $315 million of revenue and 11, 5% increase from the $283 million of revenue generated in the first quarter.
The increase is largely attributable to additional net pricing gains increased fleet utilization and our team's ability to consistently outperform for our customers.
We also had our highest revenue month in July since February of 2020 with more pricing improvements expected in this quarter and going forward.
Our effective fleet utilization for the second quarter was above our prior guidance of 13 five to $14 five fleets coming in at $14 eight fleets, which increased 8% from the $13 seven fleets utilized during the prior quarter.
Our guidance for second half effective fleet utilization is a range of 14 to 15 fleets.
As Sam mentioned, we believe our capital disciplined approach continues to pay off.
We have achieved healthy sequential topline and bottom line growth for the past two quarters without deploying any additional fleets.
This disciplined foundation that we've currently instilled in our company and will propel the pro Petro team forward as our asset base shifts to a higher percentage of ESG friendly equipment by the end of this year and again in 2023.
Cost of services, excluding depreciation and amortization for the first quarter was $219 million versus $197 million in the first quarter with the increase driven by higher activity levels, and inflationary impacts, including labor and material costs.
Second quarter General and administrative expense was 25 million compared to 32 million in the first quarter.
Adjusted G&A was 20 million and excludes 5 million relating to nonrecurring and noncash items.
Depreciation was $31 million for the second quarter.
The company posted a net loss of $33 million or 32 cents loss per diluted share compared to our first quarter net income of $12 million or 11 cents of income per diluted share.
The net loss recorded in the second quarter of 2022 was primarily driven by the nonrecurring and noncash impairment expense of 57 million in connection with the evaluation of our jurist them equipment as part of our quarterly financial would be a process.
Well, we determined an economic apparent impairment of the equipment was appropriate the equipment remains on our books with the residual value of approximately $11 million and at the appropriate time, we may consider further evaluation.
Operating income, excluding the impairment increased 200% to $17 million.
Margins expanded again in the second quarter with adjusted EBITDA coming in at $76 million or just over 24% of revenues for the first quarter.
Representing over 900 basis point increase from the fourth quarter of 2019.
Adjusted EBITDA increased 13% sequentially compared to 67 million for the first quarter.
The sequential increase was primarily attributable to additional pricing gains increased activity and continued fleet repositioning.
Also being partially offset by rising cost inflation and other supply chain issues.
Our steady focus on achieving full cycle cash on cash returns across our operating fleet paired with additional operating leverage in the form of a 15th active fleet in the fourth quarter of this year gives us confidence to guide to a full year 2022, EBITDA expectation of at least three.
<unk> hundred million.
Over 100% increase from last year.
During the quarter, we incurred $89 million of capital expenditures.
Of that amount 36 million was related to tier four dual fuel upgrades with the remaining balance predominantly related to maintenance capex.
Actual cash used in investing activities as shown on the statement of cash flows for capital expenditures in the second quarter was $78 million with positive cash flow of approximately $1 million.
This figure differs from our incurred capex number due to differences in timing of receipts and disbursements.
Based on projected activity levels, and our plan to purchase additional tier four DGB units our outlook for full year Capex spending has changed with new guidance ranging between $300 million and $350 million.
Given a robust industry fundamentals and our desire to transition our fleet to more gas burning and electric offerings, which command higher relative pricing, we are confident in our capital allocation strategy.
Accordingly on the backdrop of completing our 2022 equipment reinvestment cycle capital expenditures in 2023 are expected to come in meaningfully lower than 2022, setting the company up for strong free cash flow next year.
As of June 32022, total cash was $70 million and the company remains debt free.
Total liquidity at the end of the second quarter of 2022 was 185 million, including cash and $116 million of available capacity under the company's asset based credit facility.
Despite our aggressive reinvestment this year, our cash position and total liquidity have remained strong which in turn sets a strong foundation for us to execute on our strategy moving forward.
On that note and as we have previously stated we will not waver from our commitment to direct capital in support of transitioning our fleet to lower emissions and natural gas burning alternatives not only further our ESG efforts and the goals of our customers, but also generate improved profitability and went to.
Now I'll turn the call back to you Sam.
Thanks, David.
We're very excited about the future of our company.
The purchase of the additional tier four DGB units announced yesterday reinforces our commitment to meet our customers' urgent desire for gas burning engines that can lower their completions cost and lowered their emissions.
Accordingly, we are seeing higher demand.
And higher pricing for this equipment today and in the quarters quarters to come.
This should provide pro petro within early catalyst and achieving a healthy cash on cash return for these investments.
Did the same thing last year around this time and our investment has paid off handsomely with significant margin expansion earlier this year and continue.
Market conditions today are even better than they were then.
Given our view on the state of the global energy industry and the associated severe under supply of crude oil. We are pro petrol are convinced that we are in the early stages of a sustained multiyear long cycle.
For that reason for Petro is committed to playing a critical role in the next phases of industrializing, our energy through initiatives like electrification of the region, our conversations with our customers suggest that demand for this equipment is high and sustainable where expeditiously working.
To meet that demand and expect to provide a reliable electric solution for our customers in 2023.
Also it's important to acknowledge that the equipment discussed today will be deployed into our existing margin over market share strategy.
While it's too early to project, our total fleet count for 2023, we will make certain that we are striving to achieve proper cash on cash returns for our entire deployed portfolio of assets.
Lastly, I'd like to mention how proud we are here at pro Petro to be a vital part of an energy value chain in the Permian basin.
It is one of the best sources of reliable energy in the world.
We believe that the oil and natural gas produced in this region and across the United States will be fundamental to producing products and powering all other industries here at home and across the globe for decades to come.
We along with our peers and customers across the oil and gas value chain continue to innovate and improve as we continue to provide the most reliable and secure energy for the foreseeable future.
Finally, I'd like to thank my perpetual teammates once again for another quarter of reducing risk and creating value for our customers.
Other stakeholders through safe reliable and predictable operational performance.
Now I'd like to open it up for Q&A.
We will now begin the question and answer session.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from John Daniel with <unk>.
Simmons. Please go ahead.
Hey, guys.
Thank you John .
Put me on standby you know you guys you got you'll have the sixth DGB fleets and at least one electric.
But she worked for some really good customers, who I assume are seeing the value of the fuel efficient fleet. So it does beg the question like what's the optimal.
Fleet mix at pro petrol it terms of D. G B electric and legacy if you could just opine on that.
Timing too.
Sure. That's a that's a fantastic question John I think the answer is slightly different for.
What we think the right mix is short term and what we think the right mix is long term and.
On the on the short term basis, where we feel given these most recent.
Orders, we've placed on the on the dual fuel side and what we're working on on the electric side, we feel we feel really good about our portfolio going into next year.
I think this this most recent order we place kind of finishes off the mix of equipment that we think is optimal.
I can't say that without without mentioning what's going on and in the tier two diesel powered space given given the markets.
Effectively fully utilized and I think you'll find many of our competitors the degree.
The poll on conventional diesel equipment is also very hard you know if if if not very differentiated.
Differentiated from some of these next Gen solutions. So we feel really good about where we're positioned there.
Just a brief comment on the long term John .
You know I don't know what the what the right time frame is is it five years or 10 years, but theres going to be a lot more natural gas burned through frac equipment as we go into the medium and long term and are we where we're positioning pro Petro today to be a you know a very active participant in the natural gas future.
<unk> of our Frac equipment.
Okay, just one one more for me and I'll turn it over and it's.
I guess for Adam but on the jurist them.
Is there an another application.
Where the technology might work vertical frac are pumped down just any color on what that potential use of the asset could be.
Any.
Yeah, John I would I would say right now you know.
Well, we're not really focused on that either but you mentioned in the past. We just wanted to focus on you know getting our margins back on the.
Tier two and then converting our fleet going into the future as gas burning equipment, but by the time, though I would say.
Fair enough just curious.
Yeah.
Yeah.
The next question comes from Scott Gruber with Citigroup.
Please go ahead.
Yes. Good morning, So wanted to ask a somewhat of a follow up question to John's question.
Yeah like renewals, but the ongoing dynamic.
So you laid out you know where you'll be a.
At year end and into next year.
About fleet renewal over the long run you know if rates stay healthy do you go out and then maybe one or two new frac fleets yeah.
So maybe it's one and the C. D G b based on customer preference gas availability, but maybe at the a dollar amount that you're willing to commit to $100 million of fleet renewal every year, just how would you frame up kind of multi year fleet renewal program for you guys.
Yeah, Scott Great question. This is Sam.
I think as we think about that today and this has been.
Pretty topical here within our team in terms of trying to figure out the most appropriate long term capital allocation, but.
Today, it's it's based mostly on specific customer conversations.
So we're seeing as it as it pertains to gas burning equipment, both dual fuel intellect trick, we're seeing a very high willingness.
From the sophisticated customers e&ps in the Permian basin to contract this gas burning equipment. So right now most most of those conversations are led by that customer willingness to commit.
More commercially around that long term is as more gas burning equipment comes into the system there might be a more specified Ah you know year over year allocation to our capital allocation.
Allocation to converting the fleet.
Got you so it sounds like as long as the.
Contracts are already in place.
Would place the order.
Sure.
Additional equipment at the image here.
Payback or a return hurdle that the way to think about at this juncture.
Yes, Scott This is David I think the way we look at it is you know we're wanting to facilitate the industrialization of this business and we think that lower cost lower operating cost solutions are really going to be part of that so I think that you know whether.
Or not we get contracts is really secondary I think are our primary pursuit is ensuring that we're putting in place a model that's sustainable going forward and that enhances margins over the long term and you know I think when you think about pro Petro we've we've done that in a.
Very disciplined way, we're utilizing the resources that we have.
And not going beyond that and and and I think we will continue to do that so moving forward the pace will be dependent on market conditions on customer.
Our customers and a variety of different things, but oh long over the long term as Sam mentioned, we believe these technologies are really the solution long term.
Got you and if I could squeeze one more in just kind of on.
Other end of the spectrum, you mentioned strong pull for tier two Hum Idaho tier two fleets do you have on the sidelines and we saw one of your competitors are reactivated.
In the upstream for perpetual to reactivate and get some nice pay back some reactivation spin.
It really depends Scott and if anything we have sidelined as it you know requires bearing investment.
<unk> to get it back off the fence I think in our in our scripted remarks, we mentioned the 15th fleet.
Putting a 15th fleet into the system. This year, we've been operating 14 right around 14 fleet since the beginning of the year.
That'll be one of those fleets that.
It will be somewhat created by you know the additional tier four DGB program that we continue to execute on so at.
At the at the minimum we think we can get it we will get a 15th into the system at the end of this year and I think we'll see what the market gives us.
Going into next year, but with what we know today. It's a we're looking at 15 going into next year.
Got it appreciate the color. Thank you Sir.
The next question comes from a room GRM with J P. Morgan. Please go ahead.
Good morning.
Sam you know one of the trends that we saw from public E&ps call. It starting in the in the 2014.
Time frame.
Was the fact that they were D bundling their service offering.
And so if you're a vertically integrated frac supplier during that time, you were kind of forced to discount.
Some of your ancillary services to compete.
And obviously I think that served you know.
Pro petrol well as you're you're just essentially we're a pure play on Frac.
But it feels like the the market is changing a little bit maybe given the rising role of privates and we are starting to see some margin benefits accrued to at least in this cycle to more integrated Frac service providers. So wanted to get your thoughts on where your head's at on potentially for pro Petro two.
To expand its service offering just beyond.
Pure career, Frac sand and things and so what's your thoughts on that what's the what are you thinking about from an R&D perspective.
Yeah. Good question Ryan.
And I think you've I think you described the circumstances of the past and the present fairly accurately.
We are we were we were very competitive against some of our bundled competitors and peers are back in prior cycles because of exactly what you described.
We have a really really strong convictions about the length of the cycle that we're that we're in right now and as we look through that lens.
I think it's it's a forcing our team to evaluate other strategic opportunities a little bit differently than we have in the past and I personally look at that in in kind of two different ways. You can you can integrate vertically or you can integrate horizontally and when I say horizontally.
Talking about different services that they were out of the well site with our let's say our Frac services right now.
So I guess my short is that there's a there's probably more to look at there for.
For a company like perpetual than there has been in the past that said, there's there's a lot to choose from in the Permian Basin. I'm. This is this is from a services standpoint.
The most well equipped the most well equipped our resource play in North America by a long shot.
So I think if you're talking about bundling services say in South, Texas, and east, Texas or somewhere like the Bakken It might look a little differently than bundling services in the Permian basin.
So we have to kind of account for that as well.
Great and just my follow up maybe a difficult question to answer.
But I wanted to get an update on kind of where we stand with the the negotiations with pioneer you know they had a nice slide highlighting some of the efficiency gains up there, citing if you go to slide 13 in there a deck from last night. So it seems like you guys are executing really well for them in the field.
But where do we stand with that and are some of the investments that we're suing and next generation technology.
With pioneer in mind as it is a key customers as you move into E fleets and a higher mix of tier four equipment.
Sure Yeah, I, usually when when talking to investors or analysts are ruined half to.
Remind them of the historical context of of what pioneer pro petrol have achieved together, but you've done it pretty efficiently for me by pointing towards them.
How how pioneer presents.
Presents their own operating efficiencies that that.
We've we've played a large part in and were and we're really proud of that we're proud of what the pioneer in perpetual relationship.
Has has done over the past few years in terms of creating value in a very mutual way.
We were.
We're talking to pioneer almost on a daily basis as we have for the last few years and we'll continue to do that as we plan going.
Going into next year.
That said I I personally and I think our leadership team is highly interested in ensuring that we're putting our equipment and our people in the greatest opportunities to succeed and create value. We think that pioneer will be will be definitely a part of that going into next year, but there is a there's a lot of work going on in that arena right now to ensure that.
Where we're exposing.
Our offering in our company to.
All the all the best value, creating opportunities in 2023 and beyond.
Great. Thanks, Sam.
The next question comes from Waqar Sayed.
With <unk> capital markets. Please go ahead.
Thank you Lynn and good morning.
Some oh, there's a slide in your presentation deck, where you guys said give you a bumping our productivity and if I remember correctly I think last quarter. It was around 71% and now it's around 53.
And yeah, if I understand correctly that would mean that there was a big dip in and out of.
Productivity in Q2 am I understanding it right or is there something that I'm missing.
I think I think when you look at it and this is pretty consistent with the slides that are rune just referred to.
Pumping hour pumping productivity has increased nearly 100% over the period that we show. So I think that's that's what we're looking at the numbers you might be looking at our annual versus quarterly but.
When you look at it back at the period that we're reflecting in again. This is this is also shown.
But pioneer pump.
Pumping our productivity has increased pretty significantly.
And continues to.
Right now for modeling purposes, because they use that in their models was there a dip quarter over quarter that is that is it fair to assume.
No no.
Okay.
Fair enough and then one other question I Eh.
You mentioned next year, it would be very strong free cash flow.
How do you define strong man what would you be happy.
Happy with in terms of the use of the word strong whether you want to describe it as a percentage of revenue are but that conversion or anything like that.
You know I think in the neighborhood of.
40% to 50% of EBITDA conversion to me represent strong and when we look at.
EBITDA per fleet and the cadence that we're expecting next year you know, we we could see that up 25% to 40%. So so that's that's kind of how I would I would expect a stir.
Strong to play out.
Okay.
Okay, Great and then in terms of your total hydraulic horsepower, we've been using number of about $1 4 million hydraulic horsepower. So number one is that the correct number and number two any of these upgrades that you're doing right now is that bringing in any incremental horsepower.
Power or is it.
It mostly all replacement.
Engines.
Okay. This is David let me answer that one of the thing you should know is prior to this quarter. We did include the <unk> and the available horsepower that we had a we have since moved that or.
So we're down to $1 3 million of of our capacity and.
The the investments that we're talking about essentially are replacing investments that otherwise would have been in legacy equipment.
Now.
You know I think I think Sam talked about the fleet cadence for next year, we do think that we'll be able to generate growth.
But what we haven't laid out our full investment plan for 2023, yet either.
Yeah.
That's great.
And just one final question following the impairment charge could you provide some guidance for our DD&A for Q3.
Yeah that number is gonna be.
Right around $32 million.
All at 30 to 34.
Okay great.
Thank you very much appreciate all the color.
Yeah.
The next question comes from Stephen <unk> with Stifel. Please go ahead.
Thanks, and good morning, gentlemen.
So two things for me. The first is you talked about July I think you said record revenue quarter record revenue month and.
And when we think about the puts and takes in instead of profitability per fleet.
Just kind of curious if.
What are the headwinds versus pricing.
We think about profitability for free because it feels like your guidance is solid, but beautiful and I'm just trying to understand if there's anything that is sort of offsetting what appears to be continued price momentum as we get into the second half of the year.
Steve This is David.
There are continuing headwinds.
Sam Adams.
Adam and I have spoken about.
Place scenario pressures.
I think that some of those are receding, a little bit, but we're going to continue to face. Those however, the demand for services and the tightness in supply of Frac equipment is such that we believe that the pace of change on the pricing side is going to be greater than.
The inflationary pressures that we would.
Have to absorb so I think that we feel good about that.
Yeah, It's Steven Sam I'll, just add to that.
Over the last 810 months as we've we've tried to employ more aggressive pricing strategy in our kind of what we call margin over market share.
<unk> approach.
It's been kind of baffling is as you know you might be working with one customer in particular to get their pricing in the right spot and it takes you a month to do that and in the meantime.
Something pops up in the supply chain. It was very unpredictable either from a delay or from a cost inflation standpoint or both.
So I think we're trying to be prudent conservative in trying to factor in some expectation that some of that will continue as David said hopefully yet.
To a lesser extent, but.
But just trying to be realistic with ourselves around the headwinds in crosswinds still exist and that may come.
I'd say in the next six months through a year yes.
Yes, Stephen that the last part of your question regarding conservatism I think what you've seen out of <unk>.
Petro was we've typically provided pretty.
Pretty minimal guidance.
And tried to be very conservative around that so.
So we are coming out with a bit more guidance regarding EBITDA and and our full year.
So I think I think conservatism is something that we like to stick with.
No. That's fair that's fair I appreciate the commentary and just as a follow on when when you are you may have mentioned it a little bit.
Repaired remarks, when you're looking at the tier four D G B's and when you're thinking about the electric fleet.
Are you looking for.
Strong commitment zander contracts before.
The build or are you pretty confident in the visibility you see that there's customer demand.
Stevens, Sam it's a little bit of both actually we have we have a strong willingness for multiple customers to contract any gas burning equipment, whether it be electric or DGB.
That said is as David mentioned earlier in an earlier question around our our idea of of trying to participate in the industrialization.
Of the sector in the Permian Basin.
Some of this next generation equipment that it burns more natural gas is it's just more cost effective solution. So as we as we talk about capital allocation moving forward.
We want to do our best to be allocating capital to the most relevant technologies and tools.
And to do our job that that brings the best returns profile.
We do believe that we will be securing a.
Contracts for many of these different gas burning offerings that said, we think it's going to be prudent for.
The top tier.
Pressure pumper is like like pro Petro and its and its larger peers to be pulling equipment into the system that plays to that industrialization and there's more fish efficient cost effective and brings better emissions profiles.
Great No that's very helpful gentlemen, thank you.
Again, if you have a question. Please press Star then one.
The next question comes from Derek <unk>.
Todd Hazer with Barclays. Please go ahead.
Hey, Good morning, guys I wanted to go back and address the pioneer contract and if it could be potentially limiting exposure to the rapidly rising pricing environment can you talk about your profitability outlook for 2023, when these contracts roll off of a year and how much pricing leverage cause. It's allow you as you roll into spot market rates.
You're at your high grading the fleet with a tier four DGB and any frac just a.
A little more color around the potential profitability profitability uplift would be helpful.
Sure. This is Sam again.
I think our our addition of more dual few units our commentary around E fleets next year is.
It was really directed towards what we believe is happening in the broader market and maybe even more so directed towards what we think the medium and long term.
Circumstances are going to be in the north American pressure pumping market for really the years to come.
We're extremely confident Oh.
About what the market is going to look like really the back half of this year and going into next year and beyond beyond that the and this is no news to most informed people listening to this call, but the structural under supply of oil and gas.
Globally, we think is going to take many years many years to fix.
So as we look through that lens on the top down basis.
We want to give our company the best tools to work with.
Going going into that you mentioned in your question something like exposure to spot market.
Not that we don't do spot work here and there, but it is an extremely small portion of our work. So when you see our operating and financial performance is a direct look into a very committed dedicated model and we look to keep it that way going into 2023 and beyond we just think that's the best way to run one of these.
Businesses and make it as predictable as possible will pioneer be a part of that yes, yes. We believe they will what will the right mix be of all of our customers, where we're working hard.
As I mentioned earlier today to figure that out one one interesting thing.
But that has happened this year that's been different from.
Many cycles past.
Is that we're sitting here really from June through today is the bidding and tendering season for 2023 that usually happens in November .
So it's it's it's Ford is four to six months.
Accelerated and that's that's it that's a fantastic indicator, we think of of of demand and how tight the market is.
And we've we've had more inbounds from from different operators than than we've ever had really maybe in the history.
In the history of at least my tenure here in the last 10 years of pro petrol.
So we're taking a close look at every opportunity that we think plays towards.
That that dedicated efficient predictable model that that we at perpetual I like to put our equipment and our people.
Into.
Yeah. Derrick this is Adam the only thing I would add to that is.
As we look into going into next year any contract regardless of customer definitely has to compete with our opportunity costs.
So.
We're looking really hard at Sam mentioned that that we're looking at all of our opportunities, especially in the in the tight market that we sit in today.
Yeah. Derrick this is David just to chime in on top of a salmon Adam's comments, which they've they've communicated well I think you've actually characterized it quite well in your in your commentary from last night and I think that just like every other management team, we're going to be commercial.
And we owe it to our shareholders, we owe it to our employees and.
And.
We're going to be looking to put our assets in the best place to generate the appropriate returns and our business development team is very excited about that so we.
We feel like we've got the best services in the basin and we've.
Proven that.
And we're going to take.
Take advantage of that going into what we think is gonna be a very tight market.
Latter half of this year and into 2023.
Got it that's great I appreciate all the color.
Switching over to the the Capex outlook for 2023, it sounds like gross capital still up in the air, but maybe we can address maintenance capex still running at a very high level almost double that of your peers, you're folding in a few more tier four DGB as you're bringing in new electric Frac fleet I'd imagine that's going to drive that number down.
Is that how we should be thinking about it that we can cut that back down to the $3 million to $4 million range that we're seeing from your peers. If you could just help bridge us from where you are today. So what you could see next year as you continue to high grade the fleet.
Yeah, I think youre right.
This is something that I think is happening and may not really be recognized by the market.
We have been converting.
Assets legacy assets into like new equipment with new technology.
What we announced today is an additional down payment on that.
Not only in our tier four DGB, but electric so you know I.
I think what's what's happening at <unk> Petro.
Is a recapitalization of the fleet.
We're gonna be providing very relevant assets to the marketplace, along with the efficient and effective flat performance that we've delivered historically two top providers.
Operator, so in terms of completion performance and.
Our overall capital spend I think it's going to be trending in a very favorable way getting into 2023, as we were able to take.
Take advantage of those investments that we've made this year and.
And prior to that Derrick. This is Sam I'll, just I'll just add on top of that.
I think it's going to be very important for for Petro as well as our our entire.
Sector in the pressure pumping space.
Two.
To fix this problem.
Convert as much EBITDA into cash as possible we have.
Very very intense internal efforts to do that this year and going into next year.
Which we think will bear fruit on something like the maintenance Capex line item. We also believe that we're in the early innings of what I.
What I continue to call the industrialization of our of our business in our sector to migrate to technologies and tools.
Or just more.
More more efficient more effective from a from a cost and equipment life standpoint. So we're we're really excited to be playing a part in that and we'll look to continue to do so.
Because really there hasn't been it hasn't been significant innovation or change in pressure pumping equipment, maybe the last 30 years.
So it will take us a while as a sector to get the equipment offering right, where we can do something like minimized.
<unk> capex significantly.
And make make the investment rationale a much more competitive and compelling.
Got it that's great and if I can squeeze one more in I want to ask about your new E. Frac offering if you could how is it different than Darris, Dan can you give us maybe some extra.
Tax or specs about what it looks like.
And then secondly on the power generation side I know you sold your previous turbines or those are not necessarily oilfield ready will you be considering power generation ownership or will you be using the third party power as a service as you start to go into the Frac space starting next year.
Sure.
I guess on your on your first question around the E. Frac offering I guess I would say stay tuned there where we're.
We're working on some things that will hopefully be able to tell you more about.
More about soon on the on the power side, its really I think what we've learned is that it's very customer and geographic dependent.
So our strategy.
Currently on the E Frac power side is to remain flexible.
Steady all study all of the options out there and work with our customer to make sure that we have we have the best purpose fit options. So it could be a.
A little bit of a couple of different things for us.
Got it okay.
Good color I appreciate it guys. Thank you.
Thanks Derek.
This concludes our question and answer session I would like to turn the conference back over to Sam Sledge, Chief Executive Officer for any closing remarks.
Thanks, Andrew and thanks, everyone for joining us joining us on today's call as I mentioned earlier, we are very proud to play a part in an innovative energy industry, where oil and gas remain critical to our everyday lives across the globe.
We enjoyed talking with you today and we hope to talk to you again soon please join US on our next quarterly earnings call have a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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