Q3 2022 ProFrac Holding Corp Earnings Call
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Quarterly.
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Thank you everyone.
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Greetings and welcome to the pro Frac, holding Corp's 2022 third quarter earnings Conference call.
At this time all participants are in a listen only mode.
A question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It's now my pleasure to introduce your host Rick Black with Investor Relations. Thank you Rick you may begin.
Thank you operator, and good morning, everyone. We appreciate you joining us for prophylactic holding Corp's conference call and webcast to review third quarter 2022 results with me today are Matt <unk> Executive Chairman <unk>, Chief Executive Officer, Lance Turner, Chief Financial Officer, and Corey Randall Chief operating officer.
Following my remarks management will provide high level commentary on the financial highlights of the third quarter and outlook before opening the call up to your questions there.
There will be a replay of today's call available by webcast on the company's website at PFS Holdings Corp, Dot com as well as the telephonic recording available until November 17 2022.
More information on how to access. These replay features is included in the company's earnings release.
These note that information reported on this call speaks only as of today November 11, 2022, and therefore, you're advised that any time sensitive information may no longer be accurate as at the time of any replay listening or transcript reading also comments on this call may contain forward looking statements within the meaning.
But the United States Federal Securities laws, including management's expectations of future financial and business performance. These forward looking statements reflect the current views appropriate management and are not guarantees of performance.
Various risks and uncertainties and contingencies could also cause actual results performance or achievements to differ materially from those expressed in management's forward looking statements.
A reader is encouraged to read <unk> Form 10-Q, and other filings with the Securities and Exchange Commission, which can be found at SEC Gov or on the company's Investor Relations website section under the SEC filings tab to understand those risks and uncertainties and contingencies.
Rents today also includes certain non-GAAP financial measures as well as other adjusted figures to exclude the contribution of Flotek.
Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the quarterly earnings press release that was issued yesterday, which can also be found on the company's website.
And now I would like to turn the call over to <unk> Chief Executive offers officer, Mr. Ladd Wilkes.
Thank you Rick.
To begin I'd like to stay how excited I am having completed our acquisition of U S. Well services I wanted to welcome their team to the pro Frac family.
We believe electric fracking represents the future of the industry.
We are excited to leverage our scale and capabilities along with the clean fleet technology is the largest provider of electric fracturing services in the world.
And by changing our ticker symbol to AC D. C. After closing the U S. Well services acquisition, we wanted to communicate to investors that not only are we the market leader in E fleets, but we also had a strong commitment to ESG strategy of reducing fuel costs and minimizing emissions. In addition, we just think that <unk> is really cool.
Sure.
So as of today after factoring in the acquired fleet, we have 39 fleets active in eight of which are electric.
<unk> did in its fleet count is the deployment of <unk> first internally manufactured electric fleet.
We're pleased to report that this fleet performed extremely well in its initial customer field test.
And we're fully deployed this month.
We continue to be impressed by the technical performance of these electric fleets.
They have demonstrated the ability to pump at a high rate high pressure consistently and reliably with very little fluctuation just as important the economics are unmatched given the easily 100% use a cheaper and cleaner burning natural gas.
We look forward to the first deeply generating significant revenue and profitability in the back half of the fourth quarter.
Going forward.
And after U S. Well services fleet are brought closer to market rates, we expect to generate higher profitability.
E fleets due to their lower maintenance needs smaller footprint and the tremendous value proposition to our customer.
In the meantime, we are focused on bundling opportunities efficiency improvement cost synergies and other select strategies that we believe will improve the profitability of these fleets in the near term.
With the closing of the U S. <unk> acquisition, we now have four E fleets under construction.
We're working to complete these additional E fleets and expect full deployment of those fleets by early 2023 by which time, we expect to have 44 active fleets.
Fleet optimization remains a primary goal, which means we're not just looking to add fleets, but to maximize the throughput and profitability of the fleets and operations for our clients and for pro Frac.
In addition to the electric fleets under construction, we've accelerated our tier four dual fuel.
Upgrade program as the year has progressed.
Goal is to stay ahead of customer demand as it relates to equipment type and we believe that electric and tier four dual fuel fleets offer incredible benefits, our customers and represent the future of our industry.
Now I want to highlight several key metrics from the third quarter.
I'm extremely proud to report that we achieved 18% sequential growth in revenue leading to a 22% sequential increase in adjusted EBITDA for the third quarter.
Excluding other business activities adjust.
Adjusted EBITDA increased 49 million from $218 million in Q2, the $267 million in Q3 annualized.
Annualized adjusted EBITDA per fleet, excluding other business activities rose.
Rose, 23% to $34 million from.
From $28 1 million in the second quarter.
We believe these incredible results are the product of the best team in the industry running the best equipment in the industry focused on every aspect that makes our company our customers and our suppliers truly great.
I believe it is important to highlight three critical areas that are driving our industry leading profitability personally.
Pricing.
Our ability to control the supply chain and utilization.
Pricing continued to move higher during the quarter and we see continued momentum with a data driven approach.
Our commercial team works constantly with each of our customers to drive home the value that <unk> creates for their production return and ESG initiatives.
In addition to pricing we saw further incremental expansion from increased bundling of materials used in the services provided by pro fret vertical integration allows us to capture more share of our customers' completions budget and this is a priority for pro Frac as we believe it represents our largest topline growth opportunity in 2023.
We are always aimed to provide fine chemical storage and logistics as we believe we can manage the complicated supply chain as a single provider more efficiently and reduce the risk of M. P. T on pad.
During the third quarter, we made great progress expanding the number of fleets that are bundling materials.
By the end of the third quarter, we were providing approximately 40% of the sand, we pumped and 50% of the chemistry looking forward. We believe we have the supply the proximity and cost advantages to become the primary choice for our customers.
Another equally important factor in our results if utilization.
We posted the highest level of utilization for the company in terms of pumping hours.
The goal of everyone at pro Frac is maximizing pumping hours from our commercial team focused on filling the calendar to our operations teams and maintenance teams focus on executing every single minute on pad and keeping equipment in optimal shape to reduce downtime.
It's because of these strengths that in Q3, we were able to reduce move times pump more hours per day part more days personally etcetera.
These trends continued in October and it makes I'm excited to see what the team can do moving forward.
Lastly.
I want to provide a summary of what we're seeing from our customers.
Demand remains very strong for all fleet types, including increased demand for Neurotechnology fleets as customers appreciate the economic benefit of next generation pumping technology.
This equipment remains sold out across the industry.
As a result pricing levels remain constructive for all equipment types as we look into Q4 and 2023.
We completed the third quarter with a record level of efficiency and are carrying the efficiency into the fourth quarter.
While we don't expect year end budget exhaustion to materialize. This year fourth quarter typically comes with some uncertainty around utilization due to holidays and the possibility of inclement weather.
Overall, our 2023 pipeline and book of contracted work is very strong.
Our current calendar is the strongest we've seen in 14 years in this industry.
I'll now hand, the call over to Lance and he'll provide some comments on our financials.
Thank you Ed we're pleased to announce the improved results and the progress we made during the third quarter.
On a consolidated basis revenue for the third quarter totaled $696 million up nearly 20% compared to the second quarter.
We count remained constant at 31 fleets for the quarter.
The increased revenue was driven by higher average pricing higher material sales and increased efficiencies of our fleet. We really saw improvements in every area during the quarter.
Net income was $143 million for the quarter compared to $70 million in the second quarter.
Earnings per class a share was $1 nine.
Adjusted EBITDA was $256 million or $267 million when excluding the EBITDA loss attributable to our other business activities or flotek.
This resulted in $34 5 million of adjusted EBITDA per fleet on an annualized basis, excluding flotek, which represents a 23% improvement from the prior quarter.
Selling general and administrative costs totaled $70 million and included approximately $12 9 million in stock based compensation.
$9 7 million related to Flotek and $5 8 million in transaction related expenses.
When excluding these items SG&A was relatively flat from the prior quarter.
The increase in Flotek was primarily due to the third quarter, having a full quarter of activity compared to the second quarter that only had a partial quarter of flotek results.
Turning to our business segments stimulation services segment generated revenues of $669 million in the third quarter up 16% from the second quarter adjusted.
Adjusted EBITDA for stimulation services was $250 million compared to 196 million in the prior quarter.
As mentioned the increase from the prior quarter was driven by increased pricing a greater amount of materials provided during the quarter and increased utilization of our equipment.
The manufacturing segment generated revenues of $49 million in the third quarter up 40% from the second quarter.
Approximately 95% of this segment was intercompany revenue for products and services provided to the stimulation services segment.
Adjusted EBITDA for the manufacturing segment was $8 4 million.
Down slightly from $9 4 million in the second quarter.
This segment's throughput increased this quarter, primarily driven by an increase of its activity in support of pro Frac fleets.
These increased product sales were largely offset by continued cost pressures on underlying raw materials during the quarter.
The profit production segment generated revenues of $25 million in the third quarter up 41% from the second quarter.
Which was primarily driven by a partial quarter contribution from our newly acquired Monahan sand mine.
Approximately 56% in this segment with intercompany compared to 66% in the previous quarter.
The reduction of intercompany activity was driven by the customer mix of the newly acquired Monahan San Juan <unk>.
Adjusted EBITDA for the profit production segment was $9 2 million.
Down from $12 6 million in the second quarter. The primary drivers of the reduced profitability were lower utilization of our sand mines due to maintenance downtime and a lower average selling price per ton.
Other business activities, which represents flotek generated revenues of $47 million and negative $11 million and adjusted EBITDA. This represents the first full quarter of consolidated Flotek results.
Capital expenditures were $123 million for the quarter, excluding acquisition related capex, approximately 75% of the current quarter capex related to various growth initiatives that are underway as we continue to adapt our capital program to the current environment.
We expect full year capex to range between 330, and $350 million, 30% of which will be considered maintenance on our fleets.
The increased our capital budget reflects an acceleration of a number of growth related initiatives. We have outlined previously, which we think have and will continue to improve our pumping hours and our profit generating potential.
We continue to accelerate our engine upgrade program as the year progressed converting more tier two engines to tier four DGB engines.
We were previously upgrading five to 10 engines per month and have increased that level to 10 to 20 engines per month.
We expect our full year cost for this initiative to be approximately $50 million.
We continue to believe in this value proposition to our customers and see more customers requesting this technology.
After deploying the first fleet, we expect the construction of our first three electric fleets to cost approximately $75 million. We are over 70% complete on these three fleets as a group and expect to deploy the second and third fleet in early 2023.
The La Mesa sand plant is expected to be operational at the beginning of December and should come in at a cost to construct of approximately $45 million.
We are also investing approximately $30 million in reducing the number of fleets waiting for maintenance and establishing a robust swing program to allow for equipment to be returned to service quicker and help ensure our equipment continues to pump more hours per month.
Turning now to debt and cash flow.
Excluding the amounts attributable to other business activities. We ended the second quarter with $549 million in outstanding principal debt and 246 million in liquidity.
When we talk about liquidity, we exclude the liquidity attributable to flotek, because while we do consolidate their results. We do not have the ability to use their cash or liquidity in the rest of our operation.
Operating cash flow was $172 million during the quarter, which was impacted by an approximate $57 million and working capital build due to higher materials higher pricing and higher efficiency.
Subsequent to the third quarter and as of October 31, we had approximately $163 million outstanding on our ABL. The ABL draw was in anticipation of the U S. Well service closing on November one.
In connection with this transaction, we issued $12 9 million shares to U S. Well service stockholders and we used approximately $210 million of cash net of cash acquired.
Cash used includes $170 million for the retirement of the majority of U S well services debt and other transaction related fees and expenses.
In addition, we assumed approximately $35 million in equipment related financing as part of this transaction.
After this transaction, we expect to have approximately $650 million and net debt and have approximately 155 million shares outstanding.
As we look into the fourth quarter.
As Larry mentioned pricing continues to remain strong as we incorporate the fleets acquired in the U S. While service acquisition, we expect some fluctuations in our per fleet profitability metrics Act.
Activity levels and more importantly efficiency levels have started strong but visibility into November and December is opaque.
That being said, we expect incremental improvement to our third quarter revenue with the higher fleet count as we add the U S well service fleets into our operations.
I'd now like to turn the call over to Matt.
Thank you Lance I'm extremely pleased with our company's commitment and hard work that continues to generate improved operational efficiencies and financial growth as we continue to scale. The business I believe our employees are the best in the industry and are the key to our success.
Our view of the macro environment in oilfield services remains bullish and we believe we are extremely well positioned for the current U S. Frac market, where supply of pressure pumping horsepower is limited and incremental horsepower is bottleneck.
Our two pronged growth strategy is acquire retire replace on the equipment side and enhance scale through vertical integration on the operation side.
This is gathering significant momentum demonstrating its potential to generate strong and lasting returns for our for all of our stakeholders.
The dynamics in the marketplace that we have been speaking about since our IPO have not changed many competitors are completely sold out most have legacy footprints in need of upgrade and the supply chain for maintaining and upgrading existing fleet remains extremely strained with a limited ability to build new capacity.
On top of that capital is even more expensive than it was just six months ago taken.
Taken together these dynamics both bolster our confidence that there is a great deal of link lift in the cycle and margin expansion will continue throughout.
We continue to believe this is the best backdrop that we've seen since we started in the shale industry and we see this lasting for quite some time.
In just the past six months, we have grown the scale and scope of our business tremendously by acquiring MTS.
Acquiring demand in West, Texas sand operations last quarter, and now the acquisition of U S well services.
I would like to reiterate how excited I am for the U S well acquisition.
Not only because of the company that the U S will team created but because of what we can build together now that we have joined forces.
As we did with previous acquisitions immediately after closing we visited with each of you as well as customers.
The feedback was overwhelmingly positive and I look forward to reporting our results over the next few quarters as this acquisition starts to show its true potential.
Our goal is to bring the U S wealth leads closer to our fleet profitability within 2023.
This will include working with customers to adjust pricing to market prices within the constraints of existing contracts.
But that increased profit will also come from applying our in house manufacturing cost advantage best practices improved cost structure and the ability to bundle materials.
The other thing I would like to touch on is our capital expenditure outlook.
As Lance mentioned, we allocated more capital to our equipment.
As you can see from our results our equipment is pumping more and earning more than ever before our first priority is to reduce the risk of downtime for our customers and we are allocating more capital to ensure we do that in this environment. Our maintenance group has been hard at work upgrading engines, establishing a <unk>.
Wing program to reduce maintenance time, and reducing the amount of equipment that is in the maintenance cycle.
We see these investments as being non recurring or maintenance expenses will continue at industry, leading levels that we're known for.
One example is that we invested heavily during the quarter to reduce the amount of equipment currently in maintenance status and.
And established a swing component program to speed up the time. It takes from the point of pump has a failure to the time. It is back pumping we think approximately 15% of the industry's capacity is not pumping because it is in some stage of maintenance.
This investment allowed has allowed us to reduce the amount of equipment, we have in maintenance from that 15% level to the six and 8% levels that our equipment is currently in.
And this is probably the highest return on investment.
We have seen.
Seen in this environment.
This allows us to increase efficiency and reduce downtime in a favorable pricing environment.
We expect this to pay dividends over the course of Q4 and into 2023. This also helps US prepare for the addition of the U S well fleets.
Ultimately I look at it like it's a NASCAR race.
The driving and mechanical failures can be predictable and.
Inconsistent therefore, your edge really comes from the ability to reduce downtime and increased track time by having the fastest pit crew.
On the track and we're willing to invest to shave off hours and days from our maintenance cycle.
As we mentioned on our last call, we think the opportunity to expand our vertical integration and control more of the entire supply chain presents just as much potential as running in Frac fleet.
Continuing to expand the number of fleets, we're providing materials to is one of our key priorities and one of the major opportunities for future profit expansion.
Our ability to create incremental value for our customers.
By not only providing the sand for our customers and our reseller arrangement. We can also mind the sand for our customers, which allows us to concentrate the earnings power of each of those value added services.
And to add meaningful incremental EBITDA to our fleet.
When we acquired <unk>.
Their fleets were primarily unbundled.
As are the U S well fleet that we just acquired as Larry mentioned, we are only providing about 30% to 40% of the sand that we pump and I see a large opportunity in that metric, we think that the entire supply chain from materials to logistics.
So the logistics of those materials could represent a double digit per fleet opportunity.
That our customers are already paying to a variety of vendors.
This strategy will not only increase our fleet profitability above what we believe to be an industry leading level. It will also result in a higher quality of cash conversion due to significantly lower capex needs on a per fleet basis.
In our recent sand mine acquisition, we continue to see an industry struggling through logistical inefficiencies in terms of both trucking and sand sourcing and availability.
With our strategically located sand mines in West, Texas, I believe we can improve the sourcing efficiencies for our customers operating savings on a per ton basis, while increasing our margins considerably we expect our third sand mine to be operational in late November and I look forward to demonstrating the value of those assets.
With regard to the next step in our growth initiatives, we remain fully committed to our proven acquisition strategy that is based on very strict criteria for what is considered an accretive transaction and to maximize cash generation.
We will continue to put all potential acquisitions under the same technical and financial microscope.
A key driver within our strategy is enhancing vertical integration as we continually state having custody and control of our supply chain is one of the biggest drivers of utilization and profitability on our fleet.
We remain extremely thoughtful about our overall leverage.
The third quarter, our leverage is at <unk> eight and we believe that we are on track to maintain our target of being below one turn of debt to EBITDA.
Before we open the call to your questions I'd like to reiterate that we are bullish on the future of our industry and even more so on pro Frac as we continued to execute on our acquired retire replace and vertical integration strategies. We plan to continue to redefine what is possible for an oilfield service.
As a company and with that I will now turn the call to the operator to take your questions.
Hey, Matt wait a second.
With the with the Dabian Veterans day, I would just like to express my gratitude to all the men and women that have served this country.
You know, we will get the opportunity to work with so many so many veterans here at <unk> and they have shaped the industry and they shape pro fracking and I just wanted to say a special thank you to everyone of them. Thank you for your service.
Uh huh.
Thank you.
Go ahead, operator, thanks for saying that.
Thank you we will now be conducting a question and answer session.
I would like to ask a question. Please press star one on your telephone keypad the.
A confirmation tone will indicate your line is in the question queue.
Press Star two if you would like to remove your question from the queue.
For participants using speaker equipment may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Our first questions come from the line of Stephen John Gara with site Stifel. Please proceed with your questions.
Hi, Thank you and good morning, everybody.
Morning, Steve.
So two things for me the first is <unk>.
So around the U S. Well service assets, we were all a few people who are still covering the stock near the end of each of its Lee.
Life as a separate company and COO.
Clearly.
The contract terms seemed under market, but also the software.
Link from a lot of under absorption because of overhead sort of stayed in place while the E fleets for delivery.
Can you give us a sense for the drag on that obviously with some seasonality into your existing assets.
I know, it's I think it's seven active fleets, but are we talking about assets, which are making $20 million EBITDA per fleet or less than that as they get.
<unk>, how should we think about the timing of those rolling.
Yeah, I think the best way to answer that is as I'm looking at the individual Kpis, where we would expect to see somewhere from a 10% to 15% per fleet.
Dilution across our entire fleet however.
However, when you look at the legacy Pro Frac and what we have with our newly fleet Thats been deployed in Q4 <unk>.
The exit rate in Q3 was phenomenal and we expect to see that carry on.
As well as the addition of additional bundled fleets.
So I think that Q4 is going to be a phenomenal quarter for us over Q3.
However, we need to highlight that as we integrate U S well.
You will see a slight.
Dilution on our per fleet metrics.
When we look at these acquisitions, we we pride ourselves in our ability to integrate quickly and.
We're very excited about the opportunity to work with our new customers.
If you were if you were sitting here in 12 months reporting three Q2, three and you add all of the fleets working plus a new ones would you be surprised if the EBITDA per fleet was below what you just reported.
Can you can you ask that again.
Your your EBITDA per fleet this quarter, if you fold in these fleets and you have the new assets in place and you're sitting here 12 months from now and it's 323 results would you be surprised that your EBITDA per fleet wasn't equal to what you just did.
I would not be surprised.
Okay right.
Just one final one.
You guys have been acquisitive.
Yeah, we can you sort of just to clarify that that's kind of a loaded question I would not be surprised if it's.
Equally two or greater.
Okay, I would give you, but I was just hoping you can say that.
[laughter].
Your acquisition strategy is obviously proving to be very positive. So far can you talk about the kinds of things you're looking at.
So are there other things out there that you think could be value enhancing to the profile franchise.
So we're incredibly critical in and we watch everything in the market, we try to stay up with what's going on but we.
We won't we won't do a transaction that we don't see it as highly accretive.
And and that that doesn't fit just you know.
Right into our overall, our overall business when we look at it.
The vertical integration that we have in place, whether we're looking at pressure pumping equipment or supply chain assets.
It needs to be something that fits right in like a puzzle piece and allows us to execute.
Execute on an immediate commercial synergies, whether that's through better operational performance.
Or from bringing a higher contribution margin across the bundling.
Of these fleets.
Okay. Thank you. Thank you for the details.
Thank you.
Thank you. Our next question does come from the line of Dan Kutz with Morgan Stanley . Please proceed with your questions.
Hey, Thanks, good morning, everyone.
Alright.
Sure.
I wanted to ask on on on shareholder returns, what what you guys' latest thinking is your latest strategy is there.
I appreciate that there is that.
That it seems like a dividend is it probably what you guys have message as has been the most attractive but there is some more float out there with the U S well services and acquisition. So just wondering if if buybacks would be contemplated at any point.
Wondering if we could hear your latest thoughts on your shareholder return strategy.
Certainly so.
We don't expect to see any buybacks.
Just because we want to make sure that we have a very high quality float that provides the liquidity that.
That our shareholders look for as far as shareholder returns of course. This is a controlled company and so what we hope is that everybody appreciates and recognizes just how it aligns the interests are and being able to return capital to stakeholders.
Quicker or sooner than later.
At this time.
You can't provide guidance on that OLED that we continued to perform exceptionally well.
Generating exceptional results and we expect that to continue in a way that would allow us to provide better guidance at a much more material way.
And along those lines.
You know look.
Everything we do is about right sizing the business scaling the vertical integration. So that weakened we can increase the total returns on a per asset basis.
And so with that respect this is all about <unk>.
Expanding the business so that we can deliver distributable cash flow.
And then return it to our stakeholders.
So this this is a very high commitment that we have with this organization and we look forward to providing further guidance.
In the near future.
Great that all makes a lot of sense and then I just wanted to ask one.
I appreciate you putting out this slide kind of out wanting economic.
Especially with respect to.
Fuel costs between the diesel fleet.
For dual fuel fleet and an electric fleet I just wanted to.
To ask or get you guys thoughts on the extent to which you're actually seeing.
The disparity that youre, highlighting kind of materialize out in the market is as you know to me can we kind of take that illustrative example, and kind of applied to what the earnings power of those different tiers of fleet actually is or is that something that you think kind of you know.
There is still there still needs to be a transition process before that's that's kind of fully.
<unk> realized in the market just wondering if you could kind of expand on that illustration a little bit more.
Certainly, it's really all over those and I'm not going to provide any specific.
Detail on.
One fleet to the next only that the total savings and the arbitrage between diesel and natural gas has only increased it continues to increase and the way to that factors in commercially as well as with the decisions that our customers make on how they plan their budgets.
Is increasingly a increasingly a part of.
Of that calculus is increasingly a part of the decision that they have to make and how they treat their vendors.
When they're making these decisions so.
We highlight that.
Specifically, so that we can show just how material. This transition is we can't provide guidance on how long that transition will take but we believe that it is certainly.
An element there should be factored in.
<unk> with this upgrade cycle and how you think about the availability of horsepower on a go forward basis. This is an upgrade cycle and certainly not a newbuild cycle. The displacement that you see from fuel efficient nextgen fleets is real and it's highlighted by the excess.
Cost of diesel relative to the natural gas that is being replaced with.
Great. That's all really helpful. Thanks, a lot guys I'll turn it back.
Thank you.
Yes.
Thank you. Our next question is come from the line of Don Crist with Johnson Rice. Please proceed with your questions.
Good morning, gentlemen, and thank you for the lively our whole music, it's very appropriate with zero change in poker.
[laughter] I wanted to talk about maintenance and maintenance overall, but in specifics the $30 million that you're spending to streamline operations and get your fleets back out quicker can you contrast that to what the rest of the kind of pressure.
<unk> industry does I E. If they're going to hold warrant cat or something like that can you talk about the difference in time between them repair in there their fleets in yours, and just how youre differentiated there.
Certainly certainly and I'm glad you asked so when you look at having third parties come in and rebuild your engines or rebuild your transmissions.
Youre looking at a very long lead time, where you can see that that.
That equipment gone for anywhere from a <unk>.
Eight weeks or more before you see it again and before you are able to pump again.
And with our in House resources, we were able to get that down to around three to four week timeframe, but with this new growth initiative that we put in place we're able to keep swing units in the district.
On engines transmissions and power ends so that we can turn those pumps back to service.
Within a 72 hour time frame.
So when we look at this is basically the equivalent of reducing a pit crews pitstop from two minutes and 40 seconds too.
210 seconds.
It's just it is incredible but the best part is is our maintenance capex on a per unit basis is relatively unchanged relatively consistent and so when you look at how that raised cargoes around the track those tires wear out at the same pace at the same rate on the mile.
Driven and fuel consumption. It consumes the same amount of fuel going around that track and so the wear and tear with this program that we put in place.
Keep everything relatively consistent however, this is a true improvement on our pit crew that reduces the downtime if any of that equipment and a product of that is a significant reduction in the amount of horsepower that is tied up in that statics and that static state waiting to be repaired.
And put back into service.
It's a it's very impressive.
On the sand mines, West Monger seems to be a little bit delayed versus prior expectations, but.
But it seems like it's going to come on later this month can you just talk about the ramp up there and in any guidance around.
Sand volumes as we go into the fourth quarter, you know, obviously I believe that the ramp up a little bit, but you know, it's a little bit hard for us to model what contribution sand may have in the overall.
Going forward.
Typically with a with a new mine you'll have a ramp up period that can range anywhere from two to four months, obviously, our expectation and our goal is to certainly beat that and beat the better bookings.
Book and the like.
Just provided but for modeling purposes.
I think it's I think it's safe to use the two to four months and.
And Hey, I got to give I got to give us something that we can be so that we looked at every quarter.
Yeah, Don I would also add that we were running we just started running wet sand out there now so.
We should be starting out very soon where our plan is to be shipping sand by the 20th.
This month.
Okay. That's good to hear and just one more quick one maybe for Lance as you roll in U S well services and any guidance around SG&A.
Sure that is going to go up some but is that going to be like a couple million dollars a corner or is it a little bit more than that.
It'll be a little bit more than that I think they were running at about $20 million per year.
And I think that it'll take us a little bit of time to kind of realize the synergies that we laid out when we announced the transaction but.
But we feel good about realizing those and.
Over the next call it six months.
Okay, So probably just under $5 million or so so okay. I appreciate it I'll turn it back.
Thank you our next questions come from the line of Suraj pumps with Bank of America. Please proceed with your questions.
Hi, good morning that their lab and and Lance I wanted to start on I think a comment you made in your prepared remarks that.
The 2023 book of brokers are strongest in 14 years, which is obviously very impressive can you talk to that a little bit what kind of visibility do you have what are you seeing across public and private E&P than maybe the media can you just speak to that Olympics.
Certainly so when we look at the environment, the strength of the commodities and and.
And the outlook for each of our customers.
We see our backlog filling up and the strongest way that we have.
Than any previous year for 2023, we think that this carries over into a very strong year over year increase of activity.
However, when we look at our peer class in their current state of the oilfield services market with a challenging supply chain. What we're looking at is a fully sold out market with a with.
A difficult outlook and the industry's ability to respond to that higher spending level and higher activity levels that the customers are demanding so this dispositions us incredibly well with our vertical integration, our superior supply chain management and the Nextgen fleets that we.
Have that allows us to get higher utilization at a lower total cost to the customer.
While also providing <unk>.
Industry, leading service and utilization.
Okay. Okay, perfect and then maybe I don't know if you are in a position to speak to 2023 Capex right now, but if you can give us some directional guidance I'll walk us through the moving pieces are.
That would be helpful.
Yes.
Specifically, he kind of absorbing U S well in and getting that set for next year, but I wouldn't expect it to be all different from from this year we.
We will have more maintenance because of the higher fleets.
We're looking at around call it $3 million per fleet per year, three three and a half.
But then the growth initiatives, we're outlining now and so we'll have we'll have a bottoms up build as we look forward, but but I wouldn't expect it to be that different.
Okay. Okay. Some broad strokes you can see $3 30 to 350.
Probably probably a broader range somewhere $2 75 to $3 50 range okay.
Okay. Okay. Okay, Okay, I got it and just one last one quickly for me.
I think you said in your prepared remarks, you're going from Oh, creating five to 10 engines per month to now 10 to 20 engines per month, obviously, it looks like that's backed by demand from your customers, but how should we read into that from a supply chain perspective is supply chain easing signs that you, let anybody who get more Indians per month.
Yes for the broader read through on the market on the supply chain.
Yeah. So it's difficult to say what this does to the overall market, we've got incredible relationships with our vendors with the Oems and and so when it comes to our scale I think I think that gives us a.
A unique.
Our relationship and in contact with those vendors and so.
We've been working with them, we've we've had programs in place and and and and really through even through the Covid years, we were.
We are.
Switching to tier for the N and maintained that relationship with our with these vendors and I think they encouraged through really well in times like these when when were putting orders into two expand or <unk>.
Accelerate our upgrade programs.
Okay. Okay, Okay, I get that okay, guys. Thank you I've done it back.
Thanks Art.
Thank you I would now like to turn the floor back over to management for any closing comments.
Q3 was was incredible.
And.
It's but it's behind us.
And we're right in the middle of Q4, and we're very excited about what we're seeing how our how our crews were working the utilization on our equipment and the quality of our customers were very excited to be where we are and to continue improving and pushing the industry forward.
And we especially look forward to.
2023, and what we can deliver on.
Distributable cash flow for our stakeholders.
And unless anyone else has anything to say I just.
I would say.
Thank you to all the veterans and.
Yeah.
Have a good day.
Yeah.
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time.
Have a great weekend.