Q3 2023 ProPetro Holding Corp Earnings Call
Good day.
And welcome to the Pro Pro Petrilla holding Corp, third quarter 2023 conference call.
Please note this event.
Being a record it.
I would now like to turn the call over to Matt Augustine Director of corporate development and Investor Relations for Pro Retro Holdings Corp.
Go ahead.
Thank you and good morning, we appreciate.
Your participation in today's call with me today, as Chief Executive Officer sample edge, Chief Financial Officer, David Trimmer.
And Chief operating Officer Adam.
This morning, we released our earnings results for the third quarter of 2023. Please note that any comments, we make on today's call regarding projections or our expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act for look.
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.
Revivalist nurse to review our earnings release and risk factors discussed in our filings with the SEC Also during today's call will reference certain non-GAAP financial measures.
Reconciliations of these non-GAAP measures to the bus directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks will hold a question and answer session would that I would like to turn the call over to Sam. Thanks.
Good morning, everyone.
Building on our strong momentum perpetual was pleased to report or another solid quarter as we continue to execute on our strategy we've.
We've been squarely focused on generating robust earnings increasing free cash flow and building towards enhanced shareholder returns and value distribution.
Glad to report in the third quarter, we achieved a decrease in or Capex spending coupled with the continuing strong profitability inactivity that resulted in much improved free cash flow.
Importantly, we expect these trains will continue as supported by three primary factors.
First is our ongoing transition from legacy equipment to next generation assets.
Over the past two years, we've made significant progress transitioning or hydraulic fracturing assets.
More efficient and lower emissions equipment.
Specter total investment to reach nearly $1 billion by the end of the year as we bring additional state of the art technologies and services to prepare true.
With these investments largely behind US we are poised to begin fully realizing the benefits of our fleet transformation going forward.
In the third quarter, we took delivery and deploy our first electric fleet is part of our force offering.
We now have seven tier four D. G b dual fuel fleets and one force electric fleet operating.
And the demand for our next generation services remains strong.
We've already seen fantastic results in the first two months that our electric fleet has been in the field with high efficiencies and strong customer satisfaction.
We expect to begin to take delivery and deploy our second force electric fleet over the next month with.
With the following two electric fleets expected to be delivered and deployed in the first half of 2024.
This is a clear testament to the differentiated demand that this equipment garners.
The second area, that's supporting our results is our silvertip online business.
As you know we made our first entry into wireline services through our acquisition of Silvertip in November of 2022.
<unk> to be a strong tailwind for our earnings power and free cash flow leverage.
We're thrilled with the success of this acquisition and will continue to evaluate and pursue strategic transactions to accelerate value creation as a part of a balanced approach to capital allocation.
On that same note. We've also recently executed a non-binding letter of intent for a small bolt on acquisitions that helps us expand our cementing business we.
We expect to close that transaction before year end and are excited to add additional scale in this operating segment.
Another core element of our capital allocation philosophy is our share repurchase program.
Which is the area of focus align with our strategy to create value for shareholders. We.
We continue to execute on the 100 million dollar program that our board authorized last night.
A strong earnings results, thus far in 2023 demonstrate the significant value of our strategy and our ability to execute.
Despite the recent headwinds, which I will cover more in detail in a moment, we remain confident in the company's current and future financial and operational performance and we believe that our stock prevents a unique I return investment opportunity due to the substantial discrepancy between our equity value in our financial results Dave.
David will get more specifics on the repurchase program soon.
As I mentioned previously sidelined one fleet during the third quarter to avoid running it it said sub economic levels.
We strongly believe in this disciplined approach and are committed to only running fleets that are full cycle cash on cash return.
Despite running once your fleet, we were able to achieve an effective utilization of 15.5 fleets in the quarter as compared to 15.94.
<unk> effectively utilized sleeps the previous quarter.
The strong utilization is a testament to our highly desirable equipment industry, leading field performance dedicated police strategy and the hard work and dedication of our team is.
As high level of service, we provide every day is what our customers have come to expect.
I'd now like to move on.
To dress perpetuals longer term opportunities, we remain bullish on North American onshore service potential over the next several years.
We believe.
We are still in the early stages of a sustainable upcycle that will be supported by the industrialization of the north American oil and gas industry.
Looking ahead, we're confident in our company's ability to continue to advance our strategy and encourage our shareholders to focus on the long term value potential with our business.
David will talk more about our guidance in a moment, but I would like to comment that we expect our fourth quarter to be challenged by normal seasonality holidays and budget exhaustion.
It is important to note that we believe budget exhaustion. This year is more correlated to the increased efficiencies and service providers such as ourselves.
Provide to our customers.
We are proactively working with our customers to mitigate the impact, but anticipate a modest decline.
As it pertains to 2024, we believe the first half of the year will be an improvement over the second half of 2023 as a result of the normalization of oil prices and more rigs coming back online in the first half of 2024.
On a broader note we believe the upstream E&P industry is in a slow to no growth environment, where the appetite for capacity expansion.
Throughout the.
The hydrocarbon value chain is low however.
However, we think this benefits sophisticated service providers like pro Petra and we are confident we have the right strategy in place to continue creating value for our customers and our shareholders.
Moreover, the recent transactions in the EMP space.
Reinforce that are disciplined approach to capital deployment is the right strategy for pro cutthroat.
We offer outstanding service quality next generation equipment and have a terrific customer portfolio and advantaged operational density in the Permian.
All of which insulate us from some of the month market volatility outside the Permian and in the spot market.
Our goal in this regard as to deliver the most value enhancing services at the lowest risk to our E&P space Consolidators.
Our fleet conversion and our service line expansion was silvertip as an illustration of that value enhancing strategy.
Lastly, one of our top priorities and positioning the company for long term success is maintaining a strong balance sheet. This will enable probe that true to achieve its goal to remain resilient to market conditions, while also allowing the company to be opportunistic on value accretive M&A transactions that will further accelerate free cash flow generation is.
As well as shareholder returns.
Now I will turn the Colorado, David to discuss our third quarter financial results David.
Thanks, Sam and good morning, everyone.
Just like last quarter, we have some great news to discuss today regarding our financial performance and progress in our strategic initiatives.
The third quarter represented pro Petros fifth consecutive quarter of net income.
We also achieved and breakout quarter in terms of our free cash flow generation as noted in our earnings release of $27 million, which we believe to be strong and sustainable going forward.
Adjusted EBITDA.
Less than current Capex is 49 million this quarter compared to negative 2 million last quarter. So the cadence insignificance of cash flow is progressing as we had expected.
As part of our commitment to shareholder returns. We also retired approximately one 9 million shares during the quarter or the third quarter for $19 million in repurchases.
We are pleased that our share price has increased by approximately 50% since the inception of the repurchase program.
It's clear that investors are beginning to appreciate the longevity of this cycle and the value proposition, we have created through the dramatic reconfiguration that pro Petra.
On top of the share repurchases, we also pay down $15 million of our ABL during the quarter.
Moving onto our third quarter financial results.
Company generated 424 million of revenue net income of 35 million and adjusted EBITDA of 108 million.
Notably we generated the strong results despite lower activity in our hydraulic fracturing and wireline businesses.
Of note are submitting business recorded record revenues and profitability during the quarter.
As Sam mentioned earlier are effective frankly utilization of 15, and a half bleeds exceeded our guidance and 14 to 15 fleet.
Consistent with our disciplined asset deployment strategy in the fourth quarter headwinds our fourth quarter of 2023 guidance for Frat fleet utilization is 13 to 14 fleets.
Moving on to more details of our capital structure we.
We reported $59 million have encouraged capex in the third quarter, which we believe is began to normalize further we expect our incurred capex for the full year to be slightly above $300 million reduced from $365 million in 2022.
And we expect capital spending to step down further in 2024.
Our balance sheet and liquidity position remains strong to support the execution of our strategy.
As a quarter ends total cash was $54 million in our borrowings under the ABL credit facility, we're $45 million with total liquidity of $180 million.
With the continued decline in capital spend we expect liquidity to continue to improve.
2024, thereby enabling great greater allocations to our capital returns strategy.
Including M&A as Sam mentioned before where our silvertip acquisition is generating 80% EBITDA the free cash flow conversion ratios.
This strategy in subsequent investments and our business are beginning to drive more durable performance and stronger returns.
Returning to our share repurchase program for a moment, we have taken an aggressive approach to opportunistically repurchasing shares and it has been a huge success.
Since the inception of the share repurchase program. We have retired approximately 4.2 million shares which equates to nearly 4% of shares outstanding as of the inception of the program in May of 2023, returning approximately 36 million to shareholders.
It's important to note that in addition to our share repurchases are liquidity position remains strong we have simultaneously invested in our business and pay down debt and we haven't enhance our ability to be opportunistic and the M&A market.
We believe that pro Petro trades in a discount relative to its intrinsic value and we remain committed to what we believe is an excellent investment opportunity during the share repurchase program.
Additionally, as I have noted over the last few quarters. The company's balance sheet remained strong and we remain committed to disciplined capital deployment for the long term.
This strategy has enabled us to develop and install our capital light longterm lease agreement from the armed Force electric powered Cracklings.
This lease agreement reduces our capital requirements and improves our operating costs profile, while enabling pro Petro to accelerate the transformation of our Frack slates two emissions friendly assets that are in high demand in the market.
Are capitalized longterm lease agreement and are proven M&A architecture will strengthen pro petros strategic capabilities and accelerate our free cash flow performance <unk>.
Lastly in a Sam touchdown. We do believe we are in a low to no growth industrializing environment with customers that are disciplined in our capital spending.
Our strategy is designed for the current market environment, and we are confident pro Federer will continue to deliver for our customers and shareholders through all phases phases of the market cycle I will now turn the call back to San for some closing remarks.
Thanks, David before.
Before we turn it over to Q&A I'd like to summarize pro Petros value proposition and.
Why why we remain as confident as ever in our strategy and our long term future.
We are proud of the unmatched bifurcation that we offer including having two thirds of our fleet equipped with next generation capabilities by the end of the first half of 2024.
And we expect continued strong demand for both are new and legacy assets as well as our other services moving forward.
It is important to note that we believe our commercial art architecture is best in class or.
Our sophisticated pricing model supports our asset deployment decisions and accordingly, we will not sacrifice our fleet at the expense of pricing concessions we.
We believe this mindset and commitment physicians pro Petro for strong performance in 2024 and beyond.
Given recent E&P consolidation. We believe there are great opportunities ahead for pro Petro to be the service provider of choice for large cap consolidators perpetua as an ideal position to combine service integration with the deployment of industrial technologies like our force electric offering.
And we are working to enhance our partnerships with the large permiam producers.
To summarize our key priorities are optimizing our operations in industrializing, our business to unlock free cash flow.
Continuing to transition our fleet in the capital light way in pursuit in pursuing opportunistic value accretive transactions, while returning capital to shareholders.
We believe if we continue to execute on our priorities perpetuate will continue to build on its momentum and generate enhanced value for shareholders.
We also recently published our first inaugural Pro Petro Pro energy probe people sustainability report.
This report tells the story of our approach to operating in a sustainable way by embracing are pro energy and pro people perspectives.
Our desire to be part of an of improving human flourishing in our world requires our best efforts at perpetuate to help our customers produce hydrocarbons safely efficiently and environmentally friendly way that we will continue to execute our strategy to the end.
I would encourage everyone to download the report from our website at pro Petros services Dot com.
I'd like to close by thinking the entire pro Petro team for their outstanding and save performance this quarter and enabling our management team to move forward confidently with this strategy.
It's due to their hard work and dedication that we're taking important strides forward for the benefit of our customers Pro Petro.
And the environment.
Integral role we play in the success of the Permian Basin and the overall energy system with.
With that we can help in the lineup for questions.
Operator.
We will now begin the question and answer session to ask a question you May Press Star then why not near a touchdown song.
If you are using a speakerphone please speak up your handset before pressing the keys.
He said anytime your question has been addressed and you would like to withdraw your question. Please press Star then too.
At this time.
Momentarily to assemble our roster.
And our first question comes from Derek Odd Hey, Sarah from Berkeley.
Derek Please go ahead.
Good morning, just wanted to get some more detail around the seasonality that you guys discuss led by the budget exhaustion due to efficiencies maybe can you expand on that what's the main driver is that completion design logistics equipment type just some more color out what's driving that substantial pickup inefficiencies. Because this is really the first time or hearing up.
Exhaustion due to efficiencies.
Yeah, I'm Derek Sam.
I think this has been something that's been a play for a few years now that we're just trying to be honest about as we continue to push the envelope ourselves.
Another large competitors of ours around how many how many hours were company a day, how many feet were completing a day.
I feel like I sound like a broken record I get on there every quarter and say just when I think we're going to plateau were up another I'd again, that's that that continues to happen. So if you extrapolate that out through.
Our customers plans and the wells and footage that they wanted to get through on an annual basis.
You just finish up maybe a little bit more quicker than you expected and that affects everybody a little bit differently, but definitely.
A bit of the activity drawback, we'll see in fourth quarter is due to exactly.
Okay was there anything specific as far as like just logistics getting to the worldwide fast or maybe just some of your new equipment like anything you could specifically coin too.
It's probably a little bit of everything really.
Also the success.
Our next generation offering or do a few on our electric offering really hitting the ground running.
Is it a really good way.
But really really a little bit of everything.
Alright, Okay. That's helpful. And then just your comments around first half of next year improving over the back half of this year I guess, maybe just how do you expect that to install a new I guess what gives you. The <unk> your confidence in that statement is it just a commodity backdrop are you having specific conversations with your customers about returning to work and maybe a preliminary outlook as far as you.
Leak out do you expect to return that Idol fleet.
And the first part of next year.
Yeah, I think leading the way in that outlook is direct conversations with our customers. That's that's to us always.
I think that our customers are viewing the commodity outlook fairly positively.
Which kind of bolsters that the first thing that I mentioned.
And look we we think we've we provide a very high quality service that that is in demand with next generation technologies and I think that's keeping us.
At the front of the line or front of mind with most of our customers the fleet that we parked in.
In the.
Earlier in the quarter third quarter.
We would expect to come back first part of next year and I think just year over year I think you could see our overall average fleet cannot be slightly up year over year.
In 24 and will be as we as we deploy for the remainder of our forest electric fleets I think will be deliberating on how much of that is replacement and how much of that is added is given what other opportunities there are in the market.
This is David just to add to that you know we talk about.
The market Industrializing this as a consequence of the exactly that what you're seeing particularly for the companies that have a bifurcated service offering like Petro.
Is lower amplitude.
Movements of the market, but also.
Not the same level of amplitude when.
Turn around so I think overall that means that we have more durable and repeatable results.
Think that's attractive to investors long term and I think we.
We like it that way, it's easier to manage a business where you have.
More.
Expectations of.
Demand and that's what we're building of the business more is that long term repeat ability and durability and earnings.
Alright, I appreciate all of <unk> color I'll turn it back.
Okay.
Okay.
And our next question.
Comes from local and mine from five per Sandler milk. Please you may proceed.
Hey, good morning, Sam.
Sam you gave us a cadence for the upcoming forcefully deployments.
Could you know your pricing commentary on forcefully one operations and how it's been going and then.
Maybe product contracting update on <unk>, two three and four.
Sure Yeah fleet fleet number ones, but it worked for a couple of months now we started out as kind of a hybrid.
F electric have dual fuel fleet.
And we've since I think each additional pad added more and more equipment and we're basically.
Running very close to full electric fleet, if not a full electric fleet on that on that location right now.
The main data point for us is that the customers very satisfied.
And the initial deployments probably gone better than expected for us and.
And our customers. So that's that's really strong for us in terms of how we move forward into two three and four.
Number two should hit the ground here start hitting the ground here in the next few weeks and I think it's safe to say that the contract for that one it's basically a minute.
We're basically on the one yard line don't have anything.
Tangible to announce today, but very very very positive in terms of where we sit on number two.
The demand for three and four.
Is very strong it's not gonna be is.
Is it going to go to work under a contract it's going to be who isn't going to go to work under contract for so.
We're we're being deliberate and.
And picky about how we move forward with three and four but we feel we feel really really good about where we sit commercially with those.
Okay. Thanks, Sam <unk>.
David.
Or should this be fairly unchanged with most of the delta coming from the fleet countless.
Well I think that.
The seasonality will end up seeing some contraction and fleet performance.
As as we mentioned in our guidance.
We do expect activity to be.
Less robust than what we saw in the third quarter.
So I think you should expect some contraction there in addition to that we talk about how we have this operating lease.
Those least costs will show up in our cost of services, so that will impair a little bit on the EBITDA for fleet performance.
But we are.
Cooperating with capital charge in there.
Which which we think is overall a great.
Return on capital, but.
Something to keep in mind in your modeling.
Yeah.
Alright, thanks, guys.
And our next question comes from Iran. Diorama from J P. Morgan Chase, Iran. Please go ahead.
Yeah, good morning Salman team.
Sam in your backyard, we've seen a tremendous amount of consolidation of.
Of the resource base with companies, such as Concho parsley and pioneer.
Effectively in the hands of the majors.
What do you think this means for pump longterm.
And you know talk about have you adjusted your marketing approach to adapt to this kind of new market reality.
Yeah, Great Great question, you're exactly right.
There's been quite a <unk> quite a bit of consolidation in the empty space. This year and we wouldn't be surprised if it if it continues into next year to that almost a similar pace.
I think if you look back.
Storing glee.
Safe to say this most of us having grown up here and it's been an oilfield service industry for awhile now.
Big Big consolidation like that for the Ultimate service space might've been kind of scary.
And created some uncertainty.
But if you look at it through the industrialization that that we keep talking about and how pro petros position within that.
I can I can confidently say I think I think we will commit I think everyone on our team does knowing the quality of service, we provide with the technology that we Bray and the commercial architecture that we bring to the party and how it positions us with.
The larger operators that are making these acquisitions doing these mergers with more of a long term tilt too, they're kind of planning and mindset and that through with that that really to us plays exactly to our model. So it's.
It's always interesting to see who it is and how it plays out.
But overall.
I think we feel really well about how we're we're positioned within within kind of that changing.
Great and just to follow up Sam I was wondering if you could maybe help us.
Quantifier think about.
The magnitude of Frack efficiency gains.
That Pope Pro Petro has been abled.
To deliver.
Overtime I'd love to hear about maybe.
Maybe hours pumped per fleet on a monthly basis just maybe.
Allow us to think about the impact of those of those efficiency gains on future demand.
You characterize us and we agree with this is a low to no growth kind of operating environment or with Anp's kind of focused on efficiency gains.
And and maybe the question is you mentioned that you employ a very sophisticated pricing model. How do you adapt that pricing model to take advantage of you know if you deliver strong efficiency gains where you can get paid for that.
Efficiency gains in value delivered to the to the E&P.
I think I think the last part of that question is is really important is a great question and.
Look some of that gets gets them to kind of competitive.
Things from a pricing standpoint, but I can tell you we're very interested in making a return on the amount of assets, we deploy and how hard we work them.
Those are some of the main drivers and how we think about pricing and returns.
And look what I, what I, what I find myself talking about efficiencies I think it's.
Probably this conversation with your room.
It's kind of fun to look back to prior peak like 2019, and then you look at what we were doing then.
We had a fleet that was continually pumping.
Bumping say 15 hours a day on a regular basis that that fleet was highly celebrated.
Now it's why is it every fleet pumping over 20 hours a day.
That's kind of how we look we look at our portfolio and we know that we have we have competitors that that might look at similarly.
That's kind of the general bar watermark, Mark right now, but as you look at our daily operational metrics, it's not uncommon to have a single fleet pumps 20 over 2003 hours for multiple days at a time so.
You get to a point, where there's only 24 hours in the day. So the engineering upstream of us as it pertains to things like Simon <unk> and all the different ways. You you you can complete a pad probably as as part of the next frontier that is a much longer transition.
[noise].
Maybe maybe as a part of big bigger broader E&P consolidation I dunno, we'll see but.
The surface efficiencies.
And what we're doing what our team is doing at the well site is really just unbelievable.
So you can imagine if if you have average.
A fleet that earlier in the year was pumping 19 hours. A day is now pumping 22 hours a day that kind of place to my answer Recut earlier question about <unk>.
Efficiencies, creating budget exhaustion in a way because.
That might've been unforeseen for our customer in terms of how they plan.
<unk> so.
Lots of lots of interesting stuff going on in that arena, all of which were heavily participating in and continuing to try and push the envelope from an efficiency standpoint. It while at the same time make sure that we are paid for doing so.
Alright, and this is David just interject one.
And by the way we're looking at this today is that we have.
13, 14, 15 mobile plants and when you think about the things that kind of go on at a plant.
The level of scrutiny of activities the efficiencies that you're looking for that that's how we're.
Doing this internally and applying various techniques like lean manufacturing and other principles to help us.
Improve our efficiencies at bringing industrialized equipment.
To the application like our electric fleets is certainly one of those areas.
Areas, but.
It's a comprehensive approach and.
It's something that will continue to look at which we think we can enhance going forward part of our first leg of the stool in our strategy as optimizing our business and.
Continuing to work on that.
Thanks dance.
Our next question comes from Scott Rivera from city.
Sky You May proceed.
Thank you good morning.
Morton Scott.
I just wanted to understand a bit better how the the least expensive impact per fleet profitability I think the least expensive be about $12 million for fleet per year I'm, just not sure what to subtract. The 12 from shall we subtract at 12 from the 28th and annualized EBITDA that you posted.
Think when when we're looking at it.
We're looking at across the entire fleet in the business.
It's a capital costs for this particular.
Okay.
Asset deploy.
Deployment, but.
It's really something that we're utilizing.
Silicate the acceleration of the transition of our fleet. So you got the number right in terms of least expense is going to be $10 million to $12 million per year that will be in cost of services.
But overall that will impair our margin.
In total at the company, but we still believable will be in and well into the mid twenties to upper twenties.
In terms of EBITDA for sleep for the company.
Gotcha and I appreciate that.
And then.
You mentioned that cat back should be down next year.
Yeah, the big invested in that tier for upgrades. This year, how should we think about base maintenance per fleets and do you anticipate any additional investment you know whether it's in more DGB or next year.
Yeah. So you know as we mentioned in our current Capex in 2022 is $365 million that number is going to be a little over $300 million. This year, we do believe that will see.
Similar cadence and decline next year, we're still working on on that capital budget.
And our 2024 budgeting process.
I think right now we're regarding to five to 7 million maintenance Capex per fleet I think as we continued to blend in the.
The industrialized equipment like this electric equipment that will begin to.
Decrease that number as we go as well as impacting Opex.
Our estimates approximately 30% to 40%.
And that's excluding the least expensive but.
Just to give you a sense of the changed and when you look at our recent Capex cadence we've been.
100 million or even over $100 million from an incurred capex perspective over the last several quarters that number got down to 59, we see that number going lower in the fourth quarter. So I think our our investment.
We talked about we show a slide in our IR deck, where we've invested.
Close to $1 billion over the last two years.
That is really beginning to play out in our numbers and are reduced capex been going forward.
Got it so the the force fleets.
I heard you correctly about 30% to 40% lower opex perfectly and you have a number on the Capex side I just imagine it's pretty de Minimis. The first coupla years <unk> yeah.
Yeah, just just think of it from the perspective of taking an internal combustion engine out of the picture and replacing it with a transformer and variable frequency drive box that has.
Low to no touch required.
It's a pretty significant change in your overall.
Maintenance, an ongoing capital spend their we'll give you some more information as we build that's laid out and we garner more internal information I think on the next call will have a full quarter of operations with our fleet. So we can give you some more guidance going forward then.
That'd be great. Thank you.
Well, let me remind you if you would like to answer the question can you. Please press star N y.
And our next question comes from John Danielle from Daniel Energy Partners.
John Please go ahead.
Thank you Hey, guys good morning.
<unk>.
Equipment questions for Ya I guess, the first is just on the fleet makes seven tier for D. G. B soon for electric and a couple of quarters at.
At least whatever four five call at other what's the plans for those since its transition to tier four door, you'll keep it tier two or go electric.
I think wait and see as as the plan I think when a preserve optionality.
With that equipment look, it's it's very highly functioning and profitable and active in the market today is.
Speaking of our.
All all diesel fleets.
If the market remains strong then <unk>.
Some of that all diesel equipment might linger around a little bit longer if the market is weaker than you can look for things like our electric fleets to be more more replacement of legacy assets.
So I think as we sit here today or just trying to preserve that optionality R capital allocation priorities for.
Allocate more <unk> to things like electric and less capital to diesel only equipment.
Okay.
And in keeping with the equipment came in one of the the comments made from one day <unk> on their own it's college.
Supply chain headaches.
Electric components.
<unk> electric fleets I'm curious.
Given lead times there yeah.
Yeah can you would you be willing to safety gone ahead and ordered the necessary component parts of our fleet five on the electric side.
We've we've not placed any any specific orders for anything additional but we've got a very close collaborative relationship with our supplier on the electric side.
So if if if demand continues if we continue to deploy these.
These assets successfully and <unk>.
<unk> some of these contractual opportunities it would be a really good thing.
In our opinion that we're moving on board Morty fleets next year.
And then I guess the last one for me all came back up with snow and all those questions, but the.
When you look at the component parts right now engines transmission et cetera.
The availability is while there's more of it frankly than where we were a year ago and given your balance sheet and given a belief that the market influx higher next year does that make sense to proactively sort of start building. Some inventory is key component parts now just say you don't get stuck in a queue down the road.
No I don't I don't think we feel motivated to do that yet.
I think part of that is due to what priority we feel like we have with many of our suppliers.
So I think I think will will.
So it kind of my prior answer keep her optionality in our flexibility there and look I mean this is this kind of as a.
Also.
<unk> talk about it on the call yet but.
Makes me think of just start broader capital allocation strategy as well I mean, we're we're announcing.
Hello, I am a small submitting business, we've been buying back our stock.
Any new equipment into the into the into the heat.
The equation and into our offering we're doing all of those at once all the Meanwhile, basically that free.
We're we're really proud to be able to be balancing all of those things and.
And building the bones or something that's gonna be really valued producing in the future. So.
May I know your questions are more more equipment related but that that's kind of just one part of our capital allocation capital allocation strategy is we're kind of balancing all three of those those things M&A shareholder returns and.
Equipment transition.
Fair enough.
Oh hang up after this last time I promise.
<unk> the LOI on us in any business.
What if anything can you elaborate on that transaction.
Yeah, we're just.
Given the.
Given where we are in that process, there's just not much more we can say.
We wanted to share.
We wanted to share what we have to this point because we're excited about it and are submitting business in the team that runs our business has been performing really well.
We're working to continue to equip them with the right.
Tools and scale to continue to compete in a big way.
Thanks, guys.
We have a question now from Stephen Jen Garro from Stifel. Steven. Please go ahead.
So you have asked you a lot here. So just two things for me first.
Honest silvertip acquisition can you just talk a little bit about about the efficiencies. It has it has brought it maybe compare and contrast as et cetera.
Utilizing those services versus those that are not.
[noise] yeah.
It's pretty straightforward I think I think both silvertip Arlen units in pro Petro frat crews are neutral beneficiaries of each other.
A big reason why we were so positive on doing the transaction was silvertip was was because of their stellar and consistent operational performance.
And having but even before the deal a good bit of customer overlap with them.
It was it was very evident to us their their performance being being beneficiary to our core business.
We've we've we've made a few inroads on integrating more wireline units with more frack fleets, but that's not something that we're really trying to push a portion of the market on but when we had the opportunity to do so there are there are some efficiency benefits and that's been.
That's been a good reason why we've we've seen silvertip execute.
As consistently as we expected them to us because we kind of continued with that immigration so more to come there. We think it's part of our strategy more more integration is coming to our sector. Nonetheless.
And so we're proud to have a.
Great leg of the stool and in our solar to Portland business to help us with that.
Thanks, and then just on the pricing side can you just talk a little bit about what you're seeing and got what you're assuming as you think about the first half of next year and you're out walking sort of suggesting.
Recovery and it sounds like clearly.
You're just kind of curious where pricing stands in that mix.
It seems kind of flat.
Right now Steven we're still working through a few things planning with our customers into next year, but for the most part feels pretty flattish.
Okay, great. Thank you Sam.
And this concludes our question and answer session.
I'd like to turn the conference back over to Sam Slatch any final comments. Please.
Okay. Thank you thanks, everybody for joining today, we were we enjoyed updating your business and we look forward to talking with you again soon if everybody has a great day.
And this concludes the conference. Thank you for attending today's presentation.
May now disconnect have a good day.