Q4 2023 ProFrac Holding Corp Earnings Call
Greetings and welcome to the pool Frac holding Corp, 2023 year end and fourth quarter earnings Conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Operator: Greetings and welcome to the Profrac Holding Corp. 2023 year-end and fourth quarter conference call. At this time, all participants are in a listening, brief question and answer session. If anyone should require operator assistance during a call... As a reminder, this conference is... It is now my pleasure to answer. Thank you. Thank you, Operator. Good morning, everyone.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
This conference is being recorded it is now my pleasure to introduce your host Michael Massena. Thank you. Mr. Messina you may begin.
Thank you operator, good morning, everyone. We appreciate you joining us for pro Frac, holding Corp's conference call and webcast to review, our fourth quarter and 2023 year end results with me today are Matt well Executive Chairman Ladbrokes, Chief Executive Officer, Lance Turner, Chief Financial Officer.
Unknown Executive: We appreciate you joining us for Profrac Holding Corp.'s conference call and webcast to review our fourth quarter and 2023 year-end results. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; Lance Turner, Chief Financial Officer; and Matt Zinn, CEO of The Prop and Business. Following my remarks, management will provide high-level commentary on the financial highlights of the fourth quarter and full year 2023, as well as the business outlook before opening the call to your questions. There will be a replay of today's call available by webcast on the company's website at pfholdingscorp.com, as well as a telephonic recording available until March 20, 2024. More information on how to access these replay features is included in the company's earnings release.
And Matt Zinn CEO of the proppant business.
Following my remarks management will provide high level commentary on the financial highlights of the fourth quarter and full year 2023, as well as the business outlook before opening the call up to your questions.
There will be a replay of today's call available by webcast on the company's web site at P. S Holdings Corp, Dot com as well as the telephonic recording available until March 'twenty 'twenty 'twenty four.
More information on how to access. These replay features is included in the company's earnings release.
Unknown Executive: Please note that information reported on this call speaks only as of today, March 13, 2024, and therefore, you are advised that any time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. Also, Comments on this call may contain forward-looking statements within the meaning of the United States federal securities laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of Profrac management and are not guarantees of future performance. Various risks, uncertainties, and contingencies could cause actual results, performance, or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to read Profrac's Form 10-K 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, uncertainties, and contingencies. The comments today also include certain non-GAAP financial measures, as well as other adjusted figures to exclude the contribution of Flowtech.
Please note that information reported on this call speaks only as of today March 13, 2024, and therefore, you are advised that any time sensitive information may no longer be accurate as of the time of any replay listening or transcript reading.
Also <unk>.
Comments on this call may contain forward looking statements within the meaning of the United States Federal Securities laws, including management's expectations of future financial and business performance.
These forward looking statements to reflect the current views of pro Frac management and are not guarantees of future performance.
The risks uncertainties and contingencies could cause actual results performance or achievements to differ materially from those expressed in management's forward looking statements.
The listener or reader is encouraged to read pro Praxis Form 10-K, 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 uncertainties and contingencies.
Our comments today also include certain non-GAAP financial measures as well as other adjusted figures exclude the contribution of Flotek.
Unknown Executive: Additional details and reconciliations to the most directly comparable, consolidated, and GAAP financial measures are included in the quarterly earnings press release, which can be found on the company's website. Now, I would like to turn the call over to Profrac's Executive Chairman, Mr. Matt Wilks. Thanks, Michael. And good morning, everyone.
Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the quarterly earnings press release, which can be found on the company's website.
And now I would like to turn the call over to pro Fracs Executive Chairman, Mr. Matt Wilkes.
Thanks, Michael and good morning, everyone.
Matthew D. Wilks: After my prepared remarks, Ladd and Matt Zinn will take a deeper dive into the performance of our subsidiaries, and Lance will provide additional insight into our financial performance, although our fourth quarter results were challenged. We continue to take strategic action to better position Profrac for growth in 2024, and we are already seeing improved results in the first quarter. Despite the industry headwinds that persisted in the second half of 2023, we meaningfully grew free cash flow for the year to $293 million. An increase of 173% over 2022 is expected.
After my prepared remarks laden met then we will take a deeper dive into the performance of our subsidiary and Lance will provide additional insight into our financial performance.
While our fourth quarter results were challenged we continue to take strategic actions to better position program for growth in 2024.
We are already seeing improved results in the first quarter.
Despite the industry headwinds persisted in the second half of 2023, we meaningfully grew free cash flow for the year to $293 million.
An increase of 173% over 2022.
Matthew D. Wilks: This substantial cash flow generation demonstrates the earnings capability, the capabilities of our vertically integrated operating structure, and the resiliency and differentiation of our services in the face of market softening. We were hindered a bit in 2023 by our exposure to the spot market and our strategy to hold prices steady when activity flattens, but we have adjusted and now enter 2024 with positive momentum.
This substantial cash flow generation demonstrate the earnings capability capabilities of our vertically integrated operating structure and the resiliency and differentiation of our services in the face of market softness.
We were hindered a bit in 2023 by our exposure to the spot market and our strategy to hold prices steady win activity flattened, but we have adjusted and now enter 'twenty 'twenty four with positive momentum.
I'd also like to highlight that in 2023, we grew our asset base and improved our capital structure strategy that we believe will pay dividends for years to come.
Matthew D. Wilks: I'd also like to highlight that in 2023, we grew our asset base and improved our capital structure, a strategy that we believe will pay dividends for years to come. We completed the acquisition of Rev Energy Holdings and Producers Services Holdings, which added six Frac fleets and expanded Profrac's geographic footprint to include the Rockies and Baja. We also completed the acquisition of Performance Profits, which demonstrated our commitment to Haynesville, greatly enhanced our vertical integration strategy, and made Profrac the largest provider of in-basin sand in North America with a multi-basin footprint. Then, in October, we announced our intent to maximize the full value of our profit production segment, which operates through the wholly-owned subsidiary Alpine Silica, and confidentially filed a registration statement on Form S-1 with the SEC. Finally,
We completed the acquisition of <unk> Energy Holdings producer services Holdings, which added six Frac fleet and expanded <unk> geographic footprint to include the Rockies and Bakken well.
We also completed the acquisition of the performance problems, which demonstrated our commitment to the haynesville greatly enhanced our vertical integration strategy and made protract the largest provider of in basin sand in North America with a multi basin footprint.
Then in October we announced our intent to maximize the full value of our proppant production segment, which operates through the wholly owned subsidiary Alpine silica and confidentially filed a registration statement on form S. One with the S E T.
Finally.
Matthew D. Wilks: In December, we refinanced our senior secured term loan through two new financings, which will both mature in January of 2029. This recapitalization provides a bifurcated capital structure to allow for future optionality, designed to realize the full value potential of the profit segment, as well as enhance Profrac's overall financial flexibility. The common theme of all these achievements and strategic initiatives is that they demonstrate how highly motivated we are to enhance Profrac's position as a leader in the oilfield services industry. And these items were executed with a very targeted approach.
In December we refinanced our senior secured term loan through two new financing.
Which will both mature in January of 2029.
This recapitalization provides a bifurcated capital structure to allow for future Optionality designed to realize the full value potential of the proppant segment as well as enhanced pro Fracs overall financial flexibility.
The common theme of all of these achievements and strategic initiatives that they demonstrate how highly motivated we are to enhance prophylactic position as a leader in the oilfield services industry and these items were executed with a very targeted approach we will remain steadfast in our pursuit of enhancing value in stride.
Matthew D. Wilks: We will remain steadfast in our pursuit of enhancing value and strive to navigate the market accordingly with the end goal of being the industry's bestest breed. Moving forward, I am pleased to report on the transformative progress we are making, as well as the improving visibility we see approaching in the current market. We remain hyper focused on the operational performance that we have discussed over the past few quarters, which includes vertical integration, benefits of scale, enhancing utilization, and cost control across all of our subsidiaries. In addition, today we are working even more closely with each customer to ensure strong working relationships, providing valued solutions, and maintaining long-term partnerships. We are constantly evaluating all of our efforts in evolving these key priorities for 2024.
And navigate the market accordingly, with the end goal of being the industry best of breed.
Moving forward I am pleased to report on the transformative progress, we're making as well as the improving visibility we see approaching in the current market.
We remain hyper focused on the operational performance that we have discussed over the past few quarters, which includes vertical integration.
Benefits of scale.
Dancing utilization and cost control across all of our subsidiaries.
In addition, today, we are working even more closely with each other with each customer to ensure strong working relationships, providing valued solution and maintaining long lasting partnerships.
We are constantly evaluating all of our efforts in evolving these key priorities in 2024.
Before I get to that however, I do want to comment on the challenges of 2023, both externally and internally.
Matthew D. Wilks: Before I get to that, however, I do want to comment on the challenges of 2023, both externally and internally. As the market flattened out, our position of holding the line on price caused us to miss out on the large efficiency gains experienced throughout the industry. This, combined with the ongoing integration, led to lower market share as we reduced costs to accommodate. This was a mistake.
As the market flattened out or our position of holding the line on price caused us to miss out on the large efficiency gains experienced throughout the industry.
This combined with the ongoing integration led to lower market share as we reduced costs to accommodate this was a mistake. We fully appreciate the negative impact this had on our financial performance in the back half of the year.
Matthew D. Wilks: We fully appreciate the negative impact this had on our financial performance in the back half of the year. We're committing to correcting that in 2024 and getting back to our foundation. The foundation we were built on, which is maximizing vertical integration and high asset utilization, is core to restoring our per unit operating costs to the lowest in the industry. Prior to 2023, we were a profit leader in our industry. When comparing our metrics, we surpassed the overall peer group each year. In 2020, we were one of the few that had positive evidence.
We are committed to correcting that in 'twenty 'twenty four I'm getting back to our foundation.
The foundation, we were built on.
Which is actually amazing vertical integration and high asset utilization is core to restoring our per unit operating costs to the lowest in the industry.
Prior to 2023, we were a profit leader in our industry.
When comparing our metrics, we surpass the overall peer group each year in 2020, we were wanted you that had positive EBITDA in 2022.
Matthew D. Wilks: In 2022, we were the first in our peer group to reach record-level profitability. Profrac expects to outperform in 2024 and gain market share regardless of whether activity rises, falls, or remains at a constant level. To achieve our goals, we are focused on three primary things. First
We were the first in our peer group to reach record level profitability metrics.
<unk> expects to outperform in 'twenty, 'twenty, four and gain market share regardless of weather activity rises.
<unk> will remain at constant levels.
To achieve our goals we are focused on three primary things first.
Matthew D. Wilks: Our customers. What we do best is pump. We always have and always will.
Our customers.
What we do best is.
We always have and always will.
Matthew D. Wilks: This year, we are doubling down on our efforts to ensure the entire team's focus on providing tailored solutions for the customer, partnering with the customer to achieve long-term results and generate long-term value with constant improvement is our value property. This also means that we are partnering with the right customers that set us up for success to also achieve our next goal. Utilization. We have expanded our targets for the benefits of utilization across the entire organization.
This year, we are doubling down on our efforts to ensure the entire team is focused on providing tailored solutions for the customer partnering with the customer to achieve long term results and generate long term value with constant improvement is our value proposition.
It also means that we are partnering with the right customers that set us up for success to also achieve our next goal.
Utilization.
We have expanded our targets for the benefits of utilization across the entire organization.
Matthew D. Wilks: Today, our utilization focus is not only on total fleet count and how many fleets are deployed but also on the efficiency of active fleets and how many hours they are able to complete. We want to improve the utilization of labor hours, the utilization of our manufacturing facilities, our sand mines, as well as every single asset and team at Profrac. We are measuring it all, and we plan to improve at each and every level. This is taking one of our foundational building blocks and ingraining it across the entire organization. We have 45 high-quality fleets, and we are not satisfied until they are all in the pumping stage. Finally, our focus will continue to be on cost. We believe that we have the lowest operating costs in the industry, and we're going to keep them that way.
Today, our utilization focus not only on total fleet count and how many fleets are deployed but also on the efficiency of active fleets and how many hours they were able to complete.
We want to improve utilization of labor hours utilization of our manufacturing facilities, our sand mine as well as every single asset and T map Pro Frac.
We are measuring it all.
And we plan to improve the E at each and every level.
This is taking one of our foundational building blocks and then graining it across the entire organization, we have 45 high quality sleep.
Well, we are not satisfied until they are all pumping stage.
Finally, our focus will continue to be on Cogs, we.
We believe that we have the lowest operating cost in the industry and we're going to keep it that way.
Matthew D. Wilks: In addition, if there is a strong value proposition to improve our capabilities, our utilization, or our customer offering, we are prepared to deploy capital to meet that need. However, we are going to ensure that we remain lean and effective. With these priorities front and center for all of our teams, we expect our business to lead the industry. As we grew through acquisitions and scaled up our stimulation segment, we have adapted with a multi-pronged strategy suited for all customer types, and we have built a more dedicated business model to deliver full cycle resilience. This year we expect to generate a significant amount of cash that will be focused on the balance sheet.
Fishing, if there is a strong value proposition to improve our capabilities, our utilization, where our customer offering we are prepared to deploy capital to meet that need.
However, we are going to ensure that we remain lean and effective.
With these priorities front and center for all of our teams, we expect our business to lead the industry.
As we grew through acquisitions and scaled up our stimulation segment, we have adapted with a multi pronged strategy suited for all customer types and it built a more dedicated business model to deliver full cycle resiliency.
This year, we expect to generate a significant amount of cash that will be focused on the balance sheet.
Ladd Wilks: And we intend to delever to a point that will put us in a position to talk about returning cash to shareholders. Our focus in 2022 and 2023 was to build the business that we have today, exploit the cash generation capability of that business, and pass these rewards on to our shareholders. We will continue to execute upon our strategic goals and maintain focus on our key priorities, create long-term value for our stakeholders, and provide best-in-class services to our customers. We believe we are well positioned in 2024 for profitable growth. With that, I'll turn the call over to Ladd.
We intend to Delever to a point that will put us in a position to talk about returning cash to shareholders.
Our focus in 2022 and 2023 was to build the business that we have today exploit the cash generation capability of that business and pass these rewards onto our shareholders.
We will continue to execute upon our strategic goals and maintain focus on our key priorities to create long term value for our stakeholders and provide best in class services to our customers.
We believe we are well positioned in 'twenty 'twenty four for profitable growth.
With that I'll turn the call over to lab.
Thank you Matt I.
I want to start by thanking our amazing team for their hard work and dedication and commitment to safety.
Extremely proud of the reputation that our people have built with our customers.
Ladd Wilks: Thank you, Matt. I want to start by thanking our amazing team for their hard work, dedication, and commitment to safety. We're extremely proud of the reputation that our people have built with our customers. This is a direct result of an extreme focus on the customer experience and the strong culture throughout our entire organization to make customer service our number one priority. We also recognize that the team is vital in order for us to accomplish our three priorities in 2024. Now, diving into our 2023 results.
This is a direct result of an extreme focus on the customer experience and the strong culture throughout our entire organization to make customer service our number one priority.
We also recognize that the team is vital in order for us to accomplish three priorities in 2024.
Now diving into our 2023 results.
I'd like to give a state of the Union for P. S Holdings.
On the pressure pumping side, we have activated 10 fleets as we focused on utilization and a dedicated customer base, we believe that profitability per spread should revert to the 20 to 25 million dollar level in line with expectations for our peers.
Ladd Wilks: I'd like to give a State of the Union for PF Holdings. On the pressure pumping side, we have activated 10 fleets as we focus on utilization and a dedicated customer base. We believe our profitability per spread should revert to the $20 to $25 million level, in line with expectations for our peers and exclusive of profit generated by the profit segment. Our focus on utilization is shining through. Starting in late Q2 2023, our white space and our frack calendar reached unsustainable levels, and our pumping hours per active fleet dropped. In 2024, we plan to improve utilization by at least 30%. While we did see some lost time in January, primarily due to weather, I'm happy to share that January was a stellar start to the year, and the month of February was even better.
Exclusive of profit generated by the proppant segment.
Our focus on utilization is shining through starting in late Q2, 2023, our white space in our Frac calendar reached unsustainable levels and our pumping hours per active fleet dropped.
In 2024, we plan to improve utilization by at least 30%.
While we did see some last time in January primarily due to weather I'm happy to share that January was a stellar start to the year and in the month in February we.
We achieved a pumping efficiency that was 20% higher than what we averaged in Q2 and Q3 of last year.
And we think there's room to grow that figure as we continue to align with dedicated high finish it efficiency customers have strong backlog of work.
Okay.
Now that our recent acquisitions have been fully integrated into the pro Frac umbrella.
We have refocused on our core pumping stages and selling sand.
In addition, our leadership teams have been spending a lot of time on location with our operations teams across the organization instilling a laser like focus on our strategic initiatives. So they're all segments are aligned in our shared goals.
Ladd Wilks: We achieved pumping efficiency that was 20% higher than what we averaged in Q2 and Q3 of last year, and we think there's room to grow that figure as we continue to align with dedicated high efficiency customers that have strong backlogs of work. Now that our recent acquisitions have been fully integrated into the Profrac umbrella, we have refocused on our core, pumping stages, and selling sand. In addition, our leadership teams have been spending a lot of time on location with our operations teams across the organization, instilling a laser-like focus on our strategic initiatives so that all segments are aligned with our shared goal. This has already led to quicker decision-making.
This has already led to quicker decision, making.
More direct allocation of capital and improved customer service across their business lines and we continue to prove improve on those fronts.
Additionally, we continue gearing up and preparing fleets for reactivation this year to accommodate anticipated customer demand. We remain focused on dedicated agreements with operators at favorable prices current pricing levels are constructive.
Especially when coupled with higher utilization and optimal cost structure.
We're targeting approximately 80% of our fleets to be working for customers with larger programs on a dedicated basis.
Ladd Wilks: More direct allocation of capital and improved customer service across our business lines, and we continue to improve on those fronts. Additionally, we continue to gear up and prepare fleets for reactivation this year to accommodate anticipated customer demand. We remain focused on dedicated agreements with operators at favorable prices.
We also continued to maintain a strong presence and reputation with the customers and the gassy place, which we believe will pay dividends in the future.
Moving forward, we continue to believe we are well positioned to be the preferred pressure pumping and profit provider for large multi basin operators.
These operators require service providers with equivalent scale that can provide custody over the supply chain and materials. This is exactly what we were built for a pro frac.
Ladd Wilks: Current pricing levels are constructive, especially when coupled with higher utilization and an optimal cost structure. We're targeting approximately 80% of our fleets to be working for customers with larger programs on a dedicated basis. We also continue to maintain a strong presence and reputation with customers in Gassy Place, which we believe will pay dividends in the future. Moving forward, we continue to believe we are well positioned to be the preferred pressure pumping and profit provider for large multi-basin operators. These operators require service providers with an equivalent scale that can provide custody over the supply chain of materials.
On the profit side, we have made a lot of progress on diversifying our customer base and we think we are poised to see the increased utilization that we have discussed.
Entering 2024.
We made organizational changes to support our strategic initiatives for enhancing growth and we are very excited to welcome Matt Zinn and Rick rentals to our profit business.
Matt has over 18 years of industry experience driving results and will lead the proppant business as CEO.
Rick Reynolds is C O O and joined US with the performance acquisition.
Rick has over 35 years of mining experience driving operational improvements and peak utilization.
Ladd Wilks: This is exactly what we were built for at Profrac. On the profit side, we have made a lot of progress on diversifying our customer base, and we think we are poised to see the increased utilization that we have discussed. Entering 2024, we made organizational changes that support our strategic initiatives for enhancing growth. And we are very excited to welcome Matt Zinn and Rick Reynolds to our profit business. Matt has over 18 years of industry experience driving results, and he will lead the profit business as CEO. Rick Reynolds is COO and joined us with the performance acquisition.
You have the utmost confidence in Matt and Rick and both have already provided critical value to the business in the RFP and budgeting season, setting alpine up for major success in 2024.
Today, I've invited Matt Zen to join Us and give additional commentary on current operations and our expectations for the year.
Matt take it away.
Thanks, a lot I am honored and humbled to be chosen as the steward of the proppant production segment. We are extremely excited about the assets, we have and the transformation taking place within the organization.
On our last call last spoke about how we are marketing all eight mines for the first time with a focus on securing term contracts with customers at sustainable prices that support our goal of consistent high utilization of our minds I am pleased to report that we had success over the recent RFP season.
Matt Zinn: Rick has over 35 years of mining experience driving operational improvements and peak utilization. You have the utmost confidence in Matt and Rick, and both have already provided critical value to the business in the RFP and budgeting season, setting Alpine up for major success in 2024. Today, I've invited Matt Zinn to join us and give additional commentary on current operations and our expectations for the year. Pat, take it away.
Contracts that we secured with customers over this process or a mixture of traditional take or pay and percentage of customer demand. These percentage of demand contracts, while not as desirable as take or pay contracts align with our desire to develop long lasting partnerships with our customers with upside potential as our customers become more.
Matt Zinn: Thanks, Ladd. I am honored and humbled to be chosen as the steward of the profit production segment. We are extremely excited about the assets we have and the transformation taking place within the organization. On our last call, Ladd spoke about how we are marketing all eight mines for the first time with a focus on securing term contracts with customers at sustainable prices that support our goal of consistent high utilization of our mines. I am pleased to report that we had success in the recent RFPCA.
More efficient or expand their completion activity.
While we have a great foundation with this commercial approach, we have seen weather impact us in Q1, along with customer impacts related to natural gas prices. We estimate we lost approximately 300 to 400000 tonnes of sales in January and February but expect to further increase production into the warmer months.
Our first quarter utilization is expected to increase slightly from the fourth quarter. However, we then expect utilization to increase to 65% to 75% starting in the second quarter.
Matt Zinn: The contracts that we secured with customers over this process are a mixture of traditional take-or-pay and percentage of customer demand. These percentage of demand contracts, while not as desirable as take-or-pay contracts, align with our desire to develop long-lasting partnerships with our customers with upside potential as our customers become more efficient or expand their completion activities. While we have a great foundation with this commercial approach, we have seen weather impact us in Q1, along with customer impacts related to natural gas prices. We estimate we lost approximately 300 to 400,000 tons of sales in January and February, but expect to further increase production into the warmer months.
We are confident that our focused effort on commercial and operational growth and our proppant segment will meaningfully improve 'twenty 'twenty four metrics and results Alpine is in the middle of a transformation and will produce higher throughput higher utilization and lower cost per ton and we believe that it will sooner or just the sand market leader in 2000.
24.
I will now hand, it over to Lance to provide more detail on our consolidated financial results.
Thank you Matt.
Recap the year, we generated $688 million of adjusted EBITDA and $2 6 billion in revenue for an overall EBITDA margin of 26%.
Matt Zinn: Our first quarter utilization is expected to increase slightly from the fourth quarter. However, we then expect utilization to increase to 65-75% starting in the second quarter. We are confident that our focused effort on commercial and operational growth in our profits segment will meaningfully improve 2024 metrics and results. Alpine is in the middle of a transformation and will produce higher throughput, higher utilization, and lower cost per ton.
We also generated 293 million of free cash flow in 2023, it was used to significantly expand our asset base.
And stimulation services and the proppant production segments.
Fourth quarter revenue totaled 489 million a sequential decrease driven primarily by the lower fleet count as it bottomed in the middle of the fourth quarter.
EBITDA was $110 million as we experienced slightly lower efficiencies on our active assets and lower pricing for our products and services.
For the fourth quarter stimulation services revenues were down sequentially to 403 million.
About 75% of this reduction was driven by a lower number of fleets. The remaining decline was driven by slightly lower pricing for our services.
Lance D. Turner: And we believe that it will soon emerge as the sand market leader in 2020. I will now hand it over to Lance to provide more detail on our Consolidated Financial Resource Plan. Thank you, Matt.
The number of integrated fleets fluctuated with our active fleet count, but we continue to supply approximately 30% of our fleets with materials.
Adjusted EBITDA for the segment was $58 million for the fourth quarter.
Lance D. Turner: Recap the year, we generated $688 million of adjusted EBITDA on $2.6 billion in revenue for an overall EBITDA margin of 26%. We also generated $293 million of free cash flow in 2023 that was used to significantly expand our asset base, both in stimulation services and the profit production segment. Fourth quarter revenue totaled $489 million, a sequential decrease driven primarily by the lower fleet count as it bottomed in the middle of the fourth quarter. EBITDA was $110 million as we experienced slightly lower efficiencies on our active assets and lower pricing for our products and services. For the fourth quarter, Stimulation Services revenues were down sequentially to $403 million.
This segment was impacted by approximately $10 million in shortfall payments related to our supply agreement with Flotek.
The profitability per active fleet for the fourth quarter was also impacted by white space in the calendar.
In the first quarter as our focus on dedicated high efficiency customers takes hold we expect to improve profitability per active fleet.
In general, we expect 60% to 70% Incrementals on increased efficiencies when all else is equal.
Profit production segment generated $383 million, a full year revenues, which was up substantially when compared to the $90 million generated in 2022 due to the sand mines added during the year.
Revenues for the fourth quarter were $93 million down approximately 6% driven largely by lower sand pricing.
Approximately 75% of the volumes were sold to third parties during the fourth quarter, which is in line with our commercial strategy to focus on customers, where we can add the most value.
Lance D. Turner: About 75% of this reduction was driven by our lower number of fleets. The remaining decline was driven by slightly lower pricing for our service. The number of integrated fleets fluctuated with our active fleet count, but we continued to supply approximately 30% of our fleets with materials. Adjusted EBITDA for this segment was $58 million for the fourth quarter. This segment was impacted by approximately $10 million in shortfall payments related to our supply agreement with Flowtech. The profitability per active fleet for the fourth quarter was also impacted by white space in the calendar.
Adjusted EBITDA for the profit production segment totaled $45 million for the fourth quarter.
The manufacturing segment generated revenues of $34 million down approximately 22% from the third quarter.
83% of this segment was intercompany revenue.
As we expanded our third party sales during the quarter for this segment.
The decrease in sales in the fourth quarter was the continued result of stimulation services, reducing purchases and focusing on utilizing inventory on hand.
Adjusted EBITDA for the manufacturing segment was $1 8 million, which was comparable to the prior quarter.
This segment is also focused on reducing inventory levels and lead times on its product offering. It has been impacted as steel prices have retreated and is working through raw materials purchased in 2022.
Lance D. Turner: In the first quarter, as our focus on dedicated, high-efficiency customers takes hold, we expect to improve profitability per active fleet. In general, we expect 60 to 70% incremental profits on increased efficiencies when all else is equal. The Profit Production Segment generated $383 million of full-year revenues, which was up substantially when compared to the $90 million generated in 2022 due to the sand mines added during the year. However, revenues for the fourth quarter were $93 million, down approximately 6%, driven largely by lower sand prices.
We expect to remain at these levels of profitability until it works through its high cost inventory over the course of 2024 and starts adding lower market priced.
Raw materials in the second half of 2024.
Selling general and administrative costs were $59 million.
In the fourth quarter down approximately $2 million, primarily due to lower stock compensation costs.
This was combined with a significant reduction in acquisition related expenses as we have made tremendous progress on the integration of the recent acquisitions.
Lance D. Turner: Approximately 75% of the volumes were sold to third parties during the fourth quarter, which is in line with our commercial strategy to focus on customers where we can add the most value. Adjusted EBITDA for the profit production segment totaled $45 million in the fourth quarter. The manufacturing segment generated revenues of $34 million, down approximately 22% from the third quarter. Approximately 83% of this segment was intercompany revenue, as we expanded our third-party sales during the quarter for this segment. The decrease in sales in the fourth quarter was a continued result of Stimulation Services reducing purchases and focusing on utilizing inventory on hand.
Cash capital expenditures totaled $33 1 million in the fourth quarter down 37% from the third quarter.
As we've mentioned on previous calls when we reduce our fleet count Capex, usually takes more time to be reduced we are pleased with our ability to act swiftly to rightsize, our spending levels to more accurately reflect the demand we're seeing from customers and we will continue to prudently evaluate our spending going forward.
As we laid out in our earnings release, we expect to incur maintenance Capex between 150, and 200 million for the full year.
In addition, we are targeting.
Estimated $100 million and growth capital focused on fleet upgrades and mine optimization.
We believe maintenance Capex will be approximately three to 4 million per fleet per year in the stimulation services segment.
In addition, the profit production segment.
He is planning to spend approximately $30 million to $50 million in total capital expenditures for the year.
Lance D. Turner: Adjusted EBITDA for the manufacturing segment was $1.8 million, which was comparable to the prior quarter. This segment is also focused on reducing inventory levels and lead times on its product offering. It has been impacted as steel prices have retreated and is working through raw materials purchased in 2022. We expect it to remain at these levels of profitability until it works through its high-cost inventory over the course of 2024 and starts adding lower market prices. Raw Materials in the second half of 2024. Selling General and Administrative costs were $59 million in the fourth quarter, down approximately $2 million, primarily due to lower stock compensation costs. This was combined with a significant reduction in acquisition-related expenses as we have made tremendous progress on the integration of the recent acquisition. Cash capital expenditures totaled $33.1 million in the fourth quarter, down 37% from the third quarter.
We will remain disciplined with our capital allocation plans and focus on allocating capital where it can achieve the best return on investment.
Operating cash flow was $42 7 million during the fourth quarter working capital was reduced by approximately $10 5 million, while we continue to manage our receivables and payables.
In addition, we saw a $35 million reduction in inventory and remain committed to utilizing our inventory on hand, and expect to see continued reductions in 2024.
As we prepare to deploy fleets.
Despite these inventory reductions we expect total working capital to increase through 2024, as we seek to deploy additional fleets increase efficiencies and sell more sand.
Total cash and cash equivalents as of December 31st.
It was $25 million, including 6 million attributable to Flotek.
Total liquidity at quarter end was approximately 103 million borrowed.
Borrowings under the ABL credit facility ended the quarter with $117 4 million.
At the end of the fourth quarter, we had approximately $1 1 billion of debt outstanding.
Lance D. Turner: As we've mentioned on previous calls, when we reduce our fleet count, CapEx usually takes more time to be reduced. We are pleased with our ability to act swiftly to right-size our spending levels to more accurately reflect the demand we are seeing from customers, and we will continue to prudently evaluate our spending going forward. As we laid out in our earnings release, we expect to incur maintenance capex between $150 and $200 million for the full year. In addition, we're targeting and Estimated $100 million in growth capital focused on fleet upgrades and mine optimization. We believe maintenance CapEx will be approximately three to four million per fleet per year in the stimulation services segment. In addition, the profit production segment is planning to spend approximately $30 to $50 million in total capital expenditures for the year. We will remain disciplined with our capital allocation plans and focus on allocating capital where it can achieve the best return on investment. Operating cash flow was $42.7 million during the fourth quarter.
We already have which does not mature until January 2029.
Our primary objective in the near term remains generating free cash flow for Delevering the balance sheet.
Everyone within our organization is laser focused on operational execution efficiencies and providing best in class service to our customer. We believe this focus will improve our relative positioning within the market and lead to improved results in 2024.
That concludes our formal remarks operator, please open the line for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue you.
You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Our first question comes from the line of Luke Lemoine with Piper Sandler. Please proceed with your question.
Hey, good morning.
Matt with reactivating 10 fleets it looks like you're probably displacing some competitors can you talk a little more about just kind of market structure, how youre attacking this and as you see it right now.
Lance D. Turner: Working capital was reduced by approximately $10.5 million while we continue to manage our receivables and payables. In addition, we saw a $35 million reduction in inventory and remain committed to utilizing our inventory on hand and expect to see continued reductions in 2024, particularly as we prepare to deploy fleets. Despite these inventory reductions, we expect total working capital to increase through 2024 as we seek to deploy additional fleets, increase efficiencies, and sell more SANS. Total cash and cash equivalents as of December 31st were $25 million, including $6 million attributable to Flowtech. Total liquidity at quarter end was approximately $103 million.
There's 10 reactivation smoking rate number, whereas the Goldman eventually work back up to 45 fleets.
Yes, so we've added 10 of them and the majority of those have come in the first quarter.
So there was a there was only one or two that was actually in Q4 that we added.
And.
We expect to end at some point in this year around 41 42.
If the market there we're going to go ahead and take it to 45 and then it would get full utilization across the platform.
Okay, and then you signage or February pumping hours setting a record you added 10 fleets Ladd you talked about getting EBITDA per fleet back to $20 million to $25 million annualized just kind of within the stimulation segment is this where you guys currently are or when do you see this.
Lance D. Turner: Borrowings under the ABL Credit Facility ended the quarter with $117.4 million. At the end of the fourth quarter, we had approximately $1.1 billion of debt outstanding, the majority of which does not mature until January 2029. Our primary objective in the near term remains generating free cash flow for de-levering the balance sheet. Everyone within our organization is laser-focused on operational execution, efficiencies, and providing best-in-class service to our customers. We believe this focus will improve our relative positioning within the market and lead to improved results in 2024. That concludes our formal remarks. Operator, please open the line for questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your dial. The confirmation tone will indicate your line is in. You may press star 2 if you would like to remove your...
Transpired this year.
And not to put a.
Specific date on it we're not quite there yet.
But we expect it to be there.
In the first half.
Okay, and then maybe just one quick one.
No you're not disclosing your fleet count, but just kind of trying to triangulate. This roughly in <unk>, where you kind of maybe in the mid twenty's in malaga in the mid thirties.
That's correct.
Okay.
Thanks, Matt.
Thank you.
Thank you.
Our next question comes from the line of Alex Sky Laugher with Stifel. Please proceed with your question.
Hi, good morning, everyone and thanks for taking my question.
So just to start us off here just kind of following up on the prior question. One if you could just on the 10 fleets reactivated I was just wondering if you could comment on sort of the pricing dynamics in the market as well as overall supply and demand and what you're seeing.
Operator: Participants using the speaker... It may be necessary to pick up your handset. Our first question comes from the line of Luke Lemoine with Piper Sandler. Hey, good morning. I'm Matt with the reactivating templates.
Given where gas prices have been doing etc, etc.
Yeah, I think I think.
Top line. The market is is is flattish and so where we're coming in we're adding fleets and in an environment where.
Luke Michael Lemoine: It looks like you're probably displacing some competitors. Can you talk a little more about just kind of the market structure, how you're attacking this, and as you see it right now, is 10 reactivations about the right number? Or is the goal to eventually work back up to 45? Yeah, so we've added 10. And the majority of those have come in the first quarter.
Where there's not an increase of active fleets in the market.
So that that is that is had an impact on top line.
But the utilization and absorption of costs.
And reducing our per unit cost across across the business.
Far outweighs any concessions that we make on the top line.
And we expect that trend to continue.
As far as cost.
Got it I appreciate the color and then just shifting gears to the proppant segment I'm. Just wondering if you could comment on the current spot pricing for Frac sand and I guess, just kind of your exposure to that market given your comments on contracting.
Matthew D. Wilks: And so there's only one or two that were actually in Q4 that we added, and we expect to end the year at some point this year around, you know, 41, 42. And if the market's there, we're going to go ahead and take it to 45 and get full utilization across the platform. Okay, and then you cited your February plumbing hours, you're setting a record, you added the template. Ladd, you talked about getting Ibidoprofleet back to $20 to $25 million annualized, just kind of within the stimulation segment. Is this where you guys currently are, or when do you see this transpire? Not to put a specific date on it.
Year to date work.
Got it.
Okay.
I'll defer to Matt then on this one.
We're still seeing spot pricing in the in the twenties, depending on the market.
So the thirties and some other.
Segments are not new.
Necessarily the Permian and we continue to see some exposure to that market, but our focus is continuing to.
Hmm.
Fire long longer term supply agreements with customers and habits with minimal exposure to the spot market as possible.
Got it I appreciate it if I could just squeeze one more and I was just wondering if you could provide some additional color on your 24.
For your cash flow expectations, and any kind of target you think about the leverage ratio exiting the year.
Matthew D. Wilks: We're not quite there yet, but we expect to be there in the first half. And then maybe just one quick one.
Okay.
Yeah.
So on services.
Yeah, I don't want to guide too aggressively but.
Matthew D. Wilks: I know you're not disclosing your fleet count, but I'm just kind of trying to triangulate this roughly in four key areas, where you kind of may be in the mid 20s, and now you're in the mid 30s. Thanks, Chris. All right. Thanks, Matt.
We expect to generate a tremendous amount of free cash pay down debt.
And it's.
It's not unreasonable for us to be able to cut our debt in half this year.
Got it appreciate the color and with that I'll turn it back.
Yeah.
Thank you.
Unknown Executive: Thank you. Our next question comes from the line of, Skyloft: Hi, good morning, everyone, and thanks for taking my question. So just to start us off here, just kind of following up on the prior question line, if you could just, on the 10 fleets that you reactivated, I was just wondering if you could comment on sort of the pricing dynamics in the market as well as overall supply and demand and what that looks like. I'll give you an estimate, etc.
Our next question comes from the line of Erin <unk> with J P. Morgan. Please proceed with your question.
Hey, good morning, gentlemen, I wanted to see if you could give us a sense of the type of pricing concessions.
Did you yield call it relative to the leading edge and in order to.
Improve the utilization.
From the beginning of the fourth quarter and thoughts on could this what has been maybe the reaction from your peers.
Unknown Executive: Yeah, I think I think, you know, the top line of the market is flatish. And so we're coming in, we're adding fleets in an environment where there's not an increase in active fleets in the market. So that is having an impact on the top line, but the utilization and absorption of cost, and reducing our per unit costs across the business, far outweighs any confessions we make on the top, and we expect that trend to continue, as far as cost is concerned. Got it. I appreciate the color.
From some of your market share gains into this you know do you worry that this could have a maybe a D stabilizing impact on the level of pricing discipline that we did observe in the industry last year.
Good morning, Arun I really don't care, what it does to our competitors.
I don't spend a lot of time thinking about them.
We're doing what's right for pro Frac, we're taking market share, we're not going to hold up pricing to their benefit and cede market share to do it where.
We're taking our market share back.
And.
I don't really care, what it does to them.
What I like what it does for us.
Got it got it Matt.
Matt Zinn: And then just shifting gears to the drop-in segment, I'm just wondering if you could comment on the current spot pricing for Frac Stand. And I guess just kind of your exposure to the market, given your comments on contract, you are today. We're Transcribed by https://otter.ai, I'll defer to Matt on this. We're still seeing spot prices.
Larry mentioned that you know.
A target to get to 20 to 25 million.
And EBITDA per fleet, but we're just trying to.
To.
So to think about our modeling on the next couple of quarters, where do you think you were at from a from a profitability perspective as we sit here today.
Matt Zinn: Transcription by Trans-Expert at Fiverr.com, supplier of Longer Term Supply. I appreciate it. If I could just squeeze one more in,
As we sit here today.
High teens.
I think okay, that's a mid to high teens and then.
You know before this half and we expect to be in that 20% to 25 range.
Lance D. Turner: I just wonder if you could provide some additional color on your 24 for your cash flow expectations and any kind of target we can think about for the leverage ratio on services. You know, I don't want to guide too aggressively, but we expect to generate a tremendous amount of free cash, pay down debt, and It's not unreasonable for us to be able to cut our debt in half this year. You have got to appreciate the column with that alternate back.
Understood understood and then maybe I missed the biggest the biggest driver for it is is cost absorption.
And utilization rates diluting dilutive.
Diluting, our our cost per unit.
Right right.
And then just maybe Matt your perspective, you know what are the.
The recent.
Things that we have seen is we've seen call. It five natural gas companies go terror Chesapeake Comstock EQT in CNS now pulling back on Capex.
Arun Jayaram: Our next question comes from the line of Arun Jayaram with... Good morning, gentlemen. I wanted to see if you could give us a sense of the type of pricing concessions you have made relative to the leading edge in order to improve utilization from the beginning of the fourth quarter, and thoughts on whether this could happen, and what has been, maybe, the reaction from your peers.
Could you talk about some of your just natural gas exposure today, and just maybe potential impacts to the fracking proppant side of the businesses.
Yeah, we've got about a third of our business.
Exposed to gas markets.
And.
Matthew D. Wilks: from some of your market share gains, and do you worry that this could have a destabilizing impact on the level of pricing discipline that we did observe in the industry last year? Good morning, Arun. I really don't care what it does to our competitors. I don't spend a lot of time thinking about them.
You know really well.
We don't have a crystal ball, we don't know when the gas market is going to come back we don't know how.
Deep or wide. This this gap is going to be but we're committed to these basin.
And we're big believers in the demand drivers that are coming.
Matthew D. Wilks: We're doing what's right for Profrac. We're taking market share, we're not going to hold up pricing to their benefit and sacrifice market share to do it. We're taking our market share back, and Transcribed by https://otter.ai, I don't really care what it does to them. What I like is what it does for us.
Later this decade, so we're staying committed to or.
Our customer base, they're staying committed to these basins.
And.
Welcome a huge increase to DUC inventory.
And.
And hope for a improving commodity.
Matthew D. Wilks: Got it, got it. Matt, you know, Ladd mentioned that, you know, a target to get to 20 to 25 million in EBITDA per fleet, but we're just trying to, to think about, you know, our modeling for the next couple of quarters. Where do you think you are from a profitability perspective as we sit here today? Um, as we sit here today, um, hi team. I think that's helpful. Mid-high teens, and then and only then did the online chat.
Thank you.
Our next question comes from the line of Dan Kutz with Morgan Stanley. Please proceed with your question.
Hey, Thanks, Good morning, maybe just another one on the proppant business.
You guys have kind of touched on some of these points already but I'm. Just wondering if you can expand it all on on some of the drivers that are contemplated in daedally utilization upside that you guys flagged.
You know in terms of what the internal or external.
Matthew D. Wilks: So, thank you. Thank you. And we'll see you next time.
Matthew D. Wilks: Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. You know, before this half ends, we expect to be in that 20 to 25 range.
Particular basins, where you.
Central customer types and he you know.
When from more proppant per well.
From a well design perspective, just wondering if you could give us any more color on on the drivers of that Oh, I think it's 65% to 75% utilization target, but later this year.
Matthew D. Wilks: understood, and maybe the biggest driver for it is cost absorption and Utilization Rates Diluting diluting our costs per unit. Right, right. And then just maybe Matt, your perspective, you know, what are the things that we have seen as we've seen five natural gas companies, Cotera, Chesapeake, Comstock, EQT, and CNX now pulling back on CAPEC. Could you talk about some of your just natural gas exposure today and just maybe potential impacts on the fracking profit side of the businesses? Yeah, we've got about a third of our business exposed to the gas market, and, You know, we don't have a crystal ball. We don't know when the gas market is going to come back.
Yeah, we continue to see improved demand on our Permian assets, specifically and increasing utilization there and it's a combination of third party and internal.
The focus right now is making sure that all of our customers are provided great service and great product and we're continuing to focus on those areas in south Texas in the Permian are the greatest utilization drivers for increase.
Great.
I appreciate that color and then apologies if I missed this but I was wondering if you could give us an update on <unk>. What your nameplate capacity is now how many of those fleets are working what what.
Plans are for where new builds that were that were maybe.
Matthew D. Wilks: We don't know how deep or wide this gap is going to be, but we're committed to these basins and big believers in the demand drivers that are coming to the United States later this decade. So we're staying committed to our customer base; they're staying committed to these basins and you know, welcome a huge increase in Duck Inventory and hope for an improving commodity. Our next question comes from the line of Dan Kutz with Morgan Stanley. Hey, thanks. Good morning.
Last year and also more broadly what plans are for.
<unk> dual fuel upgrades, maybe in your 2020 for budget.
Yeah.
Yeah fuel efficiency continuing to be a.
A major theme in the.
In this industry and it's a it's become a really strong demand driver for us.
We're not at full utilization on our equally but expect it to be this year.
You know again, if this goes into how much operator spend on.
Daniel Robert Kutz: Maybe just another one on the property business. You guys have kind of touched on some of these points already, but just wondering if you can expand at all on some of the drivers that are contemplated in the utilization upside that you guys flagged in terms of whether it will be internal or external with Wayne Townsend. Tailwinds from Moorpop and Perwell, from a well-designed perspective. Just wondering if you could give us any more color on the drivers of that.
On diesel.
Being able to eliminate as much of that cost as possible.
And and grow margins alongside it so that everybody wins.
On the fleet front.
We expect to be fully utilized this year.
Working with operators, they're very interested in a turnkey solution.
That's everything from gas power Gen along with your eat sleep.
Matt Zinn: We continue to see Inc., Transcription by Transcription Outsourcing, LLC. 2013 Transcription Outsourcing, LLC. All rights reserved. 2013 Transcription Outsourcing, LLC. Party.
And so.
We've begun to find a high degree of success.
And bundling that as a turnkey solution.
And expect that to get us to full utilization this year.
Great well it makes sense and appreciate the color. Thanks, a lot I'll turn it back.
Matt Zinn: Now is making sure that all of our work is in those areas. Great. Thanks. I appreciate that, Keller.
Thank you.
Thank you.
Our next question comes from the line of John Daniel with Daniel Energy. Please proceed with your question.
Matthew D. Wilks: And then, apologies if I missed this. I was wondering if you could give us an update on EFRAC, kind of what your nameplate capacity is now, how many of those fleets are working, um, what, what... transcripts provided by Transcription Outsourcing, LLC, or dual fuel upgrades, maybe in your 2024 budget.
Hey, guys. Thanks for having me Matt.
Matt in the press release, when you know the the big step up in the pumping hours in January and February is that a function of just less white space on the calendar or is there something from a job design, which is letting you get more hours per day.
Matthew D. Wilks: Yeah, fuel efficiency is continuing to be a major theme in this industry, and it's, it's become a really strong demand driver for us. We're not at full utilization on our E-Fleet, but I expect to be this year. I'm, Again, this goes into how much operators spend on diesel and being able to eliminate as much of that cost as possible and grow margins alongside it so that everybody wins on the E-Fleet front. We expect to be fully utilized this year, working with operators; they're very interested in a turnkey solution that includes everything from gas, power generation, along with your E-clean.
Or both it's it's more associated with calendar efficiency.
I mean, our crews are amazing we get out regardless of customer type, we're usually pumping 2020 plus hours every single day that they have available to pump.
But the question is is that 18 days per month or is it 28 days per month right.
So going in and working with with customers on their program, making sure that were aligning our interest with the right customers and when you look at our revenue per pump hour.
We recognize that we have to be a little bit more competitive.
With customers that can give us 28.
Or 30 days of mud pumping.
Matthew D. Wilks: And so we've begun to find a high degree of success, bundling that as a turnkey solution, and expect that to get us to full utilization this year. Great. All make sense, and I appreciate the color. Thanks a lot.
But what we see from getting more pump hours per month in the dilutive effect on our cost structure.
It's it's more than worth it for us to come in and.
Provides.
Provide some.
Some topline concessions.
Okay.
I'm trying to translate here it sounds like you would you would think you've got a better customer mix today than maybe four to five months ago is that fair statement.
John Daniel: Our next question comes from John Daniel with Daniel Energy. Hey guys, thanks for having me. Matt, in the press release when you note the big step up in the pumping hours in January and February, is that a function of just less white space on the calendar? Or is there something from a job design that is letting you get more hours per day? or both.
Well, we love all of our customers, but as far as customers that can give us a high percentage of pumping days per fleet.
Yeah.
Its the highest its ever been this is the highest.
This is the highest calendar efficiency that we've ever seen from our customer base.
Matthew D. Wilks: It's more associated with calendar efficiency. I mean, our crews are amazing. We get out regardless of customer type, and we're usually pumping, you know, 20, 20 plus hours every single day that they have available to pump. But the question is, is that 18 days per month? Or is it 28 days per month?
Okay.
I've got another one here and this is not meant to be a gotcha question, but when you talk about full utilization later this year.
Are you assuming the U S working Frac crew count for the whole industry is growing whereas it's more of a increased market share.
So when you look at the industry I think we.
We suffered from our from our own failures in 2023.
Matthew D. Wilks: Right. And so, going in working with customers on their programs, making sure that we're aligning our interests with the right customers. And when you look at our revenue per pump hour, we recognize that we have to be a little bit more competitive with customers that can give us 28 or 30 days a month pumping. But what we see from getting more pump hours per month and the dilutive effect on our cost structure, it's more than worth it for us to come in and provide some from Top Line Consumption. Okay, so I'm trying to translate here. It sounds like you would think you've got a better customer mix today than maybe four to five months ago. But is that a fair statement?
And we come in we've come into 2024.
With a deficit of our own that when we overcome that deficit uh-huh.
We'll outperform our peer class just from from stabilizing the business to where it should have been the whole time and this we expect this to happen regardless of what the total market does.
Okay.
Alright, and then one final one for me is this is probably more for Matt on the sand side, but can you speak to any you know rfps.
Rfps inquiries in terms of not looking for price point here, but just the level of inquiries for sand maybe back half of the year out of the Haynesville mines.
Matthew D. Wilks: Well, we love all of our customers. But as far as customers that can give us a high percentage of pumping days per fleet, yeah, it's the highest it's ever been.
Are they starting to talk about that.
Is it too early.
You know, we're constantly talking to our customers about their timing.
I don't know that there's necessarily an RFP season for that.
Matthew D. Wilks: This is the highest calendar efficiency that we've ever seen from our customers. Okay. I've got another one here.
<unk> so to speak but we are closely aligned with all the major operators in that basin and were talking to them regularly about their upcoming programs and where they think their activity may shift based on gas prices.
Matthew D. Wilks: And this is not meant to be a gotcha question. But when you talk about full utilization later this year, are you assuming the US working frac crew count for the whole industry is growing, or is this more of an increased market share?
Okay fair enough I'll leave it at that thanks for including me.
Matthew D. Wilks: So when you look at the industry, I think we suffered from our own failures in 2023. And we come in, we come into 2024 with a deficit of our own that when we overcome that deficit, will outperform our peer class just by stabilizing the business to where it should have been the whole time, and we expect this to happen regardless of what the total market does. Okay. All right, and then one final one for me, this is probably more for Matt on the sand side, but can you speak to any, you know, RFP inquiries in terms of not looking for price points here, but just the level of inquiries for sand maybe back half of the year out of the Hainesville mines? Are they starting to talk about that?
Thank you. Thank you.
Oh I'm sorry.
Our next question comes from the line of Tom Curran with Seaport Research Partners. Please proceed with your question.
Good morning, Matt.
Thank you for joining the call great getting to know you a little bit better opening question for you could you share some color on the nature of where the Capex spend will be going for alpine this year when it comes to your own budget.
We evaluate all our capex based on improving utilization or lowering cost structure. So.
Improving reliability or lowering the cost of manufacturing. So that's our key focus is where our demand is and where we can lower costs improve reliability. So the places that we have growth opportunity or where we're going to have the most bang for Buck.
Matt Zinn: and the TRO. It's, you know, we're constantly talking to our customers about their, I don't know. We are closely aligned with all of them, upcoming programs, and where. Okay, fair enough.
Got it and then when it comes to utilization.
Could you tell us.
John Daniel: I'll leave it at that. Thanks for including me. Thank you. Thank you. Our next question comes from the line of Tom Curran. Office Word Document MSWordDoc Word.
One where you exited the quarter at utilization wise, and then to from there to let's say north of 70%.
What do you expect the split to be between.
Thomas Patrick Curran: Document.8, Good morning, Matt Zend. Thank you for joining the call. It's great to get to know you a little bit better.
Internal.
Feeding that pro Frac expected active fleet ramp and then.
Matt Zinn: Opening question for you. Could you share some color on the nature of where the CapEx spend will be going for Alpine this year when it comes to your own budget? We evaluate all our CapEx.
Third party sales.
In.
And the ramp from where you exited utilization wise too you know climbing north of 70% like Youre targeting.
Matt Zinn: Approving, for Lower East Side Story. Improving Reliability or Lowering the Cost. So that's our Lower Cost.
Approximately two thirds of the ramp is external customers and a third of the ramp is internal just rough numbers. We continue to see strong demand based on our footprint in the Permian with large operators that have you know.
Matt Zinn: Places where we have growth. Got it. And then when it comes to utilization, could you tell us?
Matt Zinn: One, where you exit the quarter at, utilization-wise, and then two, from there to, let's say, north of 70 percent. What do you expect the split to be between internal, you know, feeding that Profrac expected active fleet ramp and then third-party sales? Again, on the ramp from where you exit utilization wise to, you know, climbing north of 70% like your target. Approximately two-thirds. Large operators that have them.
Drilling programs completion programs that spread across the basin and we continue to see strong demand as we've.
Reach out to those customers about their operations.
And at this point, Matt would you say.
You've got all of that demand in hand.
Whatever different forms it might exist contracts you know.
Dedicated acreage.
Eric mutual interest whatever the nature of them.
How you've secured that demand you have it and it's just a question of executing from here.
Matt Zinn: Drilling Programs, Completion Programs, customers about, And at this point, Matt, would you say? You know, you've got all that demand in hand in whatever different forms it might exist, contracts, you know. Dedicated Acreage, Area Mutual Interest, whatever the nature of how you've secured that demand, you have it, and it's just a question of executing from here.
On the third party side and we have yes, we have a line of sight and we're currently negotiating supply agreements as we speak.
An assumption on a certain percentage of those being executed goes into that number.
And then we'll execute like we have for years and years.
Got it okay. Thanks for taking my questions Matt.
Thank you. Our next question comes from the line of Don Crist with Johnson Rice.
Matt Zinn: We have a line of sight, and we're currently... Supply. Assumption on www.larryweaver.com, and then we'll have it. Got it. Okay. Thanks for taking my questions. Our next question comes from the audience and Rice. Please proceed. Morning, gentlemen. I have just one question for you. I remember from past conversations that the utilization of the sand plants was somewhere in the 50 ish percent before you acquired performance. Is that a pretty good kind of bogeyman to start with?
Please go with your question.
Good morning, gentlemen, just one question from me I remember from past conversations that the utilization of the sand plants was somewhere in the 50 ish percent before you acquired performance.
Is that a pretty good kind of bogey to start with and kind of where do we think it's going to go you know year over year.
As we kind of ramp towards that 65% to 75%.
Okay.
Yeah, our historical utilization of our minds has been around that 50%.
Unknown Caller: And kind of where do we think it's going to go? You know, year over year, as we kind of ramp towards that 65 to 75% Yeah, our historical utilization of our minds has become more focused on third parties. Right, so we should expect somewhere in the 50% year-over-year kind of vote.
And we as we've become more focused on third party agreements, that's where the ramp comes from.
Right. So we should expect somewhere in the 50% year over year kind of bogey.
For modeling purposes.
Correct.
Okay I appreciate it and everything else had been answered thank you.
Matt Zinn: We're modeling partners. Okay, I appreciate it. Everything else has been answered. Thank you, and this concludes our questioning. I don't know, back over to management for. Thank you, operator.
Yeah.
Thank you.
And this concludes our question and answer session I would like to turn the floor back over to management for closing comments.
Thank you operator takeaway today is that we are aggressively focused on growing value for our for all stakeholders.
Matthew D. Wilks: The takeaway today is that we are aggressively focused on growing value for all stakeholders, and we have a plan to get it done. We look forward to sharing our successes in the coming quarters as we increase utilization and drive improved results. We look forward to speaking with you again on our next call.
And we have a plan to get it done we look forward to sharing our successes in the coming quarters, as we increase utilization and drive improved results.
We look forward to speaking with you again on our next call.
Ladies and gentlemen, thank you for your participation.
Operator: Ladies and gentlemen, thank you for your... July Film by Carl because there are a lot of them!!! OMG! Let us know in the comments section if you have the sources!
This concludes today's teleconference. You may disconnect your lines and have a wonderful day.
Yeah.
[music].
unknown: www.larryweaver.com Thomas Curran, Saurabh Pant, Stephen Gengaro, Lance Turner, Daniel Kutz, Luke Lemoine, Ladd Wilks, Brian Wheatley, Profrac Holding.... Subs by www.zeoranger.co.uk
Mhm.
[music].
Hum.
Mhm.
Hum.
Hum.
Mhm mhm.
Hum.
[music].
Mhm.