Q1 2024 ProFrac Holding Corp Earnings Call
Ladies and gentlemen, thank you for standing by Pro Frac holding Corp's conference call, we'll begin in just a moment.
Operator: Ladies and gentlemen, thank you for standing by. Profrac Holding Corp.'s conference call will begin in just a moment. Please continue to hold, the conference will begin momentarily.
Operator: Please continue to hold.
Operator: Conference will begin momentarily.
Operator: [music].
Operator: Saurabh Pant, Arun Jayaram, Luke Lemoine, Lance Turner, Donald Crist, Luke Lemoine, Saurabh Pant, Arun Jayaram, Rick Black, Profrac Holding Saurabh Pant, Arun Jayaram, Luke Lemoine, Lance Turner, Daniel Kutz, Unknown Executive, Saurabh Pant, Arun Jayaram, Luke Lemoine, Lads Wilks, Unknown Executive, Saurabh Pant, Arun Jayaram,
Speaker Change: Greetings and welcome to the Pro Frac holding Corp, first quarter 2024 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: Greetings and welcome to the Profrac Holding Corp. first quarter 2024 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Michael Messina, Director of Finance for Profrac Holding Corp. Thank you.
Operator: As a reminder, this conference is being recorded it is now my pleasure to introduce your host Mr. Michael Massena Director of Finance for Pro Frac holding Corp. Thank you you may begin.
Michael Messina: Thank you operator, good morning, everyone.
Michael Messina: Thank you, operator. Good morning, everyone.
Michael Messina: We appreciate you joining us for pro Frac, holding Corp's conference call and webcast to review, our first quarter 2024 results.
Michael Messina: We appreciate you joining us for Profrac Holding Corp.'s conference call and webcast to review our first quarter 2024 results. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; and Lance Turner, Chief Financial Officer. Following my remarks, management will provide high-level commentary on the operational and financial highlights of the first quarter 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 May 16, 2024. More information on how to access these replay features is included in the company's earnings release.
Michael Messina: With me today are Matt <unk> Executive Chairman, <unk>, Chief Executive Officer, and Lance Turner, Chief Financial Officer.
Michael Messina: Following my remarks management will provide a high level commentary on the operational and financial highlights of the first quarter before opening the call up to your questions.
Michael Messina: There'll be a replay of today's call available by webcast on the company's website at P. F Holdings Corp Dot com.
Michael Messina: A telephonic recording available until May 16, 2024.
Michael Messina: More information on how to access. These replay features were included in the company's earnings release.
Michael Messina: Please note that information reported on this call speaks only as of today, May 9th, 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's management and are not guarantees of future performance.
Michael Messina: Please note that information reported on this call speaks only as of today May nine 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.
Michael Messina: 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.
Michael Messina: 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.
Michael Messina: These forward looking statements reflect the current views of pro Fracs management and are not guarantees of future performance.
Michael Messina: Various risks uncertainties and contingencies could cause actual results performance or achievements to differ materially from those expressed in management's forward looking statements.
Michael Messina: The listener or reader is encouraged to read <unk> 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.
Michael Messina: The comments today also include certain non-GAAP financial measures as well as other adjusted figures to exclude the contribution of Flotek Adil.
Michael Messina: Additional details and reconciliations to the most directly comparable, consolidated, and GAAP financial measures are included in the quarterly earnings 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, Matt.
Michael Messina: Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the quarterly earnings release, which can be found on the company's website.
Matthew D. Wilks: And now I would like to turn the call over to prophylaxis Executive Chairman, Mr. Matt Wilkes.
Matthew D. Wilks: Thanks, Michael. And good morning, everyone.
Matthew D. Wilks: Michael and good morning, everyone. After my prepared remarks, Ladd will comment further on the performance of our subsidiaries and Lance will go through our financial performance. We were very pleased with our first quarter results. We made progress in what we told you last quarter and are now seeing the results. We are focused on getting back to our foundations to provide an.
Matthew D. Wilks: After my prepared remarks, Ladd will comment further on the performance of our subsidiaries, and Lance will go through our financial performance. We are very pleased with our first quarter results. We made progress on what we told you last quarter and are now seeing the results. We are focused on getting back to our foundations to provide an incredible customer experience, and increased utilization throughout all of our In the first quarter, we generated $160 million of adjusted EBITDA on $582 million of revenue.
Matthew D. Wilks: <unk> customer experience increased utilization throughout all of our subsidiaries and better cost control to ensure we are the lowest cost operator in the industry.
Lance: In the first quarter, we generated $160 million of adjusted EBITDA and $582 million of revenue our costs were down and our efficiencies were up we deployed nine fleet since our most recent low in the fourth quarter as we scale, we were able to absorb costs and deliver greater returns personally and we saw benefits of that in the.
Matthew D. Wilks: Our costs were down, and our efficiencies were up. We deployed nine fleets since our most recent low in the fourth quarter. As we scaled, we were able to absorb costs and deliver greater returns per fleet, and we saw the benefits of that in the first quarter.
Matthew D. Wilks: In addition, Profrac has expanded its portfolio of highly efficient customers. In the quarter, we generated substantial cash flow that we used to fund the growth of fleets and working capital. The underlying results demonstrate the earnings capabilities of our assets and our people. We believe our cash conversion is the best in the industry.
Matthew D. Wilks: First quarter. In addition, prophylaxis has expanded its portfolio with highly efficient customers.
Matthew D. Wilks: In the quarter, we generated substantial cash flow that we used to fund the growth of fleets and working capital.
Matthew D. Wilks: You're lying results demonstrate the earnings capabilities of our assets and our people. We believe our cash conversion is the best in the industry looking.
Matthew D. Wilks: Looking forward, we continue to see opportunity in this market. Our average fleet count for the second quarter will grow based on the timing of activations during the first quarter. We continue to pursue opportunities to increase our fleet count in a disciplined manner. Additionally, similar to the activity outlook for the industry, we also expect pricing to remain relatively stable. Overall, we remain on track with what we laid out for pressure pumping last quarter, and I am confident we will continue to have wins as the year progresses, even in a flat rig count scenario. Turning to Alpine,
Matthew D. Wilks: Looking forward, we continue to see opportunity in this market our average fleet count for the second quarter will grow based on the timing of Activations during the first quarter.
Matthew D. Wilks: We continue to pursue opportunities to increase our fleet count in a disciplined manner.
Matthew D. Wilks: Similar to the activity outlook for the industry. We also expect pricing to remain relatively stable.
Matthew D. Wilks: Overall, we remain on track with what we laid out for pressure pumping last quarter and I am confident we will continue to have wins as the year progresses, even in a flat rig count scenario.
Matthew D. Wilks: Turning to alpine weakness in the gas markets and weather has impacted our results. However, we are seeing an uptick in volumes and anticipate demand increases. Starting later this year that should further boost output. We continue to expect the proppant division to achieve our 60% to 70% utilization target, but we recognized that we were.
Matthew D. Wilks: Weakness in the gas markets and weather have impacted our results. However, we are seeing an uptick in volumes and anticipate demand increases starting later this year that should further boost output. We continue to expect the Propant division to achieve our 60 to 70 percent utilization target, but we recognize that we will likely need to see continued improvement in natural gas prices to get utilization where we want it. We view this as an upside opportunity, and we believe that this inflection point is getting closer.
Matthew D. Wilks: Likely need to see continued improvement and get in natural gas prices to get utilization, where we want it.
Matthew D. Wilks: We view this as upside opportunity and we believe that this inflection point is getting closer.
Matthew D. Wilks: Another one of our largest opportunities continues to be our fleet deployment recently, we completed a pad in the city limits of Midland and demonstrated diverse utility reliability and quiet nature of our fleet, which was actually our most efficient fleet in west, Texas last month.
Matthew D. Wilks: Another one of our largest opportunities continues to be our E-Fleet deployment. Recently, we completed a pad in the city limits of Midland and demonstrated the versatility, reliability, and quiet nature of our E-Fleet, which was actually our most efficient fleet in West Texas last month. These E-fleets are a meaningful component of our value proposition to our customers. Our ability to provide customers with significant fuel savings, maintain high reliability, and demonstrate efficient operations has made our E-fleets highly sought after and a critical part of our service offering. We're building our eFleet backlog and expect to have all eFleets deployed later in 2024.
Matthew D. Wilks: These E fleets are a meaningful component of our value proposition to our customers our.
Matthew D. Wilks: Our ability to provide customers with significant fuel savings maintain high reliability and demonstrate efficient operations has made our E fleets highly sought after and a critical part of our service offerings.
Matthew D. Wilks: We are building, our <unk> fleet backlog and expect to have all the fleets deployed later in 2024.
Matthew D. Wilks: I'm proud of the execution of our teams across the organization on the priorities we outlined during our last call, and I am proud of our momentum. We are heading in the right direction on each of our initiatives. At the customer level, we have successfully acquired a diverse customer base with approximately 70% of fleets operating for large, efficient customers on a dedicated base. We also continue to fill new inbound requests for additional deployments, with the highest demand being for electric and Tier 4 dual-fuel technology.
Matthew D. Wilks: I am proud of the execution of our teams across the organization on the priorities, we outlined during our last call and I am proud of our momentum we.
Matthew D. Wilks: We are heading in the right direction on each of our initiatives.
Matthew D. Wilks: At the customer level, we have successfully acquired a diverse customer base with approximately 70% of fleets operating for large efficient customers on a dedicated basis.
Matthew D. Wilks: We also continue to fill new inbound requests for additional deployments with the highest demand being for electric and tier four dual fuel technologies.
Matthew D. Wilks: Regarding utilization, we saw a significant step up with our pressure pumping assets driven partly by our focus on working with highly efficient customers, but also the team's relentless focus on minimizing downtime at every opportunity.
Matthew D. Wilks: Regarding utilization, we saw a significant step-up in our pressure pumping assets, driven partly by our focus on working with highly efficient customers but also the team's relentless focus on minimizing downtime at every opportunity. Finally, strengthened by our vertical integration, our firm grip on cost is yielding improved results and margin across the company. This focus allowed us to achieve high incrementals quarter over quarter. As an example, in Q1, we made significant progress towards our goal. And by March, we were able to dilute what we call controllable costs by 25% from our Q4 average.
Matthew D. Wilks: Finally strengthened by our vertical integration our firm grip on cost is yielding improved results in margin across the company. This focus allowed us to achieve high incrementals quarter over quarter. As an example in Q1, we made significant progress towards our goal and by March we were able to dilute what we call controllable.
Matthew D. Wilks: Costs by 25% from our Q4 average.
Matthew D. Wilks: As a leader in the oilfield services industry, we're maintaining these priorities front and center for all of our teams. We will continue to execute on our strategic goals and maintain focus on our key priorities to create long term value for our stakeholders provide best in class services to our customers.
Matthew D. Wilks: As a leader in the oilfield services industry, we are maintaining these priorities front and center for all of our teams. We will continue to execute on 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 the industry is on a solid footing, and we are well positioned to ensure that our standing within the market continues to improve. And with that, I'll turn the call over to Ladd. I'm
Ladd: We believe the industry is on a solid footing and we are well positioned to to ensure that our standing within the market continues to improve.
Ladd: And with that I'll turn the call over to Larry.
Ladd: Thank you Matt.
Ladd Wilks: I'll begin with an overview of our performance in each segment, starting with pressure pumping. I'm proud to report we achieved record efficiency levels in the first quarter for our pressure pumping segment. We generated roughly an 11% sequential improvement in pumping hours per fleet, and that makes Q1 the most efficient quarter in Profrac's history. We continue to set numerous records for our customers. One of the most recent examples occurred in March when one of our fleets hit an all-time record for a customer by pumping 675 hours.
Ladd: I'll begin with an overview of our performance in each segment, starting with pressure pumping.
Ladd Wilks: I'm proud to report we achieved record efficiency levels in the first quarter for our pressure pumping segment, we generated roughly an 11% sequential improvement and pumping hours per fleet and that makes Q1 and the most efficient quarter in <unk> history.
Ladd Wilks: We continue to set numerous records for our customers one of the most recent examples occurred in March when one of our fleets hit an all time record for a customer that's not being 675 hours.
Ladd Wilks: Efficiency across all our fleets was up nearly 30% in March over Q1 of 2023. A large portion of this is a result of the focus on efficiency for the entire industry. But this really demonstrates the commercial strategy that we employed by focusing on dedicated through-cycle customers. It also highlights how amazing our team is. We have the best crews in the industry and are consistently putting up the best numbers for our customers. In the first quarter, we activated nine fleas.
Ladd Wilks: <unk> see across all of our fleets was up nearly 30% in March over Q1 of 2023.
Ladd Wilks: A large portion of this is a product of the focus on efficiency for the entire industry, but this really demonstrates the commercial strategy that we employed by focusing on dedicated through cycle customers.
Ladd Wilks: This also highlights how amazing our team is we have the best crews in the industry and are consistently putting up the best numbers for our customers.
Ladd Wilks: In the first quarter reactivated nine fleets, increasing our scale considerably.
Ladd Wilks: Increasing our scale considerably. I'd like to reiterate that, at scale, we believe we have the lowest cost in the industry. On our last call, we laid out a path to generate mid- to high-teens EBITDA per fleet, exclusive of the Profit Division, and we achieved that. More importantly, in Q2, we expect to continue at that level, and our average fleet count should be higher due to the full quarter impact of activated fleet.
Ladd Wilks: I'd like to reiterate that that scheme.
Ladd Wilks: We believe we have the lowest cost in the industry.
Ladd Wilks: On our last call, we laid out a path to generate mid to high teens EBITDA per fleet exclusive of the proppant division and we achieved that.
Ladd Wilks: More importantly in Q2, we expect to continue at that level.
Ladd Wilks: And our average fleet count should be higher due to the full quarter impact of activated fleets.
Ladd Wilks: We believe this will lead to incremental improvement in adjusted EBITDA quarter over quarter. We have a unique vertically integrated business that benefits from lower costs at scale, yielding superior returns, and we will continue to demonstrate that in our results. The Profit Segment is also making progress. However, we are a little behind schedule on the transformation our team has embarked on, primarily due to the weakness in natural gas activity and the impacts of weather. Overall, our objective remains the same.
Ladd Wilks: We believe this will lead to incremental improvement in adjusted EBITDA quarter over quarter.
Ladd Wilks: We have a unique vertically integrated business that benefits from lower cost at scale, yielding superior returns and we will continue to demonstrate that in our results.
Ladd Wilks: The proppant segment is also making progress we are a little behind schedule on the transformation our team has embarked on.
Ladd Wilks: Primarily due to the weakness in natural gas activity and the impacts of weather.
Ladd Wilks: Overall, our objective remains the same.
Ladd Wilks: While our sales pipeline expanded rapidly in Q4 heading into Q1.
Ladd Wilks: While our sales pipeline expanded rapidly in Q4 heading into Q1, weather and operational disruptions impacted results. To address this, we have implemented a number of initiatives that will improve the utilization of our mines to ensure we can service the volumes we have in the pipeline. For example, our plant improvement in La Mesa, completed in mid-March, has enabled us to double the output and achieve 70% utilization. In South Texas, we are working on a similar plant improvement, as demand there remains very strong.
Ladd Wilks: Weather and operational disruptions impacted results.
Ladd Wilks: To address this we have implemented a number of initiatives that will improve the utilization of our mines to ensure we can service the volumes we have in the pipeline.
Ladd Wilks: For example.
Ladd Wilks: Plant improvement in La Mesa completed in mid March has enabled us to double the output and achieved 70% utilization.
Ladd Wilks: In South Texas.
Ladd Wilks: We are working on a similar plant improvement as demand there remains very strong.
Ladd Wilks: This transformation has led to some minor growing pains that we quickly overcame, and we are getting back on track. Despite the lower sequential results, we are seeing improved utilization each month in the second quarter. Based on current visibility, we expect total volumes to recover to be at or above fourth-quarter levels.
Ladd Wilks: This transformation has led to some minor growing pains that we quickly overcame and we're getting back on track.
Ladd Wilks: Despite the lower sequential results were.
Ladd Wilks: We are seeing improved utilization each month in the second quarter.
Ladd Wilks: Based on current visibility, we expect total volumes to.
Ladd Wilks: To recover to be at or above fourth quarter levels.
Ladd Wilks: In summary, we are positioning alpine to produce higher throughput higher utilization and lower cost per ton.
Ladd Wilks: In summary, we are positioning Alpine to produce higher throughput, higher utilization, and lower cost per ton. Looking at our marketplace, we continue to believe our business segments are well positioned to be the preferred providers for large multi-basin operators. These operators require service providers with sufficient scale that have custody over the supply chain of material. This is exactly what we were built for at Profrac. We believe there is a massive growing need for natural gas for a variety of end purposes, both domestically and abroad.
Ladd Wilks: Looking at our marketplace. We continue to believe our business segments are well positioned to be the preferred preferred providers for large multi basin operators.
Ladd Wilks: These operators require service providers with sufficient scale to have custody over the supply chain of materials.
Ladd Wilks: This is exactly what we were built for a pro Frac, we believe theres a massive growing need for natural gas for a variety of end purposes, both domestically and abroad.
Ladd Wilks: So we continue to maintain a strong presence and reputation with customers in the gasier plays, and we believe this will benefit us in the long run. I want to thank our outstanding team for their hard work, dedication, and commitment to safety. Throughout our organization, our people are executing on the three areas of focus that Matt outlined in his remarks. We firmly believe we have the right plans and initiatives in place with the best team in the industry. I'll now hand it over to Lance to provide more detail on our consolidated financial results.
Ladd Wilks: So we continue to maintain a strong presence and reputation with customers in the gas plays and we believe this will benefit us in the long run.
Lance: I want to thank our outstanding team for their hard work dedication and commitment to safety.
Lance: Throughout our organization and our people are executing on the three areas of focus that Matt outlined in his remarks.
Lance: We firmly believe we have the right plans and initiatives in place with the best team in the industry.
Ladd Wilks: I'll now hand, it over to Lance to provide more detail on our consolidated financial results.
Lance: Thank you Ed.
Lance D. Turner: Our first quarter revenues of $582 million represent a 19% sequential increase. We generated $160 million of adjusted EBITDA in the first quarter, for an overall EBITDA margin of 27%. First quarter EBITDA represents a 46% improvement sequentially and with incrementals of approximately 54%. The cash we generated in the quarter went primarily toward working capital and CapEx in conjunction with the scale-up of our fleets and mine improvements, as well as to pay down approximately $23 million of outstanding debt.
Lance: Our first quarter revenues of $582 million represent a 19% sequential increase we generated $160 million of adjusted EBITDA in the fourth quarter or first quarter.
Lance D. Turner: For an overall EBITDA margin of 27%.
Lance D. Turner: First quarter EBITDA represents a 46% improvement sequentially with incrementals of approximately 54%.
Lance D. Turner: The cash we generated in the quarter were primarily toward working capital and Capex in conjunction with the scale up of our fleets and mine improvements as well as to pay down approximately $23 million of outstanding debt.
Lance D. Turner: Stimulation services revenues were up 28% to $517 million in the first quarter, driven primarily by the higher number of active fleets and improved efficiencies partially offset by.
Lance D. Turner: Stimulation services revenues were up 28% to $517 million in the first quarter, driven primarily by the higher number of active fleets and improved efficiencies, partially offset by a single-digit reduction in pricing as we migrated toward highly efficient three-cycle customers. Adjusted EBITDA for this segment was $125 million, which was up approximately 116% sequentially. Margins also improved to the segment's highest level seen since the first quarter of last year. The results of the stimulation segment, in particular, stand as evidence that our strategy and cost structure are working for us, with incrementals in excess of 50% demonstrated in the quarter.
Lance D. Turner: By a single digit reduction in pricing as we migrated toward highly efficient three cycle customers.
Lance D. Turner: Adjusted EBITDA for the segment was $125 million, which was up approximately 116% sequentially.
Lance D. Turner: Margins also improved to the segments highest level seen since the first quarter of last year.
Lance D. Turner: Okay.
Lance D. Turner: The results of the stimulation segment in particular stand as evidenced that our strategy and cost structure, our working for us with incrementals in excess of 50% demonstrated in the quarter.
Lance D. Turner: This segment was also impacted by approximately $5 million of reactivation costs, and approximately $9 million and shortfall expense related to our supply agreement with Flotek.
Lance D. Turner: This segment was also impacted by approximately $5 million of reactivation costs and approximately $9 million in shortfall expenses related to our supply agreement with Flo-Tex. The profit production segment generated revenues of $78 million during the quarter. Total revenue was down sequentially due to lower tonnage sold on the hills due to weaker natural gas activity and the impacts of weather and certain operational limitations. Average pricing per ton also came down slightly, but pricing appears to be stable going forward.
Lance D. Turner: The profit protection segment generated revenues of $78 million during the quarter.
Lance D. Turner: Total revenue was down sequentially due to lower tonnage sold on the hills of weaker natural gas activity and the impacts of weather and certain operational limitations.
Lance D. Turner: Average pricing per ton also came down slightly but pricing appears to be stable going forward.
Lance D. Turner: Approximately 70% in the volumes in the proppant segment were sold to third party customers. During the first quarter, which is in line with our commercial strategy to focus on customers, where we can add the most value.
Lance D. Turner: Approximately 70% of the volumes in the profit segment were sold to third-party customers during the first quarter, which is in line with our commercial strategy to focus on customers where we can add the most value. Adjusted EBITDA for this segment totaled $28,000,000. The lower EBITDA was driven by lower volume and prices coupled with a predominantly fixed cost structure. The manufacturing segment generated revenues of $43.5 million, up approximately 28% from the fourth quarter. Approximately 78% of this segment was intercompany.
Lance D. Turner: Adjusted EBITDA for the segment totaled $28 million.
Lance D. Turner: The lower EBITDA was driven by lower volume and prices, coupled with our predominantly fixed cost structure.
Lance D. Turner: The manufacturing segment generated revenues of $43 5 million up approximately 28% from the fourth quarter.
Lance D. Turner: Approximately 78% in this segment was intercompany.
Lance D. Turner: The increased sales in the first quarter were a result of increased fleets and hours pumped at the stimulation services segment, resulting in higher consumable usage.
Lance D. Turner: The increased sales in the first quarter were a result of increased fleets and hours pumped in the stimulation services segment, resulting in higher consumable usage. Adjusted EBITDA for the manufacturing segment was $4.4 million, which was up compared to $1.8 million in the fourth quarter. Margins improved in the first quarter largely due to the absorption of costs through higher output and lower costs per unit as we start to see the benefits of our initiative to reduce third-party reliance for certain production activities. Selling General Administrative Costs were $51 million in the first quarter, compared to $59 million last quarter. No one category of spending drove the sequential decline, but rather, our general focus on cost-conscious behavior is yielding results.
Lance D. Turner: Adjusted EBITDA for the manufacturing segment was $4 4 million, which was up compared to $1 8 million in the fourth quarter.
Lance D. Turner: Margins improved in the first quarter largely due to the absorption of costs through higher output and lower cost per unit as we start to see the benefits of our initiative to reduce third party reliance for certain production activities.
Lance D. Turner: Selling general administrative costs were $51 million in the first quarter compared to $59 million last quarter.
Lance D. Turner: No one category of spending drove the sequential decline, but rather our general focus on cost conscious behavior is yielding results.
Lance D. Turner: Cash capital expenditures totaled $59 9 million in the first quarter, a sequential increase driven by our higher fleet count.
Lance D. Turner: Cash capital expenditures totaled $59.9 million in the first quarter, a sequential increase driven by our higher fleet count and other growth-related initiatives related to fleet upgrades and mine improvement. Approximately $22 million was incurred in prior periods and held in accounts payable, but later paid in the first quarter of this year. We continue to expect to incur between $150 million and $200 million in maintenance cap backs for the year, along with approximately $100 million in growth-related cap backs.
Lance D. Turner: And other growth related initiatives relate.
Lance D. Turner: Related to fleet upgrades and mine improvements approximately $22 million was incurred in prior periods and held in accounts payable, but later paid in the first quarter of this year.
Lance D. Turner: We continue to expect to incur between 150 and $200 million in maintenance Capex for the year, along with approximately 100 million on growth related capex.
Lance D. Turner: Despite the 23% increase in fleet count and 11% improvement in efficiencies cash used for working capital was only $24 million.
Lance D. Turner: Despite the 23% increase in fleet count and 11% improvement in efficiencies, cash used for working capital was only $24 million. We continue our focus on right-sizing the inventory, which provided a $16 million benefit to working capital this quarter. In addition, we were able to reduce our DSOs by approximately four days to help offset the AR build required for the ramp-up in activity levels. Total cash and cash equivalents at March 31st were $28 million, including $5 million attributable to Flo-Tex. Total liquidity at quarter end was approximately $167 million, and borrowings under the ABL ended the quarter with $138 million.
Lance D. Turner: We continue our focus on right sizing the inventory, which provided a $16 million benefit to working capital this quarter.
Lance D. Turner: In addition, we were able to reduce our dsos by approximately four days to help offset the AAR build required for the ramp up in activity levels.
Lance D. Turner: Total cash and cash equivalents at March 31 was $28 million, including 5 million attributable to Flotek total.
Lance D. Turner: Total liquidity at quarter end was approximately $167 million and borrowings under the ABL ended the quarter with $138 million.
Lance D. Turner: While the emphasis on our strategic initiatives has already begun to bear fruit in 2024, we see opportunity for improvement ahead, we remain focused on operational execution efficiencies and providing best in class services to our customers. We believe we will continue to improve our relative positioning to drive shareholder value in 2000.
Lance D. Turner: While the emphasis on our strategic initiatives has already begun to bear fruit in 2024, we see opportunity for improvement ahead. We remain focused on operational execution, efficiencies, and providing best-in-class services to our customers. We believe we will continue to improve our relative positioning to drive shareholder value in 2024 and beyond. Operator, please open the line for questions.
Lance D. Turner: <unk> 24 and beyond.
Lance D. Turner: That concludes our formal remarks, operator, please open the lines for questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Operator: 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 telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd 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 key. Our first question comes from the line of Blake McLean with Daniel Energy Partners. Please proceed with your question.
Operator: <unk> tone will indicate your line is in the question queue.
Blake McLean: You May press star two if you'd like to remove your question from NICU 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 Blake Mclean with Daniel Energy Partners. Please proceed with your question.
Blake McLean: Hi, good morning. Thank you for taking my call.
Blake McLean: Hi, Good morning, Thank you for taking my call.
Blake McLean: Alright, Thank you yes.
Unknown Speaker: Morning. Thank you. Yeah.
Blake McLean: Yeah, I was hoping maybe you guys could just speak to maybe some of the market dynamics on the FRAC side. I mean, obviously, you guys saw really nice sequential improvement in EBITDA per fleet. How do you see that progressing over the course of the year? Maybe any more color you can provide on that increase in profitability in the split between cost cuts and absorption, just any more color you could share around that and on the market, sort of generally?
Blake McLean: Yes, I was hoping maybe you guys could just speak to maybe some of the market dynamics on the Frac side. I mean, obviously you guys saw really nice sequential improvement in EBITDA per fleet, how do you see that progressing over the course of the year, maybe any more color you can provide on on that increase in profitability and the split between cost cuts and absorption just just any more color you can share.
Blake McLean: Around that and on the market sort of generally.
Speaker Change: That's definitely so.
Unknown Speaker: Definitely. So, you know, when you look at the right when the gas market was falling off, you had budgets reset on the early side. And so we saw a nice, nice migration there and a relatively stable fleet count for the industry. And, you know, we expect it to be relatively stable for the remaining part of the year, with the exception of that being a bounce back in natural gas prices. If we see that, then you'll see the fleet count grow.
Unknown Speaker: When you look at the right when the gas market was fallen off.
Unknown Speaker: You had budgets reset on the early side and so we saw a nice nice migration there in a relatively stable fleet count for the industry.
Unknown Speaker: And we.
Unknown Speaker: We expect it to two.
Unknown Speaker: Be relatively stable for the remaining part of the year.
Unknown Speaker: With the exception to that being a bounce back in natural gas prices. If we see that would then youll see fleet count growth.
Unknown Speaker: Right.
Blake McLean: And then on the profitability side, the improvements there, you know, you talked about absorption, you talked about cost cuts, you know, how should we think about the weight of each of those and the additional opportunities, you know, for kind of Q2, Q3, Q4.
Unknown Speaker: And then on the on the profitability side. The improvements there you talked about absorption you talked about cost cuts.
Blake McLean: How should we think about the weight of each of those and the additional opportunities.
Speaker Change: For Q2, Q3, and Q4 on that Brian.
Speaker Change: Definitely yes, most of it was through through the absorbing the costs.
Unknown Speaker: Definitely. Yeah, most of it was through absorbing the costs. The operating leverage that we have in this business is tremendous. Vertical integration gives us a very, you know, more fixed cost structure.
Unknown Speaker: Operating leverage that we have in this business has tremendous vertical integration gives us.
Speaker Change: A very.
Speaker Change: More fixed.
Unknown Speaker: Nature to our cost structure relative to our peers.
Unknown Speaker: Some of them have more variable.
Unknown Speaker: Cost structure, so when we pump more where more and more efficient and we have more fleets out there running.
Unknown Speaker: Well to absorb those costs in a much much broader way and I think Q1 shows.
Unknown Speaker: <unk> cases that.
Speaker Change: Okay and then maybe thank you maybe just one more.
Blake McLean: Good, and then maybe, thank you, maybe just one more. I was hoping to ask you guys have obviously a lot of insight into the gasier basins, and I was wondering if you could share any color on the conversations you're having with operators, things they're focused on, things they're looking at, anything that might give just some more insight into how they're thinking about the world for the back half of this year into 2025.
Blake McLean: I was hoping to ask you guys have obviously a lot of insight into the gas basins and I was wondering if you could share any any color on conversations youre, having with operators things they're focused on things they are looking at.
Blake McLean: Anything that might give.
Blake McLean: Just some more insight into how youre thinking about the world for the back half of this year into 25.
Blake McLean: Yes.
Unknown Speaker: Yeah, certainly. So, there's several operators that we're talking to where we see some opportunities in Q3, Q4. It's still early on, but what we're seeing on the forward curve is encouraging. But we're, we're, we're, remaining very conservative with it, sticking to our guns. And, you know, we don't want to get overly bullish and lean into it too much or too soon. But we're in constant communication with these operators and think that they're doing a phenomenal job of being disciplined with the market that they have. And we look forward to their activity picking up towards the latter half of this year.
Speaker Change: Certainly so so there are several operators that we're talking to where we see some some opportunities in Q3 Q4.
Unknown Speaker: It's still early on but what we're seeing on the forward curve is is encouraging but we're remaining very conservative with it.
Unknown Speaker: Sticking to our guns.
Unknown Speaker: We don't want to get overly bullish in.
Unknown Speaker: Lean into it too much or too soon but we're and we're in constant communication with these operators and think that they are doing a phenomenal job of being disciplined with the market that they have and we look forward to their activity picking up towards the back half of this year.
Speaker Change: Okay. Thank you guys very much for the time this morning.
Blake McLean: Okay, thank you guys very much for your time.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Stephen <unk> with Stifel. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Stephen Gengaro with Stiefel. Please proceed with your question.
Stephen David Gengaro: Thanks. Good morning, everybody. I have two things for you.
Stephen David Gengaro: Thanks, Good morning, everybody.
Stephen David Gengaro: One is, on the fleet count, are we right that it's probably in the low to mid-30s right now? Is that approximately how many active fleets you have? Okay, thanks. And when we look at the current makeup of your fleet between electric dual fuel and older diesel, Can you give us a rough breakdown and maybe even sort of talk about, I assume it's the lower emission assets, which are basically close to fully utilized. Can you give us any details around that?
Stephen David Gengaro: Good morning. Thanks for me one is on.
Stephen David Gengaro: On the on the fleet count are we right that it's probably in the in the low to mid thirties right now is that approximately how many active fleets you have.
Stephen David Gengaro: Yes.
Speaker Change: Okay. Thanks.
Stephen David Gengaro: When we look at the current makeup of your fleet between.
Stephen David Gengaro: Electric dual fuel in two of our older older diesel.
Stephen David Gengaro: Can you give us a rough breakdown and maybe even trying to talk about I assume it's lower mission assets, which are basically close to fully utilized can you give us any details around that.
Unknown Speaker: I'm you know, we won't get too detailed with it. But without a doubt, customers, you know, customers prefer fuel efficiency. I think that the value that's provided by dual fuel fleets is where as well as E-Fleet and the overall fuel savings. I mean, it displaces a lot of diesel. And, you know, this is an area that we focused on because this allows us to lower the cost for our customers.
Stephen David Gengaro: We won't get too detailed with it but without a doubt customers.
Unknown Speaker: Customers per.
Unknown Speaker: Prefer fuel efficiency.
Speaker Change: Thank you.
Unknown Speaker: The value that's provided by dual fuel fleets as where as well as he'd fleets.
Unknown Speaker: The overall fuel savings I mean, it displaces a lot of diesel and.
Unknown Speaker: This is an area that we focused on because this allows us to lower the cost for our customers.
Unknown Speaker: But without it without having.
Unknown Speaker: But without it, without having a detrimental impact on our finances, So this is a trend that we expect to continue seeing. However, there are many customers that prefer diesel, all diesel fleets. And that's really driven by the associated gas associated with some of these oily basins and the costs of bringing these other options to the field. Okay, I think you see that. I think you really see that.
Unknown Speaker: Any detrimental impact to our financials.
Unknown Speaker: So this is a trend.
Unknown Speaker: Spect to continue seeing however.
Unknown Speaker: However, there are many customers that their preferred diesel all diesel fleets and.
Unknown Speaker: And that's really driven by the associated gas associated with some of these oily basins and the costs of.
Unknown Speaker: Bringing these other options.
Unknown Speaker: Yeah.
Unknown Speaker: To the field.
Unknown Speaker: Okay, Great and then I think you see that I think you really see that across the industry as well.
Unknown Speaker: This is where.
Unknown Speaker: The majority of the growth capital in this space is going and it's <unk>.
Unknown Speaker: Most all of it is going to upgrading equipment to more fuel efficient configuration.
Stephen David Gengaro: Great. And then just one final question for me, you've been involved in this in the past, but when we think about industry dynamics and the potential for future consolidation, how do you think about allocating capital between, you know, either building new assets to replace older assets or potentially M&A?
Speaker Change: Great and then just one final from me you've been involved in this in the past.
Speaker Change: Think about it.
Stephen David Gengaro: Industry dynamics and potential for future consolidation, how do you think about.
Stephen David Gengaro: Allocating capital between.
Stephen David Gengaro: Either building new assets to replace older assets or potentially M&A.
Unknown Speaker: I mean, we're in the market, we see things that are out there, and, and, you know, we're interested in value, but that value is few and far between. And, and I think the best way to think about us is just, we take a very patient approach to the market. And we generally avoid a transaction unless we see a tremendous amount of value coming with it.
Stephen David Gengaro: I mean.
Stephen David Gengaro: We're in the market, we see things that are out there.
Unknown Speaker: <unk>.
Unknown Speaker: We're interested in value but.
Unknown Speaker: That value is few and far between in and I think the best way to think about us as just.
Unknown Speaker: We take a very patient.
Unknown Speaker: Approach to the market.
Unknown Speaker: <unk>.
Unknown Speaker: Right.
Unknown Speaker: We generally avoid the transaction unless we see a tremendous amount of value coming with it.
Speaker Change: Great. Thanks for the color.
Stephen David Gengaro: Great. Thanks for the color.
Speaker Change: Thank you.
Stephen David Gengaro: Thank you. Our next question comes from the line of Sarah <unk> with Bank of America. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Saurabh Pant with Bank of America. Please proceed with your question.
Saurabh Pant: Hi, Good morning, Matt and Lance maybe.
Saurabh Pant: Hi, good morning, Matt, Ladd, and Lance. Maybe I'll start with a follow-up. I think Matt, you said in your prepared remarks that you expanded your portfolio with highly efficient customers, which is obviously commendable. And that's what you should be doing.
Saurabh Pant: Maybe I'll start with a follow up I think Matt, though you said in your prepared remarks.
Saurabh Pant: You expanded your portfolio with highly efficient customers, which is obviously commendable and that's what you should be doing can you give us a little color Matt.
Saurabh Pant: Maybe on how much visibility do you have as we look forward for the next three to six months I'm, especially thinking in light of the completion deferrals that we are seeing in the gatsby since.
Saurabh Pant: Should we worry about to put into the white space in the gassy basins in the next three to six months.
Speaker Change: Yes, Theres a lot to unpack there and good morning, and thank you for joining our call.
Saurabh Pant: Can you give us a little color, Matt, or Ladd, maybe on how much visibility do you have as we look forward for the next three to six months? I'm especially thinking in light of the completion deferrals that we are seeing in the gas basins. How much should we worry about the potential white space in the gas basins in the next three to six months?
Saurabh Pant: Yeah.
Unknown Speaker: Yeah, there's a lot to unpack there. And good morning. And thank you for joining our call. Yeah.
Saurabh Pant: We've got some availability, but we look at the market in a very disciplined way and won't put fleets to work and less.
Unknown Speaker: You know, we've got some availability, but we look at the market in a very disciplined way and won't put fleets to work unless it, unless it fits in with our overall strategy. There are certainly benefits to scale and our ability to absorb costs. And so when we look at opportunities, we want to make sure that we're, we're, that when we deploy these, we deploy them in a very disciplined way. And, you know, one of the things that also comes with our vertical integration is that, you know, if we get into a situation where there's no fleets available, it becomes tight, really tight with gas markets coming back.
Unknown Speaker: Unless it fits in our overall strategy.
Unknown Speaker: There's certainly benefits to scale and our ability to absorb costs.
Unknown Speaker: So when we look at opportunities when we want to make sure that we're.
Unknown Speaker: Sure.
Unknown Speaker: When we deploy these we deploy it in a very disciplined way.
Unknown Speaker: And.
Unknown Speaker: One of the things that also comes with our vertical integration is that if we if we get into a situation where.
Unknown Speaker: There is no fleets available.
Unknown Speaker: <unk> tight really tight from gas markets coming back, where we can respond to that quickly to and solve any issues.
Unknown Speaker: Well, we can respond to that quickly, too, and solve any issues and meet the needs of our customers. Even, even if that means that, you know, we end up with an undersupplied market in 2025.
Unknown Speaker: And meet the needs of our of our customers, even even if that means.
Unknown Speaker: <unk>.
Unknown Speaker: We ended up with a under supplied market in 2025.
Speaker Change: Okay. Okay, I got it and just a quick clarification I think Lance you mentioned, a I think you said $9 million in shortfall cost up.
Lance D. Turner: Okay, okay, I got it. And just a quick clarification. I think Lance mentioned, I think you said $9 million in shortfall cost payable to Flowtech. Should we expect that to continue in the second quarter and in the foreseeable future, just given the volume expectation you have right now?
Lance D. Turner: Be able to Flotek should we expect that to continue in the second quarter and in the foreseeable future just given the volume expectation you have right now.
Speaker Change: So we're working working to expand our chemical profile with our our customers in and get that to where we need to be and so we expect to reduce it.
Lance D. Turner: So we're working, working to expand our chemical profile with our customers and get that to where we need to be. And so we expect to reduce it. But it, it'll take a little bit of time as we ramp that up.
Lance D. Turner: But.
Lance D. Turner: It'll take it'll take a little bit of time as we ramp that up.
Speaker Change: Okay Perfect and then just one last one for me I think this was not a you said in your prepared remarks that you expect to have all your fleets deployed by I think you said later in 2000 and photo you said by the end of 'twenty four but just a quick clarification on that is that is that a comment on your deployed electric fleets because I think you have a couple of.
Saurabh Pant: Okay, perfect. And then just one last one for me.
Saurabh Pant: I think this was Matt, you said in your prepared remarks that you expect to have all the E-fleets deployed by, I think you said later in the 24th or you said by the end of 24. But just a quick clarification on that. Is that a comment on your deployed electric fleets? Because I think you have a couple of electric fleets that are partially completed. Are you talking about those as well?
Saurabh Pant: Electric fleets that will partially completed are you talking about those Pennsylvania.
Speaker Change: Yes, we're talking about those as well so when we look at it.
Unknown Speaker: Yes, we're talking about those as well. So when we look at the remainder of this year and the recent success that, you know, we've set a goal. The most efficient fleet we had in West Texas was in the city limits of Midland, where there's a great deal of sensitivity to noise, and it's right there in front of everybody's offices. So it was on full display for the industry, and so I think what we're seeing from that is a great deal of excitement and really showcasing for the overall market what these things are capable of, that you should expect the same efficiencies from an E-fleet with fuel savings.
Unknown Speaker: And the remainder of this year and the recent success.
Unknown Speaker: We.
Unknown Speaker: We set a.
Unknown Speaker: The most efficient fleet, we had in west, Texas within the city limits of Midland.
Unknown Speaker: Where there is a great deal of sensitivity towards noise.
Unknown Speaker: And it's right there in front of us.
Unknown Speaker: Everybody's offices. So it was on full display for the industry and so I think.
Unknown Speaker: What we're seeing from that is a great deal of excitement and.
Unknown Speaker: Really showcasing for the overall market.
Unknown Speaker: These things are capable of that you should expect the same efficiencies from an E fleet.
Unknown Speaker: With fuel savings.
Unknown Speaker: And you know that there aren't really any compromises. These are as good or better than a conventional fleet, and they'll deliver you the results that you need, which is fuel savings and a quieter profile so that you can work in these sensitive areas where people are trying to sleep and live. So we're very excited about that. We're seeing a lot of inbounds and expect to have every e-pump that we have in an active status working for customers.
Unknown Speaker: And.
Unknown Speaker: There's not really any compromises theirs.
Unknown Speaker: These are as good or better than a conventional fleet and they will deliver you. The results that you need net fuel savings and a quieter profiles. So that you can work in these these sensitive areas where people are trying to sleep in live.
Unknown Speaker: So we're very excited about that we're seeing a lot of that.
Unknown Speaker: Of inbounds and expect to have.
Unknown Speaker: Every pump.
Unknown Speaker: We have.
Unknown Speaker: And in active status working for customers.
Unknown Speaker: Yeah, and I'll just add to that, like when we're talking about fleet growth. You know, it will not come from pricing reductions; it's going to come from these differentiated offerings that we have, whether it's E-fleets, hybrid fleets, or dual-fuel. It's not going to come from slugging it out over pricing for conventional diesel fleets. It's going to come from these offerings that the market wants.
Speaker Change: Yeah, and I'll, just add to that when.
Unknown Speaker: When we're talking about fleet growth.
Unknown Speaker: Yeah.
Unknown Speaker: They will not come from pricing reductions its going to come from.
Unknown Speaker: These differentiated offerings that we have whether it's E fleets hybrid fleets or dual fuel.
Unknown Speaker: It's not going to come from slugging it out over pricing over conventional diesel fleets, it's going to come from these these.
Unknown Speaker: Offerings that the market wants.
Unknown Speaker: Yes, essentially creating value in offering value to our customers, where our customers see.
Unknown Speaker: Yeah, essentially creating value and offering value to our customers where our customers see savings, but it comes from the value proposition that we bring. Right, right, right.
Unknown Speaker: Savings.
Unknown Speaker: But but.
Unknown Speaker: It comes from the value proposition that we bring.
Speaker Change: Right right right no. That's very helpful always good to see demand fully versus just a pricing based on supply push so fantastic, okay, Matt that ladder Lance. Thank you I'll turn it back.
Saurabh Pant: Right, right, right. No, that's very helpful. Always good to see demand pull versus just a pricing-based supply push, so fantastic. Okay, Matt, Ladd, Lance, thank you. I'll turn it back on.
Speaker Change: Thank you.
Operator: Thank you. Our next question comes from the line of Don Crist with Johnson Rice. Please proceed with your question.
Saurabh Pant: Thank you. Our next question comes from the line of Don Crist with Johnson Rice. Please proceed with your question.
Donald Peter Crist: Good morning, guys.
Donald Peter Crist: Morning, guys. Um, I wanted to ask a more macro question, you know, given the horsepower requirements of today to pump 20 plus hours, a traditional fleet is no longer, you know, 45 or 50,000 horsepower. And, Matt, I'm curious, just your opinion as to whether if that premise is true, where you need, you know, 50 plus 1000 horsepower just to service and pump those amount of hours per day, where we are from a macro perspective, are we pretty balanced in the fleet today? Just given those extra horsepower requirements?
Donald Peter Crist: Wanted to ask a more macro question.
Donald Peter Crist: Given the horsepower requirements.
Donald Peter Crist: Today.
Donald Peter Crist: <unk> 20 plus hours.
Donald Peter Crist: Traditional fleet is no longer 45, or 50000 horsepower and Matt I'm curious just your opinion as to.
Donald Peter Crist: That if that premise is true where you need them 50, plus thousand horsepower just to service and pump those amount of hours per day, where we are from a macro perspective or are we pretty balanced in the fleet today.
Donald Peter Crist: Just given those extra horsepower requirements.
Unknown Speaker: Um, yeah, so I mean, it really depends which basin you're in. I think the higher pressure puts, you know, a higher Unknown Speaker 30, requirement on your fleet where you need more redundancy. This is about managing around equipment failures. When they fail, how do we solve for that so there's not an interruption in the service quality at all?
Matt: Yes, so I mean.
Unknown Speaker: It really really depends which space and you are in I think the higher pressure puts puts.
Unknown Speaker: A higher.
Unknown Speaker:
Unknown Speaker: Requirement on your on your fleet, where you need more redundancy.
Unknown Speaker: And because this is about managing around equipment failures and when they fail how do we solve for that so theres not an interrupted interruption in the service quality at all and so typically you would see anywhere really to pump 100 barrels a minute you'd really only need 14 pumps, but.
Unknown Speaker: Typically, you would see anywhere, to pump 100 barrels a minute, you really only need 14 pumps. One of your pumps is going to fail while you're pumping. You should probably have 18 in line and then two on a standby and then four in a maintenance rotation. That's on typical zipper work.
Unknown Speaker: One of your pumps is going to fail, while youre pumping. So you should probably have 18 in line and then.
Unknown Speaker: <unk> on a standby and then four in our maintenance rotation. So.
Unknown Speaker: That's on typical zipper work.
Unknown Speaker: And you should be able to pump, you know, 21, 22 hours a day doing that with that configuration. But when you get into higher pressure, you're going to need a little bit more redundancy, or when you see somnofrax, some of these somnofrax are 180 barrels a minute if you've got both sides running. And so that puts a higher requirement on the number of pumps. The number of pumps you have in line has more to do with, you know, how many barrels a minute you're pumping. And then the pressure has to do with how much redundancy you need to keep that number of pumps pumping. So I think you'll understand.
Unknown Speaker: And you should be able to pump 21, 22 hours a day doing that.
Unknown Speaker: With that configuration, but when you get into higher pressure youre going to need a little bit more redundancy or when you see some old fracs.
Unknown Speaker: Some of these <unk> fracs are 180 barrels a minute if you've got both sides running and so that puts a higher requirement on the number of pumps. The number of pumps you have in line has more to do with with.
Unknown Speaker: How many barrels a minute you're pumping and then the pressure has to do with how much redundancy you need to keep dose that number of pumps pumping.
Unknown Speaker: I think youll hear.
Unknown Speaker: You know, you probably see a pretty wide range of how much horsepower is required. Some people have higher failure rates. When you take care of your equipment and you have maintenance redundancy, incredible cycle times, we run our business, our maintenance team, like it's pit row. If you can get your cycle times down really quick, and see a pit stop in two seconds, You know, we love looking at the IndyCar. In the 1990s, it took almost 10 seconds for a pit stop to get a full set of tires and fuel. But nowadays, they're under two seconds in some instances.
Unknown Speaker: You'll probably see.
Unknown Speaker: Pretty wide scale of how much horsepower is required.
Unknown Speaker: Some people have higher failure rates.
Unknown Speaker: But when you take care of your equipment and you have.
Unknown Speaker: Maintenance redundancy incredible cycle times.
Unknown Speaker: We run our business like our maintenance team like its pit road.
Unknown Speaker: If you can get your cycle times down really quick.
Unknown Speaker: C C a pit stop in two seconds.
Unknown Speaker: We love looking at the.
Unknown Speaker: Indy car and.
Unknown Speaker: In the 90% it took almost 10 seconds for a pit stop to get a full set of tires and fuel, but nowadays there are under two seconds and some some instances. So that's what we focus on we want to get the highest utilization out of our assets, we want the tightest cycle times and maintenance and to consistently deliver the the best.
Unknown Speaker: So that's what we focus on. We want to get the highest utilization out of our assets. We want the tightest cycle times and maintenance and to consistently deliver the best performance without cutting corners or putting ourselves in a bind. Under no circumstance do we want to see the rate fall below the designed rate for our customers. It's not just pump time; it's, you know, service quality and delivering the customer the spec that they require.
Unknown Speaker: Performance without it without cutting corners, or putting ourselves in a bind.
Unknown Speaker: No circumstance do we want to see rate fall below the design designed right for our customers.
Unknown Speaker: It's not just to pump time, it's it's.
Unknown Speaker: Service quality and delivering the customer the spec that they require.
Donald Peter Crist: I appreciate that. And just from a macro perspective, given the excess horsepower that's required to, you know, swap pumps out for valves and seat replacement, etc. Do you think we're fairly balanced today? And I ask that in terms of if we get a 15 or 20 fleet up, an uplift in demand from gas basins? Could we see a significant tightening across the industry and, in a matter of, you know, a couple fleets going back to work? Or is there enough slack? Horsepower in the industry today to where we can absorb, you know, an uplift of a few fleets but not maybe 15 or 20.
Unknown Speaker: I appreciate that and just from a macro perspective, given the excess horsepower thats required to.
Donald Peter Crist: Swap pumps out for valves and seats replacement et cetera, do you think we're fairly balanced today and I ask that in the in terms of if we get a 15 or 20.
Donald Peter Crist: Fleet up.
Donald Peter Crist: Uplift in demand from gas basins could we see a significant tightening across the industry and in a matter of a couple of fleets going back to work or is there enough slack.
Donald Peter Crist: Horsepower in the industry today to where we can absorb an uplift of a few fleets, but but not maybe 15 or 20.
Donald Peter Crist: Okay.
Unknown Speaker: I definitely think that's fair. It's pretty, pretty nasty out there if you don't have scale and if you don't have the vertical integration that we do, I think, you know, this, our vertical integration allows us to absorb costs and dilute the dilute costs on a per pump hour basis. It also means that we don't have to cut corners or defer maintenance capex or anything like that. And I think this is the type of environment where you'll see that with various players across the space where they're deferring maintenance and potentially, you know, seeing a higher level of attrition than the historical norm.
Speaker Change: I definitely think that's that's fair.
Unknown Speaker: It's pretty pretty nasty out there if you don't have scale and if you don't have the vertical integration that we do I think.
Unknown Speaker: Our vertical integration allows us to absorb costs Duluth.
Unknown Speaker: Dilute costs on a per pump hour basis.
Unknown Speaker: It also means that we don't have to cut corners, or deferred maintenance capex or anything like that.
Unknown Speaker: And I think this is the type of environment, where.
Unknown Speaker: Youll see that with with various players across the space, where they are deferring maintenance and potentially.
Unknown Speaker: Seeing a higher level of attrition than than the historical norm.
Unknown Speaker: You add to that a bounce back in gas prices, and you could see, you know, a tightening of the market that goes beyond, you know, a bit beyond the available horsepower. And, and with that, you do also see more simulfracs when you look at the fleet count on a year over year basis. You see how, how much, how many of those fleets are simulfrac pumping at higher rates, requiring more red And I think your line of questioning is exactly right.
Unknown Speaker: You add to that a bounce back in gas prices and you could see.
Unknown Speaker: A tightening of the market that goes beyond.
Unknown Speaker: A bit beyond the available horsepower.
Unknown Speaker: And with that you do also see more simulcast <unk>. When you look at the fleet count on a year over year basis.
Unknown Speaker: How much how many of those fleets are signed more frac pumping at higher rates requiring more redundancy.
Unknown Speaker: I think.
Unknown Speaker: I think your line of questioning is exactly right.
Unknown Speaker: It set up for a <unk>.
Unknown Speaker: It's set up for a tighter market, but what we focused on was working with customers to make sure that they don't feel that squeeze and making sure that they're able to accommodate any issues that come along and that they're not on the wrong end of the equation.
Unknown Speaker: Tighter market, but what we focus on is working with customers to make sure that they don't feel that squeeze and making sure that they are able to accommodate any issues that come along and that they're not on the wrong end of of.
Unknown Speaker: Yes.
Unknown Speaker: Debt.
Unknown Speaker: Of that trend.
Speaker Change: I appreciate the color Ryan I agree I think if we had a minimal amount of fleets here, we could see a significant uplift in pricing going forward, but I'll turn it back in queue. Thank you.
Donald Peter Crist: You appreciate the color. I agree. I think if we add a minimal amount of fleets here, we could see a significant uplift in pricing going forward. But I'll turn it back on. Thank you.
Donald Peter Crist: Yes.
Unknown Speaker: Yeah, I'll say one thing about that as well. What we focus on and what's so important for our customers is that they see some certainty in their cashbacks and know that they're working with partners that can deliver them a reliable product at a great price with no surprises. And, you know, when you see supply constraints, you know, it's easy for us to look at that and get really excited about prices going up.
Speaker Change: I'll say, one thing to that as well.
Unknown Speaker: We focus on and what's so important for our customers is that they see some certainty to their capex and some.
Unknown Speaker: That they are working with partners that can deliver them I.
Unknown Speaker: A reliable product at a great price with no surprises.
Unknown Speaker: When you see supply constraints.
Unknown Speaker: But like our customers, stability and reliable cash flows are the most important things for us. And so when we look at the path forward, we see these as opportunities to create long-lasting partnerships with our customers and deliver them reliable pricing that they can count on. And maybe that takes some of the spike out of the upswing, but it certainly takes a little bit of the bite out of any pullbacks in the cycle.
Unknown Speaker: It's easy for us to look at that and get really excited about prices going up but.
Unknown Speaker: Like our customers stability and reliable cash flows.
Unknown Speaker: Are the most important thing for us and so when we when we look at the path forward. We see these as opportunities to create long lasting partnerships with our customers and deliver them reliable pricing that they can count on.
Unknown Speaker: And maybe it takes some of the spike out of the out of the upswing, but it certainly takes a little bit of a bite out of out of any pullbacks in the cycle.
Ladd Wilks: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Wilson for any final comments.
Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Wilks for any final comments.
Wilks: Thank you everybody.
Matthew D. Wilks: We appreciate your time today, and we are very excited about this quarter, but more excited about what this year brings, and we just thank you for your time. And we look forward to continuing and delivering these results. So thank you.
Ladd Wilks: We appreciate your time today very.
Matthew D. Wilks: Very excited about this quarter, but more excited about what the.
Matthew D. Wilks: But what this year brings.
Ladd Wilks: And we just thank you for your time.
Matthew D. Wilks: And we look forward to.
Matthew D. Wilks: Carrying on in continuing these these results so thank you.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.