Q4 2024 ProPetro Holding Corp Earnings Call
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Speaker Change: Or our expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act forward looking statements are subject to several risks and uncertainties many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our body.
Speaker Change: With the SEC also during today's call, we will reference certain non-GAAP financial measures reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question and answer session with that I would like to turn the call over to Sam.
Sam: Thanks, Matt and good morning, everyone. Thanks for joining us today.
Sam: I'm proud to report another strong quarter and a great year for perpetual despite.
Sam: Despite the challenging operating environment for our entire industry perpetual closed out the year strong with a clear path ahead for future growth.
Sam: Our strategy continues to yield results and we continue to demonstrate our industrialized approach to the oilfield service business is both sustainable and profitable through cycle.
Sam: Well the fourth quarter was impacted by typical seasonality and extended customer holiday shutdowns, our ability to generate free cash flow remained intact.
Sam: Once again that our capital light high efficiency model is working as designed.
Sam: Our strategic focus on next generation service offerings operational efficiency and disciplined capital allocation has made pro Petro stronger and more resilient company, which in turn has spurred the ongoing transformation of our business over the past year to better align with macro trends and the evolving needs of our customers here in the Permian basin.
Sam: Today, approximately 75% of our fleet consist of next generation gas bearing equipment, including our tier four dual fuel and electric fleets. These assets continue to be highly utilized and its strong demand as customers prioritize efficiency fuel cost savings and emissions reductions.
Sam: Looking ahead, our fourth electric fleet remains a key area of growth for us.
Sam: For force electric fleets operating under long term contracts and we expect to deploy a bit forcefully in 2025 under a similar structure.
Sam: These contracts are designed to de risk our future earnings and provide stability in what remains an uncertain market environment.
Sam: Additionally, our cementing silvertip wireline and uncle crop sand logistics businesses continued to succeed contributing to our company's overall financial strength.
Sam: While utilization across all service lines was impacted by seasonality in the fourth quarter. We are encouraged by the resilience of our bifurcated service offering.
Sam: Our high quality service and strong customer relationships and best in class equipment continues to differentiate us from our peers.
Sam: Moving forward into 2025, and as I mentioned on our last earnings call, we remain optimistic about the strength and potential.
Sam: Of the North American onshore oilfield services over the next several years, particularly as the market moves in the direction of quality providers like perpetual which offer lower overall cost to customers through avenues, such as fuel savings, while also providing enhanced efficiencies.
Sam: We are confident that perpetual was positioned as a leader in this arena.
Sam: Moreover, according to our internal estimates the Permian Basin has approximately 85 full time active frac fleets, we believe that around 90% of this activity has held and operated.
Sam: The top seven largest pressure pumping brands.
Sam: This demonstrates the healthy and consolidated state of the market or.
Sam: Our capital disciplined over the past several years has contributed to this stability.
Sam: Providing operational and commercial leverage for top tier pressure pumper like perpetual.
Sam: Yeah.
Sam: For the most exciting developments for pro Petro in 2024 was the launch of our newest business line Pro power.
Sam: We firmly believe that pro power represents a transformational growth opportunity for our company, allowing us to expand beyond traditional oilfield services and establish ourselves as a premier energy solutions provider.
Sam: In December we announced an initial order.
Sam: Have over 110 megawatts of natural gas fueled power generation equipment.
Sam: Since then we have entered into a contractual agreement with another equipment manufacturer to purchase an additional 30 megawatts of power generation equipment.
Sam: 140 megawatts currently on order.
Sam: We plan to place orders for additional power generation capacity in the coming weeks and months as we finalize customer contracts and assess future demand from our customers.
Sam: The majority of these assets are anticipated for delivery in the second half of 2025 in early 2026, bringing our total capacity to between approximately 150 and 200 megawatts in early 2026.
Sam: We've made progress in obtaining customer commitments and are actively negotiating long term contracts for our incoming equipment.
Sam: We believe that demand for reliable low emissions power solutions is vast and increasing and we are positioning pro power to capitalize on multiple high growth verticals.
Sam: While our initial focus on on both proving the concept and establishing commercial momentum for the business is based on tried and true oilfield applications, including drilling completions production and midstream operations. We also see significant potential in industrial power applications.
Sam: Looking even further ahead, we see a unique opportunity in the data center space, particularly in the Permian Basin.
Sam: As demand for power intensive computing infrastructure continues to grow our existing relationships with leading E&P operators deep knowledge of the region and ability to deploy scalable low cost natural gas powered energy solutions make us a natural partner for data center developers looking to establish low cost operations right here.
Sam: In West Texas.
Sam: Our pro Petro we're constantly evaluating how we can best meet the evolving needs of current and prospective customers and capitalize on our core strengths.
Sam: That's why we're moving decisively to capitalize on growth opportunities with pro power.
Sam: Looking ahead, we will continue to scale pro power leveraging a combination of cash on hand and targeted financing structures.
Sam: This is just the beginning for pro power, we're aggressively expanding this business and believe that over time, it will significantly contribute to our earnings profile and further diversify perpetual revenue streams, while creating added stability in our overall business.
Sam: At the same time, it's important to note that we are acutely aware of where our core business lives and we will continue to focus on what makes our company a successful partner to major E&P producers in our in our country's most prolific basin.
Sam: Providing the high quality service and support for which we are known.
Speaker Change: Before I turn it over to David I want to highlight.
David: That the opportunity to even pursue these prospects and to be in a position we are in and despite a challenging macro environment is the result of our ability to generate strong free cash flow and maintain a sturdy balance sheet.
David: The discipline reflected in those characteristics is what has afforded us the flexibility to pursue a dynamic capital allocation strategy that we anticipate will generate healthy returns.
David: To that end I want to reaffirm our commitment to our capital allocation strategy.
David: There are four key elements on which were focused.
David: First launching and scaling pro power, which we believe will be a key pillar of our future earnings growth.
David: Second investing in our next generation fleet transition, ensuring we remain the premier provider of low emissions high efficiency pressure pumping services.
David: Third executing on accretive M&A transactions and optimizing our portfolio.
This includes our recent divestiture.
David: The vernal, Utah cementing operations during the fourth quarter, which aligns with our Permian focused strategy in.
David: In terms of M&A, we are equal opportunists between pro power and our completions businesses focused on prudently pursuing value enhancing growth.
David: And fourth returning capital to shareholders through our share repurchase program under which we have retired approximately 13 million shares or approximately 11% of perpetual shares outstanding.
David: Since inception.
David: In short, we will remain opportunistic yet disciplined in our capital deployment consistent with our focus on maximizing long term value for our shareholders.
David: I'll now turn it over to David to discuss our full year and fourth quarter financial results a bit deeper David.
David: Thanks, Sam and good morning, everyone.
David: <unk> performance in 2024 showcase the results of our strategy at work.
David: Flight revenue declining 11% from 2023, we reduced capital expenditures by 57% and increased free cash flow adjusted for acquisition consideration over nine times to 118 million.
David: The year over year improvement is a direct result of our more industrialized and capital light investments are ongoing operational optimization and our operational excellence that provides us the opportunity to work with the best customers in the Permian Basin.
David: Additionally, since the inception of our share repurchase program in May 2023, we have returned $111 million of capital to our shareholders simultaneously, we have significantly improved our working capital position year over year.
David: Our efficient capital management and strategic growth funding.
David: Underscore our company's unique strengths and unwavering commitment to financial and operational discipline, which were particularly evident in 2024.
David: Moving to the fourth quarter.
David: While our financial results for the fourth quarter decreased relative to the third quarter, we were still able to generate strong free cash flow, particularly when considering adjusted EBITDA less incurred capital expenditures.
David: We also continue to take market share across our service lines, most notably in Frac and cement.
David: Moreover, despite the headwinds we faced as a result of typical seasonality and general market softness we generated strong free cash flow and continued to execute on our strategy further illustrating the industrialized nature of our business.
David: Fourth quarter revenues decreased 11% versus the third quarter to $321 million net loss was $17 million and adjusted EBITDA decreased 26% sequentially to $53 million.
David: Notably the net loss for the fourth quarter included a noncash impairment expense of $24 million related to full impairment of the goodwill in our wireline reporting unit.
David: Additionally, we incurred an operating lease expense related to our electric fleets of 15 million for the quarter.
David: In the fourth quarter of 2024, we had 14 active hydraulic fracturing fleets in line with our prior guidance. Although there was some white space, particularly in December.
David: Expect to run between 14, and 15 Frac fleets in the first quarter of 2025.
David: Moving to capital allocation capital expenditures incurred during the fourth quarter of 2024 were $25 million.
David: Net cash used in investing activities as shown on the statement of cash flows during the fourth quarter of 24 was 24 million.
David: The company has reduced capital expenditures are a strong tailwind for perpetual is free cash flow generation again, highlighting the benefits of our decision to transition our fleet electrification in industrialized our business segments.
David: The company anticipates full year 2025 capital expenditures to range between 300 million and 400 million.
David: Of this the completions businesses, including hydraulic fracturing wireline and some many are expected to account for 150 million to 200 million.
David: An additional 150 million to $200 million will be allocated for growth capital expenditures and our pro power business with approximately $104 million of financing already secured for these pro power investments.
Petros: I'm Petros to cash and liquidity position remains strong as of December 31, 2020 for total cash was $50 million and our borrowings under the ABL credit facility were $45 million.
Petros: Total liquidity at the end of the fourth quarter of 24 was $161 million, including cash and $111 million of available capacity under the ABL credit facility.
Petros: Thanks to our dynamic capital allocation plan, we have been successful and simultaneously transforming our fleet buying back shares pursuing accretive acquisitions and launching new service lines, all while maintaining a healthy balance sheet and liquidity profile.
Petros: Although it is still early in the year 2025 is showing promising signs as utilization rates continue to trend upward.
Petros: Frac fleet calendar spill up.
Petros: While these developments are encouraging we remain committed to maintaining a rigorous level of capital discipline. We have practiced over the last past several years effectively creating a free cash flow machine in our completions business.
Petros: Simultaneously, we are focused on redeploying some of those resources to.
Petros: Pursue strategic growth, particularly in our profile, our business, giving us exposure to an industry sector, which has a more dynamic growth profile.
Petros: Understanding the different strategies necessary to drive value for the long term success of our company is critical.
Petros: Our dynamic capital allocation methodology, and strong balance sheet position enables our ability to pivot to pursue these opportunities.
Petros: We believe our strategy is ideally suited for the current market environment in both the completions and power markets and then our shareholders have much to look forward to in 2025 and beyond.
Sam: I'll turn the call back over to Sam.
Sam: Thank you David.
Speaker Change: Before we wrap up I want to reiterate my enthusiasm and confidence about the future of our business.
Speaker Change: Demand remained strong and we continue to grow our presence in the Permian basin with our sophisticated bifurcated service offerings that now included pro power along next generation Frac assets, cementing services wireline services and wet sand solutions.
Speaker Change: Much like 2024, we expect 2025 to be another year filled with growth and success for the company.
Speaker Change: We have industrialized more of our business built a strong free cash flow profile and entered into a transformational new market with pro power.
Speaker Change: And despite recent ongoing headwinds perpetually nonetheless uniquely positioned to capitalize on opportunities just as we did in 2024.
Speaker Change: As we move through 2025, we will continue to execute on our strategy grow our force fleet presence scale pro power and maintain a disciplined approach to capital allocation.
Speaker Change: Always with an eye on operating safely efficiently and responsibly.
Speaker Change: Lastly, before we open it up to Q&A I want to take a minute to thank pro Petro teammates for their hard work and dedication to our company our mission and to each other.
Speaker Change: And because of you that our success is possible.
Speaker Change: Regrettably and sadly we were recently reminded of the inherent risks faced by the Brave men and women working on our locations every day.
Speaker Change: Late last month, a perpetual important tragically lost their lives and another was seriously injured at a job site.
Speaker Change: Our hearts are with both of those teammates their families and loved ones at this very difficult time.
Speaker Change: Safety is of Paramount importance to perpetual and we continue to work diligently to determine the cause of the incident and ensure that never happens again.
Speaker Change: I ask that you keep our fallen teammate all of our teammates and everyone working in the field that helps provide the energy we all rely on and your thoughts and prayers. Thank you.
Speaker Change: With that operator, we'd now like to open the call to questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
Speaker Change: So anytime a question has been addressed and you would like to withdraw. Your question. Please press Star then tail at this time, we will pause momentarily to assemble our roster.
Kurt: The first question comes from Kurt <unk> with benchmark. Please go ahead.
Kurt: Hey, good morning, everybody.
Speaker Change: Kurt.
Speaker Change: Sam and team.
Speaker Change: Honestly want to applaud your your dynamic here in pursuing a emerging growth opportunity in and being creative on how you go about doing it.
Speaker Change: Let's see how the market kind of playing it out over time, but I mean, let me start on the on the on the power front, if I if I back right. So you guys have obviously.
Speaker Change: The process back in December was about 110.
Speaker Change: Megawatts of power, increasing that's somewhere between potentially 150 to 200.
Speaker Change: Can you just give us a quick refresher on how we can start thinking about what kind of incremental revenue and EBITDA generation say 150 to 200 megawatts of power.
Speaker Change: Good Oh could provide in and maybe just think in junction with that right.
Speaker Change: Thinking about it on an annualized run rate not a specific here.
Speaker Change: Sure Yeah, I'll, let I'll, let David kind of chime in maybe with some numbers and timing and all of that but yeah. Thanks for asking about power business, we're super excited about that.
Speaker Change: Given kind of the cycles that we've played through the last several years, it's it's definitely exciting.
Speaker Change: To have something that we can grow in kind of move back to our entrepreneurial roots and growing things organically.
Speaker Change: We believe that that's the best.
Speaker Change: The lowest cost and the highest value way to do something like this.
Speaker Change: It doesn't mean that we're out doesn't mean that we're not out in the market exploring other options to possibly accelerate that.
Speaker Change: But we're really excited to put this together with what what what we believe is great leadership for the business.
Speaker Change: And to make it sturdy and very competitive in the future. David I don't know if you would talk about timing of earnings and revenue and things like that a little bit sure. Yeah. Curt you know I think the way to look at this on the power side is really it's going to be a 2026 impact.
Speaker Change: We're spending 2025, placing orders are getting our commercial architecture put in place.
Speaker Change: And I think the impact is going to show up then and if you think about our guidance of 150 to 200 megawatts.
Speaker Change: Apply about a three to 400000 per EBITDA per megawatt per year.
Speaker Change: To that business and I think you can you can start getting to the range of.
Speaker Change: Returns that we would expect.
Speaker Change: Assets have longer lives than some of our older conventional equipment.
Speaker Change: Our return on invested capital there is on the higher teens.
Speaker Change: Three to four year payback is going to give you I think what should be a reasonable expectation there currently.
Speaker Change: The only thing I'd add to what David just said is that we expect these first deliveries to start trickling in around mid year. This year.
Speaker Change: That said that doesn't show up all at once.
Speaker Change: So we'll be taking.
Speaker Change: You know deliveries over time of what we've announced starting midyear this year into Q1 next year.
Speaker Change: Okay I appreciate that timing update and then the follow up question for me is on the Frac business obviously.
Speaker Change: Some of the other larger companies have already reported and the dynamic at play there was talk of some pricing pressures.
Speaker Change: And clearly these companies do operate when they you know.
Ryan: Hi, Ryan.
Ryan: Jack Frac business. So it kind of struck me that you referenced that pricing was relatively stable. So I'm, just I'm trying to kind of educate myself and connect the dots as to how you see things going on.
Ryan: How do you think going.
Ryan: How you see things going through your business.
Ryan: How the market's evolving from a pricing standpoint.
Ryan: Sure Yeah, and I think it's always important to make sure we aren't trying to compare apples and oranges too much.
Ryan: When we're thinking about the market that way. This is all Permian and this is all blue chip E&P for us. So it is a.
Ryan: We're very proud to have a very consistent.
Ryan: Dirty outlook because of the customers.
Ryan: We work for with the type of equipment and agreements that we have with those customers it'll be more of the same from us as it pertains to those things this year.
And to state the obvious we can't speak about basins or customer types that are in the Permian and are these larger more sophisticated e&ps.
Ryan: Got it appreciate the color. Thank you.
Speaker Change: The next question comes from John Daniel with Simmons. Please go ahead.
John Daniel: Oh, Hey, guys, thanks for including me.
Speaker Change: Hey, Jonathan Sammy I think you mentioned in the prepared remarks, you guys are estimating 85 full time fleets in the Permian today.
John Daniel: As you think about continued completion efficiencies.
Speaker Change: And all of that good stuff can you maybe provide a arrangement where do you think the Permian basin could be.
John Daniel: Four to five quarters from now and they all else being equal scenario other than efficiencies.
John Daniel: I think it's pretty flat, John but I think you know it's flat is the simple way to say it but as you know the nuance inside of that is how big are some of these fleets what type of work are they doing.
John Daniel: If you look back four or five years the.
The average fleet size in the Permian from a horsepower standpoint, because as much as 50% larger than it was.
John Daniel: Five years ago, I'm, not telling you anything you don't know.
John Daniel: So to make that comparable.
John Daniel: Number if you were.
John Daniel: And if you were going to try and compare that to five years ago.
John Daniel: 50% more fleets active right today because of this.
John Daniel: So efficiencies continue to go up and look I mean, I think a lot of people can make that kind of a a batter bear story as it pertains to pressure pumping, but if you play at the high end of the efficiency gain you will always have work, you'll always have a great value proposition and that's where we think we stand today.
Speaker Change: Sure Fair enough just one quick follow up for me on the Capex I think I remember the press release correctly $150 million to $200 million would be dead.
John Daniel: Dedicated towards the completion segment.
John Daniel: And I think your Capex in 'twenty.
John Daniel: Four was like $140 million ish ballpark okay.
John Daniel: And I know, there's some leases in the 24 number but I'm curious does that 150 to 200 does that include anything above and beyond sleep five.
John Daniel: No it doesn't but what it doesn't include is some refurbishment.
John Daniel: Our tier four DGB equipment, so we got a little bit more of that in 'twenty five and we did in 'twenty four.
John Daniel: Okay, Thanks for including me guys.
Speaker Change: The next question comes from Eddie Kim with Barclays. Please go ahead.
Eddie Kim: Hi, good morning.
Wanted to ask if you could talk about your general outlook for 25, this year and that's mostly been calling for kind of a flattish activity environment in North America. This year is that how youre seeing the market as well and kind of related to that how do you expect you said you expect to run a 14 to 15 active fleets in the first quarter is.
Eddie Kim: That a good run rate to use through the end of the year or what's the right way to think about that progression.
Eddie Kim: Yes.
Eddie Kim: Okay.
Speaker Change: Question is yes, that's that's probably a pretty good that that would go along with the comments, we just made to John about arc as being relatively flat.
Throughout the year that said as I think about kind of the market outlook in general a little bit more in something that I think is underappreciated.
Speaker Change: Is the attrition that continues to happen that we continue to see firsthand as we get inbounds from other customers about maybe some of our smaller less sophisticated customers.
Speaker Change: <unk> towards the lower end of the market.
Speaker Change: And are starting to really see issues with maintaining their equipment and their efficiencies and things like that due to not not having the equipment that they need to do the job.
Speaker Change: At the highest level that's expected.
Speaker Change: Jason.
Speaker Change: Look I think I think a flat market is really good for a company like pro petrol.
Speaker Change: With pricing in a very.
Balanced place, where you have to fight for.
Speaker Change: What you have and you have to fight to keep what you have especially on the efficiency side, but in this market there will likely continue to be.
Speaker Change: More and more attrition at the lower end of it will naturally tighten things over time. So that's what that's what we're hopeful for.
Speaker Change: In the back half of the year going into next year.
Speaker Change: Is it that kind of story continues to play out that even in a flat activity market did the frac market could could tighten up quite a bit.
Speaker Change: Got it got it.
Speaker Change: And my follow up is just on the power business you mentioned that the initial focus of this business.
Speaker Change: This will be an oil and gas applications, but you do see opportunity in data centers somewhere down. The line. So is it fair to say that nearly all the negotiations you're having currently on that initial 140 megawatts on order or with oil and gas operators or service companies or are you having conversations with.
Speaker Change: With data centers now as well.
Speaker Change: And maybe put another way should we assume that the vast majority of that initial 140 megawatts will go towards the oil and gas.
Speaker Change: Yeah, I think I think you should assume that for now.
Speaker Change: And our our initial strategy is to work through many of the customers that we already have that's one of the main reasons why we even started this business and did it the way we did.
Speaker Change: It is because we could hardly pass through your customer's office without hearing about electricity needs.
Speaker Change: So we're really excited about some of the projects that we're working on.
Speaker Change: Right now are highly confident that.
Speaker Change: You'll see more from us in the future about specific.
Speaker Change: Contracts and commitments.
Speaker Change: That said kind of an interesting and interesting thing that's happening is that I want to make sure everyone understands is that it's it's highly likely that almost all of this these these initial orders or non frac applications.
Speaker Change: Which speaks I think to the opportunity we see in diversifying our business and adding more consistency to our business I think.
Speaker Change: The first.
Speaker Change: The first few things we're working on are very related to production midstream things like that we are entertaining.
Speaker Change: Opportunities to possibly power.
Speaker Change: Some or many of our of our existing frac fleets of where our growing electric.
Speaker Change: Capacity.
Speaker Change: But the demand on the production midstream non frac side as it is quite large.
Speaker Change: This is David I would encourage you to take a look at page 19 in our IR deck.
Speaker Change: One of the things that is so striking gears that we're expecting.
Speaker Change: Two five gigawatts of growth of load growth just in the oil and gas sector over the next three years for power.
Speaker Change: When you when you then add on to that the additional load growth for the entire Permian basin over the next.
10 to 13 years.
Speaker Change: Significant.
Speaker Change: It's a different growth trajectory than the business that we're in so a lot of.
Speaker Change: Opportunities there certainly are.
Sam: Sam has mentioned.
Speaker Change: Leveraging on our oil and gas routes and the connectivity that we have with our customers and we see that as an interim units right now.
Got it right, yes, it definitely sounds like a lot of viable end markets here. So thank.
Speaker Change: Thank you for all that color and I will turn it back.
Speaker Change: Again, if you have a question. Please press Star then one.
Speaker Change: Our next question comes from Waqar Syed with ATB capital markets. Please go ahead.
Waqar Syed: Good morning, Sam David a couple of questions just wanted to get a bit more specific guidance for our Q1 and for 2025.
Speaker Change: How do you see the revenues and they've been down maybe tracking a quarter over quarter in Q1.
David: This is David.
David: Thank you know, we'd like to stick with the guidance that we gave.
We believe our our fleet activity is going to be between 14, and 15 fleets I think we've seen some.
David: Positive activity so far early on in the year, but I think we want to be mindful of.
David: Providing.
David: Too much guidance there.
David: I think we aren't benefiting significantly from the cost management efforts over the last couple of years and those are really beginning to play out but.
Waqar Syed: That's about the guidance that we'd like to give at this point, yeah, Waqar I'll just pile on top of that.
Waqar Syed: We think <unk> headed back in the direction of <unk> and <unk> last year.
Waqar Syed: Look look something similar to that.
Waqar Syed: Okay right, Okay and then.
Waqar Syed: You don't.
Waqar Syed: The Echo prop acquisition coming along are you seeing penetration into additional fleets.
Waqar Syed: Yeah, I mean aqua.
Waqar Syed: It has been great that said the timing of when we acquired that was quite a peculiar time in the San market in general.
Waqar Syed: Where we saw sanmark sand prices dry and wet.
Waqar Syed: Crash across the market.
Waqar Syed: It's probably hinder some of our growth opportunities.
Waqar Syed: But we're excited about what's to come with that and we're continuing to push.
Waqar Syed: Certain customers to consider that.
Waqar Syed: As more of our integrated option with what we're doing I can tell you where we do have fleets, where we do have also prompt and silvertip wireline services, we're seeing some of the best efficiencies in our entire portfolio.
Waqar Syed: So that story is definitely proving out and as helpful. As we go into customers' offices to to promote and talk about that.
Speaker Change: Okay and could you maybe talk about the pricing environment for your cementing and wireline business.
Speaker Change: Yes, the submitting our I think our cementing business here recently and our outlook throughout this year might be one of the brightest spots in the entire company.
Speaker Change: You saw that we.
Speaker Change: Nounced the divestiture of our vernal Utah.
Speaker Change: Operation.
Speaker Change: It was our only it was it was very small in terms of significance compared to our Permian business that was our only non Permian business and Thats.
That's helped to kind of bolster focus in the Permian.
Speaker Change: So we've evolved our team the par five.
Speaker Change: Edition.
Speaker Change: <unk> is continuing to pay dividends with with a better outposts on the on the west side of the Permian Basin, We're super excited about speed.
Speaker Change: Wireline has been a little loose.
Speaker Change: Here in the back half of last year rebounded a little bit first part of this year, but that that that pricing environment is definitely weaker.
Speaker Change: And I'd say similar approach to Aqua prop this year, we're going to be looking.
Speaker Change: To try and push that service more as an integrated.
Speaker Change: An integrated service along with our Frac fleets this year.
Speaker Change: And.
Speaker Change: So there was a major acquisition announcements made recently.
Speaker Change: In the E&P side, the Diamondback crowding.
Speaker Change: But double Eagle, how does that affect our pro petrol if any.
Speaker Change: How could it.
Speaker Change: Potentially.
Speaker Change: Yeah look we're on we're on both sides of that deal right. Now so we like we like deals like that it has not been uncommon for us to be on both sides.
Speaker Change: The deal back to kind of some of the efficiency and operational performance comments I made earlier, we let that speak for itself.
Speaker Change: Really I mean companies like diamondback or looking for consistency reliability.
Speaker Change: And great performance at a great value and price and we think we're providing that on both sides of that deal. So overall look we're not we're not scared of consolidation in the Permian and we think it's really healthy we think it creates more rational behavior.
Speaker Change: Upstream and downstream of us.
Speaker Change: Maybe every now and then it causes some.
Speaker Change: Turbulence in the near term, but we're not building a business for the next month or the next quarter. We're building a business for the next decade, so the more rational long term behavior that exists.
Speaker Change: Upstream of us the better and we'll be here to serve those sophisticated.
Speaker Change: Large e&ps.
Speaker Change: Okay.
Speaker Change: And then what's the timing of the fifth easily.
Speaker Change: Mid year mid year third quarter.
Speaker Change: Okay and just my last question.
Sam David: Sam you are entering into a new business are the profile of business.
Speaker Change: It's certainly new business scan have operational risks.
Speaker Change: How do you see those operational risk how are you trying to mitigate those you know how would you Uh huh.
It's kind of good.
Speaker Change: The investors confidence that Oh.
Speaker Change: There won't be any growing pains or hiccups that things to outpatient hiccups as you build that business.
Speaker Change: Yes, two things great Great question, and it's something that we're talking about a lot we're very focused on.
Speaker Change: Given that we kind of we've already made our entrance into the supply chain with these orders next.
Speaker Change: Next focus of that business is.
Speaker Change: Obtaining commitments in contracts and in executing once we get it but I think the two things that leave us confident in our one.
Speaker Change: The leadership that we already have for that business in Travis and Dave and the team that they are currently building.
Speaker Change: It's really fun to have the opportunity to build a team from scratch and to bring in the expertise and the culture.
Speaker Change: You want to build without inheriting.
Speaker Change: Issues from somebody else. So we're hard at work building that team.
Speaker Change: Really excited about that.
Speaker Change: And then after that you've got to go you got to go execute you got to execute in the field and another thing that we're really confident about is that going to be our ability to use the existing probe petro infrastructure.
Speaker Change: We believe and can confidently say this that we think we are one of the best organizations.
Speaker Change: At managing personnel equipment and logistics.
Speaker Change: We already have the infrastructure, we already have the customers we already have the supply chain the maintenance systems, and we're going to rely heavily on what already exists within our company to make sure that we're able to execute.
Speaker Change: It just as high or higher level that you see all of our other business lines currently executing today.
David: Well this is David.
Speaker Change: The other example here.
Speaker Change: 18 months ago, we did not have electric frac operating in the field today, we've got four fleets on contract. We believe that we are at the top of the technology stack there.
Sam David: And I would call out another slide in our IR deck slide 20, which talks about the commercial rationale that Sam just eloquently described.
Sam David: But it really is it shows you that it's a natural extension of what we've already been doing from a strategic standpoint bring.
Sam David: Bringing in equipment that has longer lives lower capital intensity going forward.
Sam David: And leveraging on prep Petro strengths.
Sam David: Great well. Thank you very much that's all from me.
Speaker Change: The next question comes from Derik part Hazier with Piper Sandler. Please go ahead.
Speaker Change: Hey, good morning, guys.
Speaker Change: And Derrick.
Speaker Change: Just wanted to maybe if you could expand on the types of equipment Youre ordering for pro power. So you obviously had the initial 110 megawatts yet this follow up 30 megawatts.
Speaker Change: Provide more color out whether these are turbines resets, maybe cut size, whether it's two and a half megs to five 7% to <unk>.
Speaker Change: Give you some more color around the kind of kept that youre using a buildup for our power.
Speaker Change: Yes.
Speaker Change: It's a little bit of both our initial order was turbines.
Speaker Change: Five megawatts and up and our most recent order is a receptor that's three megawatts.
Speaker Change: Got it okay. That's helpful.
Speaker Change: And then just just a question on switching over to the E. Frac side I mean like David you said you've had them in the field for 18 months now four of them how does the evolution on the maintenance Capex has been moving from conventional to E. Frac, maybe just some color around what maintenance Capex per fleet looks like how often are you, bringing these things in the shop.
Speaker Change: Your major.
What are your major Capex cycles look like now just maybe some more color on the overall maintenance capex cycle for these easily now that you've had it in the field for a while.
Speaker Change: Yes, David David can share some particulars, but I'd say in general it's been phenomenal, it's better than I personally expected.
Speaker Change: And I think what we're seeing is that things like maintenance Capex and just day to day operational efficiencies.
Speaker Change: Kind of run hand in hand parallel the more you can keep that equipment on location.
Speaker Change: The more.
Speaker Change: The more you can operate efficiently with it so generally its been great, which leaves us high conviction.
Speaker Change: In my prepared remarks, we kind of.
Speaker Change: Listed out the stack of capital allocation priorities that we've been pivoting between dynamically in the last couple of years.
Speaker Change: I would say that stack is relatively an order today.
Speaker Change: Turning to what competes for capital in our business.
Speaker Change: It can change as the market changes and it and it has definitely changed a little bit in the last cut.
Speaker Change: A couple of years.
Speaker Change: But that's up.
Speaker Change: First or second on that stack because of the successes that we've seen operationally and economically with that equipment on though David we would want to add a little bit of.
Speaker Change: Color on the maintenance Capex sure Derik. This is such a positive aspect of what's been going on we decreased our capex guidance three times last year, and we went from having two electric fleets at the beginning of the year to having four by the end of it and we saw such a dramatic.
Speaker Change: Impact and the Capex intensity that we had previously experienced in prior years. So just the complexion of the fleet changing and continuing to evolve toward electric is going to be impacting our maintenance capex going forward.
Speaker Change: I think I think we're seeing 30% or 50% lower capex intensity and when you think about it.
Speaker Change: One of the major components on a conventional frac asset as a.
Speaker Change: A diesel or a tier two tier four dual fuel engine, which got which has 3500 parts in it many of which are moving.
Speaker Change: The electric fleets replace that with a transformer and a variable frequency drive box.
Speaker Change: The moving part is the door handle so it just kind of shows you the significance and the paradigm shift there.
Speaker Change: And when we think about the electric equipment.
Speaker Change: Now, we're moving even further toward.
Speaker Change: Lower capital intensity, because they don't have.
Speaker Change: The power ends on the back of that are pumping harsh.
Speaker Change: Water and sand and high pressure downhole, you've just got a generator.
Speaker Change: Spinning spinning a crank shaft or or <unk>.
Speaker Change: Some type of.
Speaker Change: Generator. So we think that that's going to continue to play out and pull our maintenance capex down over time, and we're seeing that already.
Speaker Change: Okay.
Speaker Change: Great color guys I'll turn it back.
Speaker Change: The next question comes from Don Crist with Johnson Rice. Please go ahead.
Don Crist: Good morning, guys I'm, saying, one quick question on the power side.
Speaker Change: Sure.
Speaker Change: Contract Wise are you ordering these assets with firm indications and working on contracts or do you actually have contracts in place any kind of color you can give around there.
Speaker Change: Great question.
Speaker Change: We don't have any contracts in place today that said.
Speaker Change: We are looking at this very similarly to the way we've looked at our.
Speaker Change: Existing business, especially our Frac business, where.
Speaker Change: You might not have a contract in hand, when you place the order, but you might be talking to 3% to five customers.
Speaker Change: For any single asset or any fleet.
Speaker Change: And it's.
Speaker Change: It's the same thing here with 140 megawatts on order today I'd say are our.
Speaker Change: Opportunity exceeds that.
Speaker Change: And we're just we're just kind of in the early days of marketing and commercializing. This.
Speaker Change: And kind of making known what were going to be capable of so we'd expect that that demand to grow and we will be balancing.
Speaker Change: Being competitive in the supply chain is many of these items are rather long lead.
Speaker Change: How many opportunities we're seeing out out in the future to do it in a disciplined manner.
Speaker Change: We're we're not obtaining assets that don't have work on day number one when they are delivered.
Speaker Change: Okay, and when we do given that there is.
Speaker Change: Got it and on there we do expect to obtain.
Speaker Change: Long term contracts for all of this equipment I'd say everything where we are.
Speaker Change: Negotiating are conversating about right now is three years plus three years at the minimum if not five years or more.
Speaker Change: And that's I mean for sure one frac guys like us to be able to get that kind of visibility and consistency in our business. We think that's transformational from a value proposition standpoint to create much more consistency in.
Speaker Change: In our outlook.
Speaker Change: Dan This is David just to add to that I think when we look at the value proposition that we might provide a customer for our.
Speaker Change: Conventional or completions businesses.
Speaker Change: It certainly.
Speaker Change: Compelling, but when we look at the pro.
Speaker Change: Power opportunities and the value proposition for our customers there.
Speaker Change: That is really exciting because it's the significance of that value is.
Speaker Change: Materially greater so.
Sam David: Sam mentioned, there's a lot of confidence in what we're doing right now, but as we did before you know remember we ordered four electric fleets before we had any contracts right.
Sam David: We had we had confidence in the equipment and this was not unproven technology. We're doing the same thing here on the power side and we've got the expertise to support that deployment.
Sam David: So I think the confidence is very high.
Don Crist: Yeah, Don sorry.
Speaker Change: <unk> really got us going here because this is exciting stuff, but I think another thing to consider which is not I don't think this is at the forefront of our strategy, but will likely play a significant role in our power deployment in the future as our growing equally demand and just the growing power demand for E fleets.
Don Crist: In general.
Don Crist: And I think we're I think we're consuming about 160 megawatts of power on our four fleets today.
Speaker Change: Two of which are simultaneous these are big these are going to be big operations that are going to need more and more power like David mentioned earlier, we kind of outlined that in the demand for that.
Don Crist: In our investor deck.
Don Crist: And back to the contract story I mean this all of this equipment comes with contracts.
Don Crist: And we're headed towards possibly even contracting almost half of our Frac business. Later this year between what we're doing in the dual fuel knee in the fleet market.
Don Crist: So if you kind of look out over the hill as it pertains to the contract story and the consistency of what this power business could bring you pair that with.
Don Crist: The E fleet and dual fuel.
Don Crist: The progress that we've seen in our business in the last couple of years, we could be going into 2026.
Don Crist: And beyond with a majority of our asset base under long term contracts, which we think is game changing in the oilfield service market Super excited about that.
I appreciate all the color its going to be fun to watch thanks, guys.
Don Crist: Thanks, Don.
Don Crist: This concludes our question and answer session I would like to turn the conference back over to Sam sledge for any closing remarks.
Sam Sledge: Thanks, everybody for joining us today, let me tell you a little bit about our company and our story and I look forward to talking to you again soon.
Don Crist: Okay.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.