Q1 2025 ProPetro Holding Corp Earnings Call

Operator: Good day and welcome to the Propetro Holding Corp first quarter 2025 conference. Please note, this event is being recorded. To require operator assistance, please press star then zero.

Good day and welcome to the pro petrol holding Corp, first quarter 'twenty 25 Conference call. Please note. This event is being recorded.

If you require operator assistance. Please press Star then zero.

Matt Augustine: I would now like to turn the call over to Matt Augustine, Director of Corporate Development and Investor Relations for Propetro Holding Corp. Please go ahead. Thank you and good morning. We appreciate your participation in today's call.

I'll now turn the call over to Matt Augustine director of corporate development and Investor Relations for property holding Corp. Please go ahead.

Speaker Change: Thank you and good morning, we appreciate your participation in today's call with me today are Chief Executive Officer, Sam Sledge, Chief Accounting Officer, and principal financial Officer, Selena, Davita, and President and Chief operating Officer, Adam It goes.

Matt Augustine: With me today are Chief Executive Officer Sam Sledge, Chief Accounting Officer and Principal Financial Officer Selena Davila, and President and Chief Operating Officer Adam Munoz.

Matt Augustine: This morning we released our earnings results for the first quarter of 2025. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are 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.

Speaker Change: This morning, we released our earnings results for the first quarter of 2025. Please note that any comments, we make on today's call regarding projections or our expectations for future events are forward looking statements covered by the private Securities Litigation Reform Act forward looking statements are subject to several risks and uncertainties many of which are beyond our control these risks and uncertainty.

This 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 filings 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.

Matt Augustine: We advise listeners to review our earnings release and risk factors discussed in our filings 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.

Matt Augustine: Finally, after our prepared remarks, we will hold a question and answer session.

Speaker Change: 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 Sledge: With that, I would like to turn the call over to Sam. Thanks, Matt. Good morning, everyone. And thanks for joining us today.

Sam: Thanks, Matt Good morning, everyone and thanks for joining us today.

Sam Sledge: I'd like to start with an overview of our first quarter performance and some perspective on the current market dynamics.

Sam: I'd like to start with an overview of our first quarter performance and some perspective on the current market dynamics.

Sam Sledge: And we'll then turn it over to Celina Davila, our current Chief Accounting Officer, who is also serving as our Interim Principal Financial Officer until a new Chief Financial Officer is appointed. The first quarter was another great quarter for Propetro, both operationally and financially. Our performance underscores our commitment to strong execution and demonstrates that our strategy is working and continues to yield solid results. This strength is even more notable in light of recent macroeconomic volatility. In particular, the impact of tariffs and the OPEC Plus production increases have placed significant pressure on the energy market and crude oil prices, a dynamic that creates uncertainty for the entire energy value chain.

Speaker Change: I will then turn it over to Selina Davila, our current Chief Accounting Officer, who is also serving as our interim principal financial officer until a chief in a new Chief Financial Officer is appointed.

Speaker Change: The first quarter was another great quarter for perpetual both operationally and financially our performance underscores our commitment to strong execution and demonstrates that our strategy is working and continues to yield solid results.

Speaker Change: This strength is even more notable in light of recent macroeconomic volatility in.

Speaker Change: In particular, the impact of tariffs and the O plague OPEC plus production increases have placed significant pressure on the energy market and crude oil prices a dynamic that creates uncertainty for the entire energy value chain.

Sam Sledge: Despite the industry stagnation over the past couple of years, our focus on more capital-efficient asset investments is generating resilient free cash flow, demonstrating the effectiveness of our industrialized model. The investments we have made over the last few years in Disciplined M&A, our new ProPower offering, and our forced electric fleet transition ensure Propetro is built to withstand market turbulence and deliver durable returns over time. We've created a strong company with low-debt, first-class customers, a focused presence in the leading Permian Basin with hard-working and dedicated team members. and we are confident that Propetro will continue to perform in light of volatile market conditions.

Speaker Change: Despite the industry stagnation over the past couple of years, our focus on more capital efficient asset investments is generating resilient free cash flow demonstrating the effectiveness of our industrialized model.

Speaker Change: The investments we've made over the last few years and disciplined M&A or new pro power offering and our fourth electric fleet transition ensure pro Petro is built to withstand market turbulence and deliver durable returns overtime.

Speaker Change: We've created a strong company with low debt first class customers.

Speaker Change: Focus president's presence in the leading Permian basin with hardworking and dedicated teammates and we are confident that perpetual will continue to perform in light of volatile market conditions.

Sam Sledge: Demand for our next generation services remains strong as it encompasses 75% of our fleet through our Tier 4 DGB, dual fuel, and electric offerings. We currently operate seven Tier 4 DGB dual fuel fleets with industry-leading diesel displacement, two of which are now recently under long-term contract. Additionally, we have four force fleets in the field under long-term contracts, with a fifth force fleet expected to be deployed under contract this year. In total, we now have six fleets under contract, which represents approximately 50% of our active hydraulic horsepower today. We plan to increase this number as we deploy more force fleets over the next few years.

Speaker Change: Demand for our next generation services remains strong as it encompasses 75% of our fleet through our tier four DGB dual fuel and electric offerings.

Speaker Change: We currently operate seven tier four DGB dual fuel fleets with industry, leading diesel displacement two of which are now recently under long term contracts.

Speaker Change: Additionally, we have four force fleets in the field under long term contracts with a fifth force fleet expected to be deployed under contract this year.

Speaker Change: In total we now have six fleets under contract, which represents approximately 50% of our active hydraulic horsepower today.

Speaker Change: We plan to increase this number as we deploy more force fleets over the next few years.

Sam Sledge: Accordingly, we intend to continue to transition capital from legacy diesel equipment to forced electric equipment, which is in high demand and securing committed contracts that reduce our future earnings risk.

Speaker Change: Accordingly, we intend to continue to transition capital from legacy diesel equipment to force electric equipment, which is in high demand and securing committed contracts that reduce our future earnings risk.

Sam Sledge: Now to Pro Power. As a reminder, earlier this year, we reported an approximate total of 140 megawatts of mobile natural gas fuel power generation equipment on order. Since then, we have placed additional orders for approximately 80 megawatts of natural gas reciprocating generators, which are expected to be funded from our cash flow. With this, our equipment type is split relatively evenly between turbines and natural gas reciprocating generators.

Speaker Change: Now to pro power.

Speaker Change: As a reminder, earlier this year, we reported an approximate total of 140 megawatts of mobile natural gas fueled power generation equipment on order.

Speaker Change: Since then we have placed additional orders for approximately 80 megawatts of natural gas reciprocating generators, which are expected to be funded from our cash flow.

Speaker Change: With this our equipment type is split relatively evenly between turbines and natural gas reciprocating generators.

Sam Sledge: We anticipate full delivery of all ordered ProPower equipment approximately 220 megawatts by mid-year 2026. Moreover, we are encouraged by the sustained robust demand for these assets and have secured letters of intent on approximately 75 megawatts of long-term pro-power service capacity with two separate operators in the Permian Basin to support their in-field power needs, with final contract execution expected soon. We're encouraged by these early results, but believe this is truly just the beginning for ProPower. We've made significant progress in obtaining additional customer commitments. and are actively negotiating long-term contracts beyond what we have announced today. We believe the demand for reliable, low-emission power solutions is vast and increasing, and we are positioning ProPower to capitalize on this high-growth firm.

Speaker Change: We anticipate full delivery of all ordered pro power equipment, approximately 220 megawatts by mid year 2026.

Speaker Change: Moreover, we are encouraged by the sustained robust demand for these assets and have secured letters of intent on approximately 75 megawatts of long term pro power service capacity with two separate operators in the Permian basin to support their infield power needs with final contract execution expected soon.

Speaker Change: We are encouraged by these early results, but believe this is truly just the beginning for pro power.

Speaker Change: We've made significant progress in obtaining additional customer commitments.

Speaker Change: And are actively negotiating long term contracts beyond what we have announced today.

Speaker Change: We believe the demand for reliable low emission power solutions is vast and increasing and we are positioning pro power to capitalize on this high growth vertical.

Sam Sledge: Now, I mentioned this earlier, but I want to touch on it once again, given today's macro We believe in a dynamic capital allocation strategy that allows us to pursue growth through M&A, our pro-power offering, and our force-electric fleet transition, all of which drive opportunities for shareholder returns. We expect to continue to execute on all of these moving forward, and I would like to underscore the fact that our financial improvements over the past two years are a result of the execution of this very strategy.

Speaker Change: Now I mentioned this earlier, but I want to touch on it once again, given today's macro trends, we believe in a dynamic capital allocation strategy that allows us to pursue growth through M&A or pro power offering and our fourth electric fleet transition all of which drive opportunities for shareholder returns.

Speaker Change: Yeah.

Speaker Change: We expect to continue to execute on all of these moving forward now I'd like to underscore the fact that our financial improvements over the past two years are result of the execution of this very strategy.

Sam Sledge: Selena will review our first quarter results shortly, but I would like to highlight a few things. As I shared at the beginning of the call, despite market headwinds, we generated strong free cash flow, as well as solid adjusted EBITDA, and lower than expected capital expenditures relative to guidance. This is due to a variety of factors, including our higher utilization across all segments, stabilization of prices, Effective Cost Control.

Speaker Change: So even with Selena will review, our first quarter results shortly but I would like to highlight a few things.

Speaker Change: As I shared at the beginning of the call. Despite market headwinds, we generated strong free cash flow as well as solid adjusted EBITDA and lower than expected capital expenditures relative to guidance.

Speaker Change: This is due to a variety of factors, including our higher utilization across all segments stabilization of pricing.

Speaker Change: <unk> cost controls.

Sam Sledge: Operational Excellence and Record Efficiency. In addition to strong. Operational Performance. We are benefiting from the resilience of our offering as both our Tier 4 DGB dual fuel and electric equipment remain highly utilized.

Speaker Change: Operational excellence and record efficiency.

Speaker Change: In addition to strong.

Speaker Change: Operational performance.

Speaker Change: We are benefiting from the resilience of our offering as both our tier four.

Speaker Change: DGB dual fuel and electric equipment remained highly utilized.

Sam Sledge: Finally, in terms of our outlook, and how our strategy will support us through current market uncertainty. We recognize that the near-term outlook is unclear. Due to the recent decline in oil prices, influenced by tariffs and OPEC Plus production increases, along with our Discipline Asset Deployment Strategy, we anticipate operating approximately between 13 and 14 fleets in the second quarter, a reduction from the 14 to 15 fleets we ran throughout the first quarter. I want to make it abundantly clear that we are committed to maintaining the health of our fleet and will not compromise it by operating assets at sub-economic levels.

Speaker Change: Finally in terms of our outlook and our strategy will support us through current market uncertainty.

Speaker Change: We recognize that the near term outlook is unclear.

Speaker Change: Due to the recent decline in oil prices influenced by tariffs and opaque OPEC plus production increases.

Speaker Change: Along with our disciplined asset deployment strategy, we anticipate operating approximately between 13 and 14 fleets in the second quarter of <unk>.

Speaker Change: Production from the 14 to 15 fleets, we ran throughout the first quarter.

Speaker Change: I want to make it abundantly clear that we are committed to maintaining the health of our fleet and will not compromise it by operating assets in sub economic levels are.

Sam Sledge: Our primary focus is on preserving our assets to be well-positioned once the broader market stabilizes.

Speaker Change: Our primary focus is on preserving our assets to be well positioned once the broader market stabilizes and the cycle turns back around.

Sam Sledge: and The Cycle Turns Back Around. That said, for all the reasons I've highlighted throughout these remarks, Propetro's low debt Premier Customer Base, Permian Focus, Long-Term Service Contracts, and Flexible Capital Allocation Program that safeguards free cash flow generation, along with the earnings growth potential of ProPower. We are confident that we will continue to maximize long-term value for our shareholders.

Speaker Change: That said for all the reasons I've highlighted throughout these remarks perpetual as low debt.

Speaker Change: Premier customer base Permian focus long term service contracts and flexible capital allocation program that safeguards free cash flow generation, along with the earnings growth potential of pro power.

Speaker Change: We are confident that we will continue to maximize long term value for our shareholders.

Selena Davila: With that, I'll turn it over to Selena to discuss our financial results. Thanks, Sam. And good morning, everyone. I am pleased to be here. As you have just heard, we continue to advance our strategy in the first quarter of 2025. And in doing so generated substantial free cash flow. In terms of results, financial performance for the quarter was strong and supported by our differentiated service offering, our loyal customer base, our Permian focus and our operational excellence. Propetro generated total revenue of $359 million, an increase of 12% as compared to the prior quarter. Net income total $10 million, or $0.09 per diluted share, compared to a net loss of $17 million, or $0.17 per diluted share, for the fourth quarter of 2024.

Speaker Change: With that I'll turn it over to Selina to discuss our financial results.

Selina Davila: Thanks, Sam and good morning, everyone I am pleased to be here as you've just heard we continue to advance our strategy in the first quarter of 2025 and in doing so generated substantial free cash flow in terms of results financial performance for the quarter was strong and supported by our differentiated service offering are loyal.

Selina Davila: Customer base, our Permian focus and our operational excellence.

Selina Davila: Perpetual generated total revenue of 359 million, an increase of 12% as compared to the prior quarter.

Selina Davila: Net income totaled 10 million or nine cents per diluted share compared to a net loss of 17 million or 17 cents per diluted share for the fourth quarter of 2024.

Selena Davila: Net income for the first quarter was 2025, included a net loss on disposal of assets of $10 million, primarily related to the sale of certain Tier 2 hydraulic fracturing equipment. Adjusted EBITDA totaled $73 million, which was 20% of revenue and an increase of 38% as compared to the prior quarter. Additionally, we incurred a lease expense related to our electric fleet of $15 million for the quarter. Net cash provided by operating activities and free cash flow were $55 million and $22 million respectively. Capital expenditures incurred for the first quarter were $39 million, most of which related to maintenance and our initial pro-power orders.

Selina Davila: Net income for the first quarter was 2025 included a net loss on disposal of assets of 10 million primarily related to the sale of certain <unk> hydraulic fracturing equipment.

Selina Davila: Adjusted EBITDA totaled 73 million, which was 20% of revenue and an increase of 38% as compared to the prior quarter. Additionally.

Selina Davila: Additionally, we incurred a lease expense related to our electric fleet of 15 million for the quarter.

Selina Davila: Net cash provided by operating activities and free cash flow were 55 million and $22 million respectively.

Selina Davila: Capital expenditures incurred for the first quarter were 39 million, most of which related to maintenance and our initial pro power orders.

Selena Davila: Net cash used in investing activities, as shown on the statement of cash flows, was $33 million for this quarter. We have demonstrated in the last few quarters that our lower cap ax is a strong tailwind for free cash flow generation. That rings true today and is a testament to our fleet transition and the industrialization of our business segment. As you are aware, we have already made significant investments in our assets and capabilities, and those investments are bearing fruit. In terms of CapEx guidance, we will continue to evaluate the market and scale CapEx with activity realizations.

Selina Davila: Net cash used in investing activities as shown on the statement of cash flows with 33 million for this quarter.

Selina Davila: We have demonstrated in last few quarters that our lower Capex is a strong tailwind for free cash flow generation that reached shoot a day and is a testament to our fleet transition and the industrialization of our business segments as Europe.

Selina Davila: We are aware, we have already made significant investments in our assets and capabilities and those investments are bearing fruit.

Selina Davila: In terms of Capex guidance, we will continue to evaluate the market and scale capex with activity realizations, but as we sit here today, we anticipate our full year 2025, capex to be between $295 million and 345 million down from the $300 million to $400 million of.

Selena Davila: But as we sit here today, we anticipate our full year 2025 CapEx to be between $295 million and $345 million, down from the $300 to $400 million of CapEx we discussed last quarter. This represents a 9% reduction at the midpoint from our prior guidance. Of this, the completions business is expected to account for $125 million to $175 million, a reduction from the original guidance, thanks to additional successful cost optimization efforts. Additionally, the company plans to allocate $170 million in 2025 and $60 million in 2026 to support current ProPower equipment orders that Sam mentioned. As a reminder, $104 million of the ProPower CapEx is financed.

Selina Davila: Capex, we discussed last quarter.

Selina Davila: This represents a 9% reduction at the midpoint from our prior guidance.

Selina Davila: This the completions business is expected to account for 125 million to $175 million a reduction from the original guidance. Thanks to additional successful cost optimization efforts. Additionally, the company plans to allocate 170 million in 202025.

Speaker Change: And $60 million in 2026 to support current pro power equipment orders that Sam mentioned as a reminder, $104 million of the pro power Capex is financed.

Selena Davila: Importantly, cash and liquidity remain strong, which is very important in today's uncertain market. As of March 31st, 2025, total cash was $63 million, and our borrowings under the ABL credit facility were $45 million. Total liquidity at the end of the first quarter of 2025 was $197 million, including the cash and $134 million of available capacity under the ABL credit facility. As for our share repurchase program, we have retired approximately 13 million shares. representing approximately 11% of our outstanding common stock since the inception of the program in May of 2023. We view share repurchases as an important part of our strategy, showing our conviction in the future of the company while creating value for shareholders, and it is a key pillar of our value proposition for investors.

Speaker Change: Importantly, cash and liquidity remains strong which is very important in today's uncertain market as of March 31, 2025, total cash was $63 million and our borrowings under the ABL credit facility were $45 million total liquidity at the end of the first quarter of 2025 was 197.

Speaker Change: Including the cash and 134 million of available capacity under the ABL credit facility.

Speaker Change: As far as share repurchase program, we have retired approximately 13 million shares.

Speaker Change: Representing approximately 11% of our outstanding common stock since the inception of the program in May of 2023.

Speaker Change: We view share repurchases as an important part of our strategy is showing our conviction and the future of the company, while creating value for shareholders and it is a key pillar of our value proposition for investors.

Selena Davila: As such, we intend to extend the program for another year, subject to approval by the Board of Directors, to enable us to continue to be opportunistic in deploying excess cash flow to share repurchases. Finally, as we have underscored several times already, Propetro's capital allocation strategy is balanced and key to maintaining flexibility and navigating uncertain conditions. Looking forward, we will remain focused on balancing investments between share repurchases, forced electric seat conversion, disciplined M&A, and pro-power investments while maintaining a strong balance sheet and liquidity profile. We are fortunate to have a strong financial profile and free cash flow to pursue all these value-enhancing opportunities simultaneously.

Speaker Change: As such we intend to extend the program for another year subject to approval by the board of directors to enable us to continue to be opportunistic in deploying excess cash flow to share repurchases.

Speaker Change: Finally, as we've underscored several times already perpetual capital allocation strategy is balanced and key to maintaining flexibility in navigating uncertain conditions looking.

Speaker Change: Looking forward, we will remain focused on balancing investments between share repurchases.

Speaker Change: Fourth electric fleet conversion disciplined M&A and pro power investment, while maintaining a strong balance sheet and liquidity profile. We are fortunate to have a strong financial profile and free cash flow to pursue all of these value enhancing opportunities simultaneously what that Sam back over here.

Sam Sledge: With that, Sam, back over to you. Excellent. In closing, we believe Propetro is a resilient company that is built to withstand market volatility and thrive over the long term. We're prepared for the uncertain market that lies ahead and are confident in our ability to execute because we have built a business that has proven profitable through various market cycles. Our investments in Discipline M&A, the Force Electric Fleet Conversion, and our ProPower offering position our company for sustainable growth and success. And our low-debt, blue-chip customers, contracted assets, and Permian Basin focus will all help us to keep moving forward, even in the face of significant market volatility.

Sam: Thanks Julio.

Sam: In closing we believe perpetual is a resilient company that is built to withstand market volatility and thrive over the long term.

Sam: We're prepared for the uncertain market that lies ahead and are confident in our ability to execute.

Sam: Cuz, we have built a business that has proven profitable through various market cycles.

Sam: Our investments and disciplined M&A the force electric fleet conversion and our pro power offering position our company.

Sam: For sustainable growth and success.

Sam: And our low debt blue chip customers contracted assets, the Permian basin focus.

Sam: All help us to keep moving forward, even in the face of significant market volatility.

Sam Sledge: I'm very proud of the work our team did to generate the strong performance in the first quarter. We have significant momentum that I'm confident we will continue to build on.

Sam: I'm very proud of the work our team did to generate the strong performance in the first quarter, we have significant momentum that I'm confident we will continue to build on.

Sam Sledge: None of this would be possible without our Propetro teammates. whose efforts and dedication to operating safely, efficiently, and responsibly give me and our management team that much more confidence in our ability to lead the company through this dynamic environment. Thank you for everything you do.

Sam: None of this would be possible without our perpetual teammates.

Sam: Whose efforts and dedication to operating safely efficiently and responsibly give me and our management team that much more confidence in our ability to lead the company through this dynamic environment.

Sam: Thank you for everything you do.

Operator: With that, operator, we'd now like to open the call to questions. Yes, thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone. If you are using a speakerphone, please pick up your handset before pressing the button. If at any time your question has been addressed and you would like to withdraw it, please press star then enter.

Sam: With that operator, we'd now like to open the call to questions.

Sam: Yes. Thank you.

Sam: We'll now begin the question and answer session.

Sam: That's a question you May press Star then one on your telephone keypad.

Sam: If youre using a speakerphone please pick up your handset before pressing the keys.

Sam: Same time your questions addressed and you would like to withdraw it. Please press Star then two.

Operator: At this time, we will pause momentarily to assess...

Sam: At this time, we will pause momentarily to assemble the roster.

John Daniel: And the first question comes from John Daniel, what Daniel Hey guys, thank you for including me. Sam, I've got two questions this morning. One is on power and one is on the traditional practice. start with power. The opportunities that you're seeing with Propower, I mean, you all are a Permian Basin company. Are you limiting, or is that not the right way to say it? Are you focused entirely on the Permian for the power side as well? Are you guys looking at opportunities outside the basin? Could you distinguish the opportunities that's both inside the base and outside the base?

John Daniel: And the first question comes from John Daniel with Daniel Energy Partners.

John Daniel: Hey, guys. Thank you for including me.

Speaker Change: Sam I've got two questions. This morning, one is on power and one is on the traditional <unk> business.

John Daniel: I'll start with power.

John Daniel: The opportunities that you were seeing a profile I mean, you all are a Permian basin company are you limiting.

John Daniel: It's not the right way to say.

John Daniel: Are you focused entirely on the Permian for the power side as well are you guys looking at opportunities outside the basin and just could you distinguish the opportunity sets both inside the base and outside the basin.

Sam Sledge: Yeah, John, good morning. Great question. I think, you know, originally, when we set out to design the strategy for our pro-power business. It was gonna be very, very focused just on permeate oil and gas operations. It's still very much is so with these first two deals that we are very close to having contracts on. It's gonna be just that. Those are deals to support production operations. That said, the longer we're in the market, the more we see. across different geographies and different industries. Part of our thesis was to get in the supply chain and to acquire.

John Daniel: Yeah, John Good morning, Great question, I think you know originally when we set out to.

John Daniel: To.

John Daniel: You know designed the strategy for our pro power business. It was going to be very very focused just on Permian oil and gas operations at.

John Daniel: It's still very much is so with these first two.

John Daniel: Deals that we are very close to having contracts on.

John Daniel: It's going to be just that those are those are deals to support production operations that said the longer we're in the market the more we see okay.

John Daniel: Across different geographies and different industries.

John Daniel: Part of our thesis was to get in the supply chain and to acquire power.

Sam Sledge: Power Generators to acquire power capacity that we know was going to be needed just in this. in this increasing demand environment that we see ourselves in. So I think our strategy and thesis is playing out that we're going to build a really strong foundation on Permian oil and gas, something we know very well, customers we know very well. But this is very soon going to create a platform that's gonna be able to service potentially other areas and other industries. So yes, we've sought some of those. for it to hold true to what we're known for from an operational excellence standpoint, these first couple steps, we need to stick to what we know.

John Daniel: Power generators Gen. Two to acquire power capacity that we know is going to be needed just in this.

John Daniel: And this increasing demand environment that we see ourselves in so I.

John Daniel: I think our strategy and thesis is playing out that we're going to build a really strong foundation on Permian oil and gas something we know very well customers, we know very well.

John Daniel: But this is very soon going to create a platform that's going to be able to service other potentially other areas and other industries. So yes, we've we've saw some of those.

John Daniel: Opportunities out ourselves some of those have come in the door unsolicited Lee and we will continue to hold an open ear to opportunities there outside of oil and gas all the Meanwhile, we've got we've got a very distinct focus plan to attack the Permian oil and gas operations pretty.

John Daniel: Pretty exciting, but we know that to get this business off the ground and for it to.

John Daniel: For it to hold true to what were known for from operational Excellence standpoint, Alright that these these these first couple of steps steps, we need to stick to what we know.

John Daniel: Okay, well, thank you for that.

John Daniel: Well. Thank you for that the second one is just on the traditional frac business.

John Daniel: The second one is just on the traditional frac business and recognizing a lot's in flux right now and there's no shortage of uncertainty. But when you look at going from the 14 to 15 fleets down to, say, 13 to 14, is that a function of a customer reducing activity or you choosing to walk away from lower prices or just... The Consequence of Continued Efficiency Gains, just a little bit of color around the change would be appreciated. Yeah, the simple answer is it's a little bit of both, John. As you and I both know, we all know that when oil price takes an aggressive dip, like it did after the OPEC and tariff announcement.

John Daniel: Recognizing a lot in flux right now and there's.

John Daniel: No shortage of uncertainty, but when you look at going from about 14, or 15 fleets down to 13 to 14 or is that a function of.

John Daniel: Our customer reducing activities or you choosing to walk away from lower prices or just the consequence of continued efficiency gains just a little bit of color around the change would be would be appreciated.

John Daniel: Yeah. The simple answer is it's a little bit of both John.

John Daniel: As you and I both know we all know that when oil price takes an aggressive dip like it did after the OPEC and tariff announcements.

Sam Sledge: You know, the customers maybe that have the most flexibility or the most hindered economics are some of the first ones you hear from. And you know, it's really, thankfully, been a very, very small part of our customer portfolio that we've had those inbound calls from. You know, the almost half of our frack. FRAC capacity, as we state in the press release and in the scripted remarks, is under what we call long-term contracts, contracts more than a year. So you, you call it the traditional FRAC business, and it is, but 75% of our capacities burning natural gas is what we call next generation equipment, and almost all of that equipment is garnering long-term contracts, and we think those are going to be very valuable and useful in any market volatility or downside fluctuations, and that's proving out as we sit here today.

John Daniel: You know the customers maybe that have the most flexibility or the or the most hindered economics are some of the first ones you hear from us.

John Daniel: And.

John Daniel: It's it's really thankfully been a very very small part of our customer portfolio that we've we've had those inbound calls from.

John Daniel: You know the.

John Daniel: Almost half of our Frac frac.

John Daniel: Frac capacity as we stated in the press release and in the scripted remarks is under what we call long term contracts contracts more than a year.

So.

Hugh: Hugh you call it the traditional frac business and it is but.

Hugh: 75% of our capacities burning natural gas is what we call next generation equipment and almost all of that equipment is garnering long term contracts and we think those are going to be very valuable and useful and any market volatility or downside fluctuations in and that's proving out as we sit here today.

John Daniel: Okay, that's all I got for now. I'll let others jump in. Thank you very much. Thanks, John. Thank you.

Hugh: Okay, well, that's all I got for now I'll, let others jump in thank you very much. Thanks Todd.

Hugh: Yeah.

Alex Shevelhoffer: And the next question comes from Alex Shevelhoffer. Good morning, everyone, and thanks for taking my question. Yeah, so just to kick us off, kind of following up on that last question there, I just want to maybe put a finer point on what you're seeing in terms of pricing for pressure pumping equipment in the market. I think you said about 50% of your active horsepower is contracted. Just curious if you provide some context on like what spot versus contracts doing and exiting 24 and exiting the first quarter. And naturally, I just assume that there's some benefits from your higher quality assets or newer assets.

Speaker Change: Thank you and the next question comes from Alex Hoffmann with Stifel.

Alex Hoffmann: Hi, good morning, everyone and thanks for taking my question.

Hugh: We're now.

Speaker Change: Yeah. So just to keep yourself kind of following up on that last question. There I just wanted to maybe put a finer point on what youre seeing in terms of pricing for pressure pumping equipment in the market. I think you said about 50% of your active horsepower is contracted at just curious who provide some context on my worst spot versus contracts doing an exiting <unk>.

Hugh: 24, and exiting the first quarter.

Speaker Change: And.

Speaker Change: Naturally I would assume that there's some benefits from your higher quality assets or newer assets. So just any color there would be appreciated.

Sam Sledge: So just any color that you're appreciating. Yeah, I'd say the benefits from the newer and high quality assets, namely, you know, I'll point out our force electric offering, efficiencies and economics on those fleets continue to be very, very attractive and valuable for us. And as it pertains to pricing in the contracted market, I'd say it's very steady. When you're having those, you know, contracted fleet discussions, it's with a certain type of EMP, one that has, you know, a very long view of the future that's trying to create a lot of consistency, continuity, both operationally and financially in kind of their approach to executing on their acreage.

Speaker Change: Yeah, I'd say that the benefits from the newer and high quality assets, namely and I'll point out our force electric offering.

Speaker Change: Efficiencies and economics on those fleets continue to be.

Speaker Change: Very very attractive and valuable for us and as it pertains to pricing and the contracted market I'd say, it's very steady.

Speaker Change: When you're having those contracted fleet discussions, it's with a certain type of E&P.

Speaker Change: One that has you know a very long view of the future.

Speaker Change: Trying to create a lot of consistency continuity, both operationally and financially.

Speaker Change: In in kind of their approach to executing on their acreage. So we still very still feel very confident about our thesis to continue to evolve into more electric more dual fuel fleet overtime as a portion of our portfolio because that market seems very sturdy from a pricing standpoint, it's also very sturdy from an activity standpoint.

Sam Sledge: So we still feel very confident about our thesis to continue to evolve into more electric, more dual fuel fleet over time as a portion of our portfolio, because that market seems very sturdy from a pricing standpoint. It's also very sturdy from an activity standpoint. I mean, these are These are customers where the plan is the plan. And you know, a $5 dip or a $10 dip in oil prices out of nowhere, like we've seen here just recently doesn't really make them blink, they just kind of continue on. with their plan. On the other side of the market, you know, call it diesel or spot, those aren't the same thing, but those markets overlap quite a bit.

Speaker Change: Or.

Speaker Change: These are customers, where the plan is the plan and you know a $5 dip or a $10 dip in oil prices out of nowhere like we've seen here just recently doesn't really make them Blake. They just kind of continue on.

Speaker Change: With their plan on the other side of the market you know call it diesel or spot those arent the same thing, but those markets overlap quite a bit.

Sam Sledge: There's just a lot of, it's very fluid right now. I'd say you're seeing a lot of price discipline, but you're seeing some very, very small areas where, you know, there are some people willing to price enough under us where we would be willing to turn the work away. So we're seeing that happen on the fringes. And, you know, for a company like us that has the balance sheet that we do and the scale and density that we do, when that happens, we're happy to allow that to happen many times because pricing that's significantly below where we are, say, in the diesel or the spot market is extremely unsustainable.

Speaker Change: There's just a lot of it's it's very fluid right now I'd say, you're seeing a lot of price discipline, but you're seeing some very very small areas where.

Speaker Change: You know there are some people willing to price enough under us, where we would be willing to turn that work away.

Speaker Change: So we're seeing that happen on the fringes and you know.

Speaker Change: For for a company like US that has a has the balance sheet that we do.

Speaker Change: And the the scale and density that we do.

Speaker Change: When that happens we're happy to allow that to happen many times because pricing that's significantly below where we are say in the diesel or.

Speaker Change: The spot market is extremely unsustainable.

Sam Sledge: You know, it's not uncommon to see competitors pricing at negative free cash flow. So from a consolidation standpoint, we're happy for that to be consolidation via attrition. when those parts of the market are willing to go that low. Really, as we sit here today, I think it's very important for anybody, especially if you're new to the space listening to this call or maybe you're coming back from a hiatus, that part of the market, which is diesel and spot, is a very small part of the market as compared to prior cycles. In the Permian Basin, you might only be talking about 20-ish percent of the market that is playing in that game.

Speaker Change: It's not it's not uncommon.

Speaker Change: To see competitors pricing and negative free cash flow.

Speaker Change: So from a consolidation standpoint, we're happy for that to be consolidation via attrition.

Speaker Change: When when that when those parts of the market.

Or are willing to go that low really as we sit here today I think it's very important for anybody.

Speaker Change: Especially if you're new to the space listening to this call or.

Speaker Change: Maybe you're coming back from a hiatus that part of the market, which is diesel and spot is a very small part of the market as compared to prior cycles.

Speaker Change: You might only in the Permian basin, you might only be talking about 'twenty.

Speaker Change: 20 ish percent of the market.

Speaker Change: It is playing in that game so it's.

Sam Sledge: So, it's changed quite a bit from both an equipment makeup and kind of a contracted, dedicated situation. That's why we're making it clear, you know, calling out that 75 percent of our fleet is burning natural gas and 50 percent of our fleet is contracted. Almost 100 percent of our fleet is on dedicated agreements that's not contracted. So, yes, I can give you some fringe commentary. We're talking about, you know, a very small part of the market here today.

Speaker Change: It's changed quite a bit from both of them equipment makeup and kind of a contracted dedicated situation. That's why we are.

Speaker Change: Making a clear.

Speaker Change: You know calling out that 75% of our fleet is burning natural gas and 50% of our fleet is contracted almost 100% of our fleet is on dedicated agreements that's not contracted.

Speaker Change: So so yes, I can give you some fringe commentary, we're talking about a very small part of the market here today.

Alex Shevelhoffer: Got it, appreciate it. That's excellent color there.

Speaker Change: Got it appreciate it that's excellent color there and then kind of shifting gears a little bit here I know you touched on this during the prepared remarks, we just saw.

Alex Shevelhoffer: And then kind of shifting gears a little bit here. I know you touched on this during the prepared remarks, but just some maybe added color on your capital allocation framework when you're thinking about funding the power business versus buybacks. And, you know, any opportunities to maybe finance some of the spending like on the initial 110 megawatts with the incremental 80 or how you're thinking about that? Sure. Yeah, I think we're really proud of what we've been able to do. From a capital allocation standpoint, over the last couple of years, you've quite literally seen us do all the above without ever putting our balance sheet in question.

Speaker Change: Maybe added color on your capital allocation framework, when you're thinking about funding the power business versus buybacks and.

Speaker Change: Any opportunities to maybe finance and the spending like on the initial 110 megawatts with the incremental 80 or are you thinking about that.

Speaker Change: Sure Yeah. We're I think we're really proud of what we've been able to do.

Speaker Change: From a capital allocation standpoint.

Speaker Change: Over the last couple of years, you've you've quite literally seen us do all of the above without ever putting our balance sheet in question at.

Sam Sledge: At the top of the stack today, and hopefully this comes through clear in our communications, is our power business and our force electric offering. And probably the main reason why those go to the top of the stack today is because of how known the returns are with those things. in large part due to the contracts that we're able to obtain and the take-or-pay nature of those contracts, where when you're investing a dollar into one of those types of equipment or opportunities, you're all but guaranteed, at least in an oilfield services sense, you're all but guaranteed a specific return that is very attractive and frankly transformational for a business like ours.

Speaker Change: At the top of the stack today.

Speaker Change: And hopefully this comes through clear in our communications as our power business and our force electric offering.

Speaker Change: The.

Speaker Change: Probably the main reason why those go to the top of the stack today is because of how known the returns are with those things.

Speaker Change: In large part due to the contracts that we're able to obtain in the take or pay nature of those contracts, where when you're making when you're when you're investing a dollar into one of those one of those types of equipment or opportunities.

Speaker Change: You're all put guaranteed.

Speaker Change: At least in the and in oilfield services since you're all but guaranteed.

Speaker Change: A specific return that that is very attractive and frankly transformational for a business like ours.

Sam Sledge: And to maybe go one layer deeper on what we're seeing here recently... On the power side and the contracts that we're obtaining, there's one of these contracts that's as long as 10 years. I could almost call them data center life. So, we're not just flippantly saying, you know, these contracts are good, you know, they're, like I said, they're transformational if we can continue to execute. on that on that model in a large way and we think we can. The other capital allocation opportunities, look, you've seen us do M&A, you know, three bolt-on deals in the last couple years, you've seen us buy back, you know, more than 10% of our market cap.

Speaker Change: And then maybe go one layer deeper on on the.

Speaker Change: What we're seeing here recently.

Speaker Change: On the power side, and the and the contracts that we're obtaining theres one of these contracts that's as long as 10 years.

Speaker Change: I can almost call them data center like.

Speaker Change: So we're not just flippantly, saying you know these contracts are good.

Speaker Change: You know there there like I said there are transformational if we can continue to execute on.

Speaker Change: On that on that model in a large way and we think we can.

Speaker Change: The other capital allocation opportunities look you've seen us do M&A.

Speaker Change: You know three bolt on deals in the last couple of years, you've seen us buy back more than 10% of our market cap.

Sam Sledge: over the last, say, 18 months or so. We've also, you know, kind of in the background, continued to allocate capital to, you know, our smaller business lines like Wireline and Cementing that are two very well-positioned, competitive businesses that have high free cash flow conversion. So that's, I mean, that's quite literally five different categories that I just mentioned to you from a capital allocation standpoint. Power, eFleets, M&A, Wireline, Cement, and Buybacks and Shareholder Returns. And we will keep our optionality open to do all of those things moving forward.

Speaker Change: Over the last say 18 months or so we've also kind of in the background and continue to allocate capital to our smaller business lines like wireline and submitting that to vary.

Speaker Change: Ah well positioned.

Speaker Change: Competitive businesses that have high free cash flow conversion.

Speaker Change: So that's I mean, that's that's quite literally five different categories that I just mentioned to you from a capital allocation standpoint power E fleets M&A.

Speaker Change: Wireline cement and buybacks and shareholder returns.

Speaker Change: And we will keep our Optionality open to do all of those things moving forward, we have a framework.

Sam Sledge: We have a framework that we move opportunities through. that helped us make that decision. But as we sit here today, the forces that exist in the market, we really like the power and the E-Fleet opportunities. All the meanwhile, we're gonna allocate capital in a manner that also protects our balance sheet. I got it. I appreciate the color there.

Speaker Change: That we move opportunities through.

Speaker Change: Did that help us make that decision, but as we sit here today the forces that exist in the market.

Speaker Change: We really liked the power and the.

Speaker Change: He fleet opportunities all the Meanwhile, we're going to allocate capital in a manner that also protects our balance sheet.

Speaker Change: Got it got it I appreciate the color there now I will turn it back congrats on the quarter.

Alex Shevelhoffer: And I'll turn it back. Congrats on the quarter. Thanks.

Speaker Change: Thanks.

Waqar Syed: Thank you, and once again, please press star then 1 if you would like to ask a And the next question comes from Waqar Syed with ATV Capital Market. Thank you for taking my question. Good morning. Sam, you know, given where commodity prices are today, you know, how many crews do you expect to be working in by, let's say, June in the Permian versus where they are maybe today or where they were a month ago? Yeah, I think June, Waqar will probably, for the Permian, is that your question, the Permian in general? right here. I think you'll see a downtick in June.

Speaker Change: Thank you once again, please press Star then one if you'd like to ask a question.

Speaker Change: And the next question comes from Waqar Sayed with a T V capital markets.

Waqar Sayed: Thank you for taking my question good morning.

Speaker Change: Sam.

Speaker Change: Given where commodity prices are today, you know how many crews.

Speaker Change: Do you expect to be working and by let's say.

Speaker Change: Julien.

Speaker Change: In the Permian versus where they are maybe today, albeit they were a month ago.

Speaker Change: Yeah, I think I think June will car will probably for the for the Permian is that is that your question that the Permian in general.

Speaker Change: Yeah.

Speaker Change: I think you'll see a downtick in June I don't think <unk> seen much come off.

Sam Sledge: I don't think you've seen much come off. um in total yet here since you know the tariff and the OPEC announcements. But I think you might see a little bit come off in June. Part of our part of our fleet guidance being down kind of a one whole fleet at the midpoint is is us looking at June saying Matt there there could be a little bit of activity come out of the system. For us in June, you might this summer be headed into a setup where, you know, the Permians run 75 to 85 fleets, something like that.

Speaker Change: In total yet here since you know the tariff and the OPEC announcements.

Speaker Change: But I think you might see a little bit come off in June part of our part of our fleet guidance being down kind of one whole fleet at the midpoint is is us looking at June saying Mad there there could be a little bit of activity come out of the system.

Speaker Change: For Us in June you might this summer would be headed into a set up where the.

Speaker Change: The Permian is running 75 to 85 fleets something like that.

Sam Sledge: um So, yeah. So 75, 85, is it versus 100 today? You're probably not running 100 today. You might be closer to 85 to 90 today. Yeah, all right. So about 10 feet or so come out. Now, just to be clear, so today you're still work, you know, running around, you know, 14 feet, you know, 14 creels cruiser, sir? Correct. Yeah.

Speaker Change: Hmm.

Speaker Change: So yeah.

Speaker Change: So 70 585, just is it well it says 100 today.

Speaker Change: Ah you're probably not run at 100 today, you might be closer to 85 to 90 today.

Speaker Change: Yes.

Speaker Change: So about 10 cases do come out.

Speaker Change: Just to be clear today, you stated was running around.

14, four increased screw this up.

Speaker Change: Correct Yeah.

Sam Sledge: Of which, I think, I think interesting, I think another thing interesting to note from an activity standpoint, Waqar is that, you know, headed into May, we'll be running four simulfrac fleets. as well. So that's I know we've we've traditionally given fleet guidance and things like that but you know in the background is some of these fleets are twice the size of a of, say, a normal traditional fleet. I know that that kind of might create a lot of noise when you're trying to fine-tune a model. But these fleets, on average, continue to grow in size.

Of which I think it'd be interesting I think another thing interesting to note from an activity standpoint with cars that.

Speaker Change: Headed into May.

Speaker Change: We will be running for simulcast <unk> fleets as.

Speaker Change: As well so.

Speaker Change: That's I know, we've we've traditionally given fleet guidance and things like that but you know in the background as some of these fleets are twice the size of our.

Speaker Change: I would say a normal traditional fleet.

Speaker Change: I know that that kind of might create a lot of noise when you're trying to fine tune the model.

Speaker Change: But these fleets on average continue to grow in size I think that's not only true for US I think that's true for the entire industry.

Sam Sledge: I think that's not only true for us, I think that's true for the entire industry. Okay, so, you know, your guidance regarding a crew is that that is just being down is just an expectation that come June, you don't have any. Any requests from a customer to release a rig? Yeah, there's there's just some, you know, one or two very small spots where we're getting some pricing pressure that that we're probably not going to be willing to meet on the low side. So we're, we're right now expecting to pull at least one fleet out of the mix in June, if is kind of the broader.

Speaker Change: Okay. So you know the guidance regarding our Kuwait.

Speaker Change: Being down it just an expectation.

Speaker Change: That comes to you and if you don't have any.

Speaker Change: Hum.

Speaker Change: Any request from our customer.

Speaker Change: To me the wrangler.

Speaker Change: Yeah Theres just some.

Speaker Change: One or two very small spots, where we're getting some pricing pressure.

Speaker Change: That we're probably not going to be willing to meet on the low side, So where were right now expecting to pull at least one fleet out of the mix in June if.

Speaker Change:

Speaker Change: It's kind of the broader.

Sam Sledge: Circumstances don't change from a macro standpoint.

Speaker Change: Circumstances don't change from from a macro standpoint.

Speaker Change: Okay.

Sam Sledge: Secondly, on your... CapEx cuts on the pumping side, is that mostly related to one fleet lower or, you know, you mentioned optimization and is that optimization benefits mostly on the E-Fleet side or you're seeing across your entire fleet including your Tier 4 DGBs and others? It's almost all optimization, Waqar. If you, I mean, if you go back and look at our last several. call scripts, and what my team and I've been communicating about the continued wins. on the optimization front, i.e. extending The life of equipment and the large components on that equipment has just been phenomenal.

Speaker Change: And secondly on your.

Speaker Change: Capex Scott for the update.

Speaker Change: <unk> side is that mostly related to one nor are you know you mentioned optimization.

Speaker Change: Then optimization benefits, mostly on the E fleet side are you seeing across the U.

Speaker Change: Our entire fleet, including a tier four DGB than others.

Speaker Change: It's almost all optimization waqar.

Speaker Change: I mean, if you go back and look at our last several.

Speaker Change: Call scripts.

Speaker Change: What my team and I have been communicating about the continued wins.

Speaker Change: On the optimization front ie extending.

Speaker Change: The life of equipment and the large components on that equipment has just been phenomenal.

Matt Augustine: Adam and his team and the work that they've been doing every quarter just seems to continue to surprise to the upside in different ways. So we've continued to issue the challenge to our operations and maintenance teams. and they've continued to raise the bar and knock it out of the park. So, there's probably a very small bit of activity in that CAPEX guide lower, but I'd say almost all of it is optimization.

Speaker Change: Adam and his team and the work that they've been doing.

Speaker Change: Every quarter, just seems to continue to surprise to the upside in different ways. So we've we've continued to issue the challenge to our operations and maintenance teams.

Speaker Change: And they've continued to raise the bar and knock it out of the park so.

Speaker Change: There is probably a very small bit of activity in that Capex guide lower but I'd say almost all of it is optimization, Matt do you want to add to that yeah. Waqar. This is Matt I think you know.

Matt Augustine: Matt, do you want to add to that?

Matt Augustine: Yeah, Waqar, this is Matt. I think, you know, the point on the activity is really indicative in the range we're providing on the completion side, the 125 to 175. And that wider range is more of an indication of our flexible CAPEX program, depending on how activity flushes out through the rest of the year. And then in terms of your mobile power, you mentioned there's a mix between turbines and reciprocating engines.

Speaker Change: The point on the activity is really indicative of it in the range, we're providing on the completion side the 125 to $1 75.

Speaker Change: And that that wider range is more an indication of our flexible Capex program.

Speaker Change: Pending on how activity flushes out through the rest of the year.

Speaker Change: Okay great.

Speaker Change: And then in terms of your mobile power.

Speaker Change: You mentioned that the mix between turbines addressable creating engines.

Matt Augustine: Why are you deciding between one versus the other or is it all the recent orders have been all reciprocating engines and these turbines are mostly some of the legacy equipment that you have? No, these are all new. We have a team in our pro-power leadership team that has vast experience in both. Our initial approach has also been one of flexibility and modularity. You know, we want to be able to open ourselves to many different types of opportunities. You know, these first couple of deals that we... announced and communicated today are going to go to oil and gas production operations.

Well why are you deciding between one versus the other or is it all of the recent.

Speaker Change: Or does that mean, all the rest of locating antennas and these deadlines that mostly the some of the legacy equipment that you have.

Speaker Change: No. These are these are all new.

Speaker Change: We have a we have a team in our pro power leadership team that has vast experience in both.

Speaker Change: Our initial approach has also been one of flexibility and modularity.

Speaker Change: We want to be able to open ourselves to.

Speaker Change: Many different types of opportunities you know these these first couple of deals that we.

Speaker Change: Announcement communicated today youre going to go to oil and gas production operations.

Matt Augustine: But those assets will be usable across more than just that, midstream, frac, industrial applications. That's a big part of our strategy. And then another part is just availability, right? This is a crowded supply chain that we're continuing to compete in and try and carve out our spot in. So, you know, a very small part of this is what you can get your hands on. But what we've been able to get our hands on thus far has been very well fit to our strategy to be able to do many different things. And we will continue to evolve this portfolio over time.

Speaker Change: But those assets will be usable across more than just that midstream frac.

Speaker Change: Industrial applications.

Speaker Change: That's a that's a big part of our strategy and another part is just availability right. This is this is a crowded supply chain that we're continuing to compete in.

Speaker Change: And trying to carve out our spot and so you know a very small part of this is what you can get your hands on.

Speaker Change: But what we've been able to get our hands on thus far has been very well fit to our strategy to be able to do many different things. So we will we will continue to evolve this portfolio over time.

Matt Augustine: We're simply just getting started. And, you know, we expect this power business to be a very meaningful part of the overall business moving forward. So, you know, we'll look to grow from here.

Speaker Change: We're simply just getting started and we expect this power business to be a very meaningful part of the overall business moving forward. So.

Speaker Change: We'll look to grow up from here.

Speaker Change: Okay.

Matt Augustine: Great.

Matt Augustine: Well, thank you very much for your time. Thanks, Waqar.

Speaker Change: Great well, thank you very much for your answers.

Speaker Change: Thanks Waqar.

Arun Jayaram: Thank you. And the next question comes from Arun Jayaram with JPP. Hey, Sam, how are you and team?

Arun Jairam: Thank you and then I saw that comes from Arun Jairam with J P. Morgan.

Speaker Change: Hey, Sam how are you and team.

Arun Jayaram: I wanted to see if you could kind of elaborate on your longer term ambitions on the on the force new builds as we think about, you know, capital allocation over the balance of the year and into 2026. Yeah, I think you've always heard us say that we think electric frack is the future. You know, if you just look long, long term 10, 20 plus years We fully expect, you know, North America shale to continue to industrialize. And we think a huge part of that is electrification. So that's been the thesis for years, frankly. That said, you have to be able to carve out the right opportunities in the market.

Speaker Change: I wanted to see if you could kind of elaborate on your longer term ambitions on the on the force Newbuild as we think about capital allocation over the balance of the year and into 2026.

Speaker Change: Yeah.

Speaker Change: Yeah, I think you've always heard us say that we think electric Frac is the future. You know if you just look long long term 10 20 plus years.

Speaker Change: We fully expect North America scale to continue to industrialize, and we think a huge part of that is electrification.

Speaker Change: Patients.

Speaker Change: So that's been the thesis for years frankly.

Speaker Change: That said you have to be able to carve out the right opportunities in the market and we did that pretty aggressively with our first four fleets because.

Sam Sledge: And we did that pretty aggressively with our first four fleets because The E-Fleet market was frankly just growing very quickly at that time and opportunities were vast. I'd say we're kind of starting to trend from growth to maturation in the E-Fleet market. The first wave of e-fleets that were built even before ours are, you know, coming off of their initial contracts. and you know many of the largest EMP operators have gotten most of what they need. That doesn't mean that it's still growing. I think it's just growing at a slower rate. That's why I say it's kind of trending on.

Speaker Change: Deeply market was frankly, just growing very quickly at that time and opportunities where fast.

Speaker Change: I'd say, we're where we're kind of starting to trend from growth to maturation in the fleet market.

Speaker Change: The first wave of E fleets that were built even before ours or you know coming off of their initial contracts.

Speaker Change: And.

Speaker Change: Many of the largest E&P operators have gotten most of what they need that doesn't mean that it's still growing I think it's just growing at a slower rate. That's why I say, it's kind of trending on.

Sam Sledge: maturation.

Sam Sledge: So I think you should look for us to continue to transition into more E-fleets maybe at a rate of one to two a year in perpetuity. because we think those opportunities are going to be there. We think it's the right thing to do for our financial returns and the consistency in those returns and we'll be very tactical and picky about how we choose to do that, who we choose to do that with.

Speaker Change: Maturation. So I think you should look for us to continue to transition into more of your fleets may be at a rate of one to two a year in perpetuity.

Speaker Change: Because we think those opportunities are going to be there. We think it's the right thing to do for our financial returns and the consistency in those returns.

Speaker Change: And we'll be very <unk>.

Speaker Change: Tactical and picky about how we choose to do that we choose to do that with so as we said our remarks earlier, we've got a fifth coming.

Sam Sledge: So as we said in our remarks earlier, we've got a fifth coming this year. Another thing that I think is interesting to note, we have four running today, one of which is a 200 barrel a minute thermal frag. So that's basically two regular fleets. So however you want to slice and dice it, you could say we have technically a five worth of horsepower working today, you know, going on six, but that's five. for for real profit centers as it pertains to, you know, crude fleets and customers going on five. today, but, you know, we're gonna, we're gonna stay in the market there.

Speaker Change: This year another thing that I think is interesting to note. We have four running today, one of which is a 200 barrel a minute simultaneously.

Speaker Change: So that's basically two regular fleets. So however, you want to slice and dice that you could say we have technically a five worth of horsepower working at battle going on six but that's five.

Speaker Change: Four four real profit centers as it pertains to crude fleets and customers going on five.

Speaker Change: Today, but.

Speaker Change: We're going to we're going to stay in the market there and look I think I think our I think we should expect the existing eclipse, we have many of them to look to transition to <unk> in the future too.

Sam Sledge: And look, I think, I think, I think we should expect the existing E-fleets we have, many of them to look to transition to Simul in the future, too. That's These E-fleets are really built for that type of work. I think our customers that are running zippery fleets are starting to understand that. I think there's an interest to convert many existing e-fleets to simul as well. I'm sorry, that was a long-winded answer. Hopefully, I answered your question.

Speaker Change: These these E fleets are really built for that type of work.

Speaker Change: But I think our customers that are running zipper. He fleets are starting to understand that.

Speaker Change: I think there's a there's an interest to convert many existing fleets to silo as well so.

Speaker Change: Sorry that was a long winded answer hopefully I answered your question.

Sam Sledge: No, that was super helpful. You mentioned a couple of LOIs for 75 megawatts of power generation. Can you help us think about, you know, what type of returns you're seeing on these type of opportunities versus maybe some opportunities you have of reinvesting in the frac side of the business, how the returns are looking? Yeah, so we're executing on exactly what we've said previously that you're looking for, you know, 4-year paybacks, if not a little bit better on those assets, cash-on-cash paybacks. which in turn ends up generating in the ballpark of $300,000 of EBITDA per megawatt per year.

Speaker Change: That was Super helpful. You mentioned, a couple of L. O wise for call. It 75 megawatts of power generation.

Speaker Change: Can you help us think about.

Speaker Change: What type of returns you're seeing on these type of opportunities versus maybe some opportunities you have.

Speaker Change: Of reinvesting in and the Frac side of the business Yeah, how does it return to chicken.

Speaker Change: Yeah, I'd say, we're executing on exactly what we've said previously that Youre looking for.

Speaker Change: Four year paybacks, if not a little bit better on those assets cash on cash paybacks.

Speaker Change: Which in turn ends up generating you know in the ballpark of $300000 of eat of EBITDA per megawatt per year, that's the that will equate to that.

Sam Sledge: That will equate to that. for your payback pretty closely. But so those that that still holds true.

Speaker Change: Four year payback pretty closely.

Speaker Change: But.

Speaker Change: So those that that still holds true we'll keep it pretty tight you know a whole lot of cards pretty tight in terms of other parts of those contracts because we think we're doing a unique.

Sam Sledge: Well, we'll keep it pretty tight. You know, we'll hold our cards pretty tight in terms of other parts of those contracts because we think we're doing a unique. Thanks, um, in the market commercially. Uh, but we're super excited about this and the willingness and the openness of the EMPs to contract with us is, is definitely there. This is not. This is not kind of a new thing that we have to be worried about them taking us up on. This is, we're doing things that are frankly right now on the, on the production operations side in PSPACE that are just ensuring their operations in general, while at the same time we're helping them lower their OPEX significantly and lower their emissions significantly.

Speaker Change: And the market commercially.

Speaker Change: But we're super excited about this and the willingness and the openness of the E&ps to contract with us as.

Speaker Change: It is definitely there this is not this.

Speaker Change: This is not kind of a new thing that we have to be worried about them, taking us up on this as well.

Speaker Change: We're doing things that are frankly, right now on the.

Speaker Change: On the production operations and P space that are just ensuring their operation in general while at the same time, where we're helping them lower their opex significantly and lowered their emissions.

Sam Sledge: So it's pretty, it's pretty exciting stuff. It's a real win-win opportunity.

So it's pretty it's pretty exciting stuff, it's a real win win opportunity.

Sam Sledge: All right, great, thanks a lot.

Speaker Change: Alright, great. Thanks, a lot.

Speaker Change: Thank you.

Sam Sledge: And this does conclude the question and answer session, I would like to turn the conference back to Samuel Sledge for any closing comments. Thanks everybody for tuning in today. Thanks for your interest in the company. We look forward to talking to you again soon. Have a great day. Thank you.

Speaker Change: And this does conclude the question answer session I would like to turn the conference back to Sam sledge for any closing comments.

Sam Sledge: Thanks, everybody for tuning in today. Thanks for your interest in the company. We look forward to talking to you again soon have a great day.

Sam Sledge: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Operator: The conference is now concluded. Thank you for attending today's presentation.

Operator: You may now disconnect. Copyright © 2020 Mooji Media Ltd. All Rights Reserved.

Sam Sledge: Yeah.

Sam Sledge: [music].

Sam Sledge: Okay.

Sam Sledge: [music].