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Good day, and welcome to the ProPetro Second Quarter 2023 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Matt Augustine, Director of Corporate Development and Investor Relations. Please go ahead.

Thank you, and good morning. We appreciate your participation in today's call. With me today is Chief Executive Officer, Sam Sledge; Chief Financial Officer, David Schorlemer; and President and Chief Operating Officer, Adam Munoz. This morning, we released our earnings results for the second quarter of 2023. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. 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 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, after our prepared remarks we will hold a question-and-answer session. With that, I would like to turn the call over to Sam.

Thanks, Matt, and good morning, everyone. Building on our strong momentum, ProPetro again delivered solid results in the second quarter. David will walk you through our financial results in a few minutes, but first, I'd like to go over a few highlights from the quarter and take stock of where we are halfway through the year. As we've discussed many times, modernizing our fleet has been an important strategic priority, and this quarter we were pleased to deploy our seventh Tier 4 DGB dual-fuel hydraulic fracturing fleet. As expected, given our diversified blue-chip customer base, demand for our dual-fuel portfolio remains very strong and more insulated from any near-term bobbles in the market. Additionally, in the third and fourth quarter we begin our new FORCE electric frac fleet deployments. We plan to deploy our first fleet in August and the second fleet early in the fourth quarter. We are also still on track to deploy 2 additional FORCE fleets in the first half of 2024. With the ongoing, high demand for this equipment, we plan to begin operating these fleets as soon as we receive them. As you all know, we acquired Silvertip Completion Services in November of 2022, therefore making our entry into wireline services, and we are pleased to have seamlessly integrated the company since that time. The Silvertip acquisition continues to be a significant tailwind for ProPetro's earnings and free cash flow profile. ProPetro has developed a strong track record for identifying, acquiring and successfully integrating high-quality assets, and we continue to make excellent progress on our strategic initiatives. We will continue to seek value-accretive acquisition opportunities to further enhance our growth. As always, we will be disciplined and opportunistic in deploying capital, prioritizing only high-return opportunities that will enhance free cash flow and create shareholder value. Consistent with our overarching focus on delivering strong returns for investors, in addition to reviewing value-enhancing acquisition opportunities our board and our management team also prioritizes the return of capital to ProPetro shareholders. During the second quarter, we were pleased to announce a $100 million share repurchase program. The program gave authorization to repurchase approximately 13% of the company's market capitalization based on the value of the shares at the time of the announcement in mid-May. The share repurchase program is directly aligned with our strategy to drive free cash flow growth and create value for our shareholders. Through this program, we plan to capitalize on dislocations between the Company's public equity valuation and what we believe is its intrinsic value. During the second quarter, the company repurchased approximately 2.3 million shares for about $17.5 million, at an approximate 27% discount to the current share price as of July 31, 2023. This represents 2% of total outstanding shares. I would now like to address the market environment and recent headwinds and provide some detail on how we're navigating through the choppiness. Undisciplined pricing concessions at the expense of keeping fleets utilized, especially from some of our distant peers exposed to the spot market, did have an impact on the overall frac market. Due to some of these circumstances, we elected to sideline 1 fleet during the quarter. This was an easy decision for us given the low pricing we would have had to put forward to keep the fleet operating, and we are now able to strategically preserve these assets and not run the equipment at sub-economic levels. I want to reiterate that we are committed to only running our fleets at economic levels that earn full-cycle, cash-on-cash returns. I do want to note that because of our disciplined approach and our bifurcated offering, we have been able to effectively offset much of the pricing pressure in various ways, including directly handling or contracting more materials and services on location. We believe that ProPetro is positioned to effectively handle materials and services on location, and we'll continue to pursue more of that market. Even in the face of the headwinds I just mentioned, we remain confident in our ability to continue to deliver strong financial results. Looking into the future, we remain bullish on ProPetro's potential for growth and value creation over the next several years. We believe we are still in the early stages of a sustained upcycle that will be supported by the industrialization of the frac space, which is more resilient and disciplined than previous cycles. And we believe ProPetro is well positioned to succeed in this new chapter for our industry. We do expect the second half of the year will be only slightly down from operational levels that we saw in the first half. Therefore, we believe the current rig count is approaching the bottom and it's possible it might already be on bottom. Importantly, despite some of these challenges across our industry, we are not slowing down. ProPetro offers differentiation in our service quality, equipment, customer portfolio and operational density in the Permian. We believe in this bifurcation internally and also hear this directly from our customers. This differentiation continues to insulate us from some of the market inconsistency outside of the Permian and in the spot market. We are confident that our continued capital discipline and improved free cash flow profile will allow us to maintain a strong balance sheet as we move forward while also executing opportunistically on our share repurchase program. As always, we remain focused on executing our strategy, which has proven successful throughout various economic cycles, to deliver superior returns for shareholders. Finally, I'd like to take a moment to thank our incredible ProPetro team. It's their continued dedication and hard work that helps us achieve consistently solid results quarter over quarter. Now I'll turn the call over to David to discuss our second quarter financial results. David?

Thanks, Sam, and good morning, everyone. We have some great news to discuss today regarding our financial performance and progress in our strategic initiatives. While executing the share repurchases, we also paid down $15 million in debt and continued to maintain strong liquidity. Since announcing the share repurchase program, ProPetro's share price has increased nearly 50% as of July 31. Coupled with our strategy execution, we've been working hard to enhance transparency. And thanks in part to our strong investor engagement program, we believe our story is beginning to resonate with the financial community. Increasingly, investors and analysts are telling us that they recognize ProPetro's compelling value and potential. This is evidenced by our leading relative share price performance over the last three months. Moving on to our second quarter financial results. We generated $435 million of revenue, a 2.8% increase over the first quarter of this year. Notably, we experienced nearly 2x the amount of weather days during the quarter relative to last year, due to severe lightning in the Permian Basin, and we also idled 1 fleet for over a month due to inadequate pricing. These impacts resulted in lost revenue of approximately $15 million to $20 million, with the most significant impacts during May and June. Adjusted EBITDA decreased 5% sequentially to $113 million, largely due to unabsorbed costs related to the increased weather days and the idled fleet and our decision to retain the crew for continuity, going forward. In spite of those impacts in the quarter, our effective frac fleet utilization of 15.9 fleets was on the high end of our prior guidance of 15 to 16 fleets. Consistent with our disciplined asset deployment, or margin-over-market share strategy, we will not run our equipment at sub-economic levels. Therefore, our second half 2023 guidance for frac fleet utilization is slightly down, to 14 to 15 fleets. As we've previously mentioned and in line with our fleet transition and replacement strategy that does not expand net capacity in the market, we retired an additional 30,000 hydraulic horsepower of Tier 2 conventional diesel frac equipment in the second quarter. So far this year, we have retired 100,000 horsepower of Tier 2 equipment, with more retirements expected in the coming quarters. Moving on, cost of services, excluding depreciation and amortization, for the second quarter of '23 was $298 million, versus $280 million in the first quarter, with the increase primarily driven by a higher level of activity across our service lines. Second quarter general and administrative expense of $29 million was flat as compared to the prior quarter. G&A expense excluding management adjustments was $25 million, or 5.7% of revenue. Management adjustments include $4 million of nonrecurring and noncash items, including stock- based compensation and other items. Depreciation and amortization was $53 million in the second quarter, and we continue to expect D&A to be in this range, going forward. The company achieved net income of $39 million, or $0.34 per diluted share, compared to net income of $29 million, or $0.25 per diluted share, in the prior quarter. This is the highest quarterly net income reported by the company since the first quarter of 2019 and our fourth consecutive quarter of increasingly positive net income. During the quarter, we incurred $115 million of capital expenditures. Actual cash used in investing activities, as shown on the statement of cash flows, for capital expenditures, net of proceeds, in the second quarter was $108 million, with free cash flow of $6 million. This figure differs from our incurred CapEx number due to differences in timing of equipment receipts and cash disbursements. We are reaffirming our previously provided CapEx range for 2023, which we expect to be between $250 million and $300 million, with a bias toward the upper end of the range due to our Tier 4 DGB and FORCE electric fleet deployments this year. Additionally, as quarterly CapEx decreases in the second half of the year, we expect this to contribute to accelerating free cash flow over the coming quarters, to be utilized for further debt reduction, opportunistic share repurchases and other strategic opportunities. Moving on to our capital structure. Our balance sheet and liquidity position remain strong to support execution of our strategy. As of June 30, 2023, total cash was $62 million and our borrowings under the ABL credit facility were $60 million. Total liquidity at the end of the second quarter of '23 was $170 million, including cash and $108 million of available capacity under the ABL. As mentioned, since the close of the second quarter we paid down our credit facility by $15 million. And as of July 31, our cash balance was $63 million, and we had $45 million of borrowings under our ABL, with $175 million of total liquidity. As I noted during our first quarter call, ProPetro's balance sheet is strong, and we remain committed to disciplined capital deployment for the long term. This strength and capital discipline enabled us to develop and install certain commercial architecture that will benefit the company for years to come; namely, our capital-light, long-term lease agreement for our FORCE electric-powered frac fleets. This lease agreement reduces our capital requirements and improves our operating cost profile, while enabling ProPetro to accelerate the transformation of our fleet to emissions-friendly assets that are in high demand in the market. Lastly, and this is incredibly important to understand about ProPetro, over the last 18 months and through the end of this year we will have invested nearly $1 billion in recapitalizing our fleet and bringing state-of-the-art technologies and completion services to ProPetro. By the end of this year, we will have transformed our fleet to become the youngest and one of the most valued fleets in the industry. Attend a few industry or investor conferences and you'll hear our customers talk about the ProPetro difference. It's real and we have the accolades to prove it. This differentiation in strategy has delivered a tremendous value proposition for our customers and an opportunity for our shareholders. And the indicators of our successful strategy are already clearly visible: continued earnings strength, a transformed fleet of highly desirable assets and services, positive free cash flow, debt reduction, share repurchases, share price outperformance and strengthening liquidity. With this significant investment as a foundation, essentially a down payment on our future success, we expect to yield continued strong financial returns for many years to come. Let me now turn the call back to Sam for some closing remarks.

Thank you, David. Before we turn it over to Q&A, I'd like to touch again on ProPetro's differentiated offering. We are proud to offer industry-leading service quality and service equipment with next-generation capabilities that will be 2/3 of our fleet in early 2024 and a robust customer portfolio that comes with operational density in the Permian Basin. While we continue to face market pressures in some areas, our best-in-class commercial architecture and superior execution in the field are distinct competitive advantages for ProPetro. As demonstrated, our sophisticated pricing model supports our asset deployment decisions, and we will remain disciplined by not sacrificing our fleet at the expense of pricing concessions. Furthermore, we are not going to stress our operating system with fleets operating at sub-economic levels. Instead, we're focused on navigating the near term in a disciplined manner with long-term value in focus. As a result, we believe this will set us up for outsize upside in 2024 and beyond. Here at ProPetro, we are relentlessly focused on the execution of our strategy, as I have stated earlier, and we have no plans of letting up. We recognize the fundamental change needed in the servicing space to focus on industrialization. We also expect that the continued optimization of our operations and industrialization of our business will unlock continued free cash flow growth. In addition, we will continue to transition our fleet in a capital-light manner and pursue opportunistic strategic transactions that accelerate value for our shareholders, while also not expanding capacity in the marketplace. We are confident that we can achieve all of this while generating enhanced shareholder returns through our capital discipline and strategic approach. Finally, I'd like to once again thank the entire ProPetro team for their outstanding and safe performance this quarter and enabling our management team to move forward confidently with this strategy. With that, I'd like to now open the line up for questions. Operator?

[Operator Instructions] The first question we have is from Luke Lemoine of Piper Sandler.

Sam, you comment on the sum but stacking of fleet to maintain pricing, and your overall 2Q rev per fleet was pretty flat. Do you think with your discipline and your frac calendar, operational performance in the second half can be pretty close to the first half as far as EBITDA per fleet?

Luke, I think it can be close. There's a few moving parts, I think we mentioned some of those in our prepared remarks here recently, where we might be slightly adjusting pricing, but picking up margin on other parts of the location, wireline sand, logistics, all those other things. So I think we're looking here in the next couple of months to see how that settles out. But look, we're pretty confident that fleet activity should remain in that 14 to 15 range. If anything comes at us to the downside, we think we're well positioned to handle that. That said, I mean, this is, and you know our story well, this is very much a story of a very focused, dedicated approach. There's almost 0 spot market exposure here as it pertains to the customers and the programs that we're currently working with. So yes, we're confident that activity holds up well. And we think as compared to Q2, we think there's a really great opportunity that profitability hangs in there as well on a per-fleet basis.

Okay. And just on your fleet retirements, another 30,000 this quarter, I believe; 100,000 year-to-date. So basically two fleets. Is it fair to assume this picks up more as the e-fleets are deployed later this year? Or how should we think about that?

David might want to make an additional comment to this, but I think it's just pretty steady throughout the year. A lot of that is in tandem already with the dual-fuel conversions we've been doing, basically bringing new equipment into the system and retiring old equipment as that transition happens. So I think it's a fairly linear retirement process for us if you look over the span of 2023.

Yes, I would agree.

The next question is from Arun Jayaram, of JPMorgan.

Sam, I was wondering if you could kind of describe what you're seeing in terms of the bifurcated market for equipment between kind of dual-fuel and diesel, and are you seeing kind of premiums for the dual-fuel reflect the gas-to-diesel arbitrage? Or are you seeing even more of a premium being placed on those dual-fuel fleets?

That's a great question, Arun. I think this is not only a big part of our story here at ProPetro, maybe as it pertains to large Permian frac players that might be -- we might be affected the most by these dynamics in a positive way, but this is a huge story for the whole sector, this bifurcation. And along the lines of some things you mentioned, equipment type and spot market or dedicated exposure, we are really seeing things play out almost exactly how we thought they would. And look, you had crude pricing get a little weak in certain points of Q2. There were a few of our customers that wanted to talk to us about different pricing arrangements. Almost none of that happened across our dual-fuel fleet, which was just confirmation of those investments and that transition that we made, that that equipment is differentially positioned from a competitive standpoint. We think that will continue to be the case in the future with dual-fuel and probably even more so with electric for the players that are. So that's kind of just a look into what's happening on the differentiated equipment offerings. Also, the spot market dedicated market, I think, showed through in the quarter, where we saw some headwinds and crosswinds, where the dedicated customers, the conversations with them are just completely different conversations than a customer too that we were serving in the spot market. I wouldn't even call the fleet we parked a spot fleet either. We were in the process of changing back to a previously dedicated customer that went back out to RFQ for their work and got some just too-good-to-be-true pricing from some of our smaller competitors, and we were happy to let them pursue that while we preserved the assets and our people to go attack better returns in the future. Easy decision for us, like I said in our scripted remarks. A third thing that's happening in the market from a bifurcation standpoint is just execution on location. You've heard us talk about this time and time again on these earnings calls. We think this is one of our greatest competitive moats, is to just be better at the wellhead than anybody else is. So there still remains a bifurcated market as it pertains to that as well.

That's helpful. And Sam, how do those views on the dual-fuel or this bifurcation influence your future CapEx plan that David mentioned of almost $1 billion of CapEx in terms of fleet renewal thus far or, I guess, at the end of the program? I think you have 7 Tier 4 DGB fleets now. Do you expect to expand that number over time? And do you have any preliminary thoughts on 2024 CapEx?

The three different offerings that we'll have will be kind of, from top to bottom from a fuel standpoint, will be electric -- we'll have 4 electric fleets by Q1 next year, 7 dual-fuel fleets and the difference, maybe 5 or 6, diesel fleets. Today, we believe that we are most competitive if we have all 3 of those. In the future, E&P consolidation continues. Some of these very active E&Ps and customers of ours begin to plan further and further out. We think that the demand for dual-fuel and electric only strengthens from here. So as we look at that through the CapEx allocation lens, it tells us to push every dollar of CapEx towards the top end of that offering that we can: dual-fuel and electric. It doesn't mean that diesel completely goes away, but it means we're less apt to rebuild or refurbish a diesel-only piece of equipment than we were, say, a year or 2, 3 years ago. So I think you can look for us in the future to be more dual-fuel and more electric, and I think that we're kind of taking each quarter or year as it comes to help us better understand what is the best mix. We think we are very well positioned going into next year, being more than 2/3 dual-fuel and electric. So we're going to lean on that hard going into next year and reassess as we start to build the budget for 2024.

This is David. Just to give you a little color, again, we're not ready to give you 2024 guidance, but I think as you saw in 2023 CapEx stepping down, we would expect another step down in 2024 as we begin to deploy and have most of our fleet configured around our newer offerings. So certainly some progression there favorable on the CapEx side next year.

The next question we have is from Scott Gruber, of Citigroup.

I wanted to stay on the DGB question. I'm just curious, how is the availability for gas in the Permian to really maximize the diesel displacement on the DGB fleets? Is it pretty good today? Or are there shortages out in the marketplace? And I'm curious how often you're able to take advantage of field gas versus CNG?

Thanks for the question, Scott. It makes me think about a couple of different things. I think one of which is just the regional gas availability. We have a couple of customers that are trying to use as much in-field or field gas as they can. Maybe at times, we have to pair that with a little bit of CNG to keep up with the high displacement rates that we're seeing. But I think what leads the way sometimes is regionally, is our customer out in the Delaware in a more stranded location or are they in the Midland Basin where CNG is very readily available. There's kind of some puts and takes there. Second to that, I think, is just how much gas we're displacing, which we think we're doing as good, or maybe better, than any of our peers in that realm. And having a gas partner, whether that be the in-field transportation or trucking of CNG, that can keep up with that displacement, and this is going to be vital as we move into the electric space as well. So part of it is regionally are we close to good gas sources. The other part of it, to me, is do we have all the right services and partners to support a high-performing operation that consumes a lot of gas. And look, I think we're doing pretty good there. I think our customers are pleased with our displacement. But we're not done. We want to continue to push the envelope to maximize the value of these assets.

Got it. That's good color. And then one on just kind of the near-term prospects. You mentioned you're at 14 fleets today, but could potentially see 14 to 15 in the second half of the year. So what's the prospects today to put another fleet back to work before the end of the year?

I think it depends. I think we're just in an interesting time right now where we're coming out of a time period where many of the E&Ps in the Permian were kind of pulling back because you saw crude in the $60s and they were trying to make economic decisions there. And now we see crude kind of back in the low $80s and I think a pretty good strong macro outlook for crude in the back half of the year, at least we believe that. So I think we're kind of waiting to see how that pairs with customer decisions and just remaining as disciplined as possible around only putting assets in the field at prices that make sense to us. So I think if you see $80-plus crude persist through the end of the year, I think the likelihood of putting the 15th back in the system is pretty good. But we'll see if that's what the market gives us.

Our next question is from Kurt Hallead, of Benchmark.

I was kind of curious, if you look at the -- you've got the 4 e-fleets that are coming in here in the second half of '23 and first half of next year, and some recent discussions with some of the other major players in the business that are deploying e-fleets as well have kind of indicated that they're seeing contract terms as long as 3 years. So I'm kind of curious as to what kind of discussions you're having, what does the term structure look like on that front.

Good question. I'd just like to remind everybody that we do have our first e-fleet contracted on a long-term agreement, very similar to a time frame that you just mentioned. We're really excited about that. It's with a premier operator that has a lot of experience in the e-fleet space. So we're excited to get that fleet on the ground here just really in the next few weeks. We've got great, great demand for #2, #3 and #4. We have various, I would say, very developed conversations, contract negotiations going on with those fleets. That said, we are from an economic standpoint incentivized to put those fleets to work right when we get them. The cost of ownership is lower. The assets are more purpose-fit for the jobs we're doing today. So we are motivated to get that equipment in the field. But look, we're super confident that all 4 of these fleets are going to be contracted and they're going to be on long-term agreements that have some type of minimums or take-or-pay mechanisms in them. And just as a leader in this space, I'm personally really excited about that transition into more committed work with more purpose-fit assets. And I think over the next 5 years or so, you're going to see more equipment, more agreements like this across the space, and we're proud to be a heavy participant in that.

Okay. That's fair. And you guys referenced it in your commentary here, that you had a $15 million to $20 million impact in the second quarter with the combination of some weather and idling of frac crew. Then you talk about some modest decline in the second half of '23 relative to the first half in terms of your EBITDA progression. So can you help us take the guesswork out of this? And what kind of magnitude of decline in EBITDA are you looking for in the second half?

I think, as Sam mentioned on one of the prior questions, we're not looking at significant declines from here. We feel like 14 to 15 is about what it looks like, going forward. So July revenues look to be up just a little bit from June, and we're not expecting any kind of material changes from that activity level. I think there's opportunities, but we feel good with the remainder of the year. And keep in mind, I mean, we're not running this company for the next quarter; we're running it for the next several years. And making the investments, having the pricing discipline and the asset deployment strategy and also doing things like bringing industrial equipment into our mix like the e-fleets is really for the long term. And I think that's what we'd like to focus on.

Okay. Just maybe one more for Sam. Just in the context of you mentioned diesel still being part of your fleet, moving forward. I'm just kind of curious, what's the economic benefit or economic incentive to have diesel still be part of your asset mix?

I think if you just look at the pure cost incentive for us and our customer and on the dual-fuel side the ability to displace diesel, use more natural gas, I think the benefit is somewhere between maybe $5 million and upwards of $20 million a year, depending on the customer and the gas price, and that could manifest itself in maybe a 10% to 20% price decrease. And that's what makes us really excited about electric, because it's 100% gas and the savings, when executed correctly, can be pretty big. But back to your question about diesel, it's just that this transition is also coming with the transition on the E&P side and their willingness to kind of trust in what those savings are or [spool up] an operation that needs to do things like gas logistics and gas purchasing. So it's just a bit of a transition that we think will persist into the future, and we think that you're going to see dual-fuel as being more of the base load from a Permian frac operations standpoint. We've got some of the best infrastructure in the world out here in the Permian Basin as it pertains to moving these molecules around. So I think as more and more E&Ps up and down the kind of sophistication chain start to understand what the opportunities are there, the more likely we're going to see more and more dual-fuel in the system. I'll also say that the one thing we really like about this dual-fuel equipment is that it can burn 100% diesel, too. It costs a little bit more, so we don't like to do that as often, but in a tight market it could very likely make sense to deploy dual-fuel assets in the future, while still burning 100% diesel, if pricing takes a leg up from current pricing levels. So it's also very flexible, and we really like that as well.

And Kurt, this is David. We're running different scenarios on fleet configuration. So if the market is demanding a higher proportion of electric and other types of assets, we have the ability to pivot, particularly using the commercial architecture that we talked about in our comments, to facilitate that. But in any way, we're going to be disciplined about how we do that.

The next question we have is from Derek Podhaizer, of Barclays.

So you talked about that customer that idled the fleet with you guys. They got pricing on the spot market that was too good to be true. Just wanted to ask, do you believe this will weigh on the dedicated pricing market as you move forward into RFP season, just as we start thinking about 2024 pricing and profitability? Or do you consider what happened to be more of a one-off?

I think it could. I think we're naive to think, Derek, that it won't weigh, that it couldn't weigh on RFP for 2024. I think it remains to be seen if it will. So I hold out hope and confidence that it won't, and if it does, it will be very minimal. That said, I think it's important to just remind anybody that's paying attention to OFS or the frac sector, more specifically, is that there's more pricing discipline in the system than we've seen in maybe a couple of decades; definitely, in my 12-year career. I've never seen this much price discipline. So in a volatile market that we play in that is full of entrepreneurs, you're always going to have some maybe less logical things happen in certain parts of the cycle. I don't think that ever goes away totally. I think what we've seen over the last couple of years is that the amount of that type of, what we'll call, irrational behavior is less than it's ever been, which makes us confident in the medium- and long-term future for ProPetro and for our sector, in general.

Well, Derek, the other thing, we're now sitting at over $80 a barrel oil and with a $15 million draw on inventories. I think people are beginning to see that supply constraint play into the market and also into crude prices. So I think as we move into the second half of the year, that could create a bit more sensitivity to securing service supply for next year than maybe has persisted over the last, call it, 4 to 6 months, and we might be looking at something more akin to the first quarter of this year in terms of the pricing dynamics and market dynamics. And I think that's what you're hearing from our larger peers, other oil service companies. And I think that would be favorable for us as we get into the second half of the year and pricing for next year.

Great. I appreciate that color. Wanted to move over to -- you mentioned sand and logistics being part of the integrated services that you're providing now. Can you refresh our memories? I don't really recall you guys having assets in this arena. What are you doing differently? Are you starting to partner up with some of the companies that we're seeing in this arena? Just maybe some more color around your standard logistics offering and how you see that progressing as we move into next year.

I'll just give you kind of an anecdotal example of how that looks. I mean, I'd hate for you to extrapolate this across our whole fleet. But in these times where we might be kind of negotiating a different pricing model with one of our customers, and say that this customer was in-housing, brokering themselves sand and logistics and maybe chemical and maybe wireline for themselves or directly, and they wanted to negotiate with us about a tweak on our hourly pricing. Well, we then can go back to, say, something like our sand contracts and try and find out what that customer, who really has the better sand contract and the better pricing in the market and make sure that we're leveraging the best contract. And we found in a couple of instances here recently that we do have better contractual terms or pricing than some of our customers do. So we then will offer a trade, maybe a tweak to the hourly pricing to leverage a contract and the volume that we already have commitments to on the sand side. So it's not that we're mining or trucking with our own assets. It's that we're using partnerships in our supply chain to make sure that we're pushing forward the best value to our customer that also generates the best return for us. So just kind of a little bit of blocking and tackling around the supply chain to ensure that we protect our margin and our return.

Got it. Okay. Great. And then just one more if I could squeeze it in. I know you're not ready to give us an outlook for 2024 CapEx. But maybe if we just think about maintenance CapEx, are you expecting any sort of step-change? I mean, I know you don't capitalize the [fluid ends] anymore, but now that you're going to be having 4 e-fleets and 7 Tier 4 DGBs I would suspect that maintenance CapEx should be coming down versus your legacy Tier 2 diesel assets. So any color on that, where you guys are seeing that shake out so far?

I think that we're not ready to give you '24, but as I mentioned earlier, there's going to be a continued progression, we believe, because we now have really recapitalized the majority of our fleet and gone to an electric-focused model. So I think, certainly, some progression is going to be very favorable in '24 and on.

Derek, I'll just add on to that. This is Sam. I think we do expect it to be down on a per-fleet basis. I don't think, as David alluded to, we're ready to tell you by how much. The big part of that story is electric. Another part of that story is just the internal optimization efforts that we've been pursuing in a very focused, intentional manner for, I'd say, the last year. And I'd be remiss to get off the call without recognizing the efforts of our team in that arena. We've been very, very intentional for about a year now, organizing cross-functional teams inside of our business, to make sure that we are maximizing every asset that we're responsible for, especially on the maintenance side of things. And we've undergone a lot of change and reassessed a lot of processes internally. And we're really, really proud of the work our team has done in that arena and some of the progress we've seen. That said, some of the results that you see that come from that don't necessarily show up Day 1. So my hope and my confidence is that in 2024, we're talking a little bit more about the fruits of some of that labor, that really derive from taking a company that was built on growth and a growth-oriented mindset, which is kind of how we built the foundation in ProPetro, and transitioning our company and our team into a mindset of optimization and industrialization. We are right in the middle of that transition right now, and we think it's going to bear some fruit going into next year.

The next question we have is from Stephen Gengaro, of Stifel.

Sam, one of the things that we heard from some others was some optimism of this sort of lull in U.S. activity recovering perhaps even as soon as the fourth quarter. But just curious on your end and conversations if you're hearing anecdotes that support that and what your sort of thoughts are around that.

Look, I mean, we hope that that is what happens and that that's what plays out maybe going into the fourth quarter. That said, we're not sitting here depending on that whatsoever. Like we said various times through our prepared remarks and through some of our Q&A here, look, we think we've got a really strong vehicle to create value into the future. We live and work in what is a volatile business. I think our customers and other players in oilfield services are doing a lot of great things to pull out some of that volatility and smooth the curves. But we're -- I think we're confident regardless, Stephen. I will say there's been a lot of comments, and we made some of our own, about the potential of the rig count bottom and when does it pick back up, and maybe that's part of your question. Look, if rigs are coming into the system today or in the very, very near term, it's hard to say that those rigs create added opportunities for the frac space in the fourth quarter. We're a bit past midyear, and there's a good 2- to 3-month, maybe more, lag to those rigs actually generating more completions work. So could that happen here over the next few weeks? Could we see more rigs come into the system and it create a Q4 tailwind for the frac space? Sure. I don't think that's out of the question. But back to how I kind of began the answer, I don't think we're sitting here depending on that whatsoever.

Got it. And then, the follow-up, you mentioned, I think in response to a question about the second half of the year, maybe some of the things that offset activity and/or slightly lower prices. And you mentioned sand. And I was curious, because I've thought that frac sand prices on the spot basis were down a bit. So I was just kind of thinking through that. Am I thinking about that wrong? Because I would think you'd lose a little from lower frac sand prices in the second half? And is there any way to quantify that impact?

It's a bit nuanced there, Stephen. I think what it comes down to is who has a better scale and market position to purchase the sand. And as I was answering Derek's question earlier about how we're kind of using sand as a lever to maintain a certain margin, that because of our operational density and scale in this basin we're also a big purchaser of sand as compared to other E&Ps and service companies in the Permian. So when there's movements in the sand market and we can kind of flex our scale and our purchasing power, we like to do that and be opportunistic. So for us, it's less so about -- not being directly in the sand business ourselves and mining sand ourselves, I think it's more about what purchasing power do we have and what margin can we put on top of a product like that, while at the same time providing it to our customer. I think that's more so what it's about for us.

Our next question is from Don Crist of Johnson Rice.

I just wanted to ask about share repurchases versus debt repayment. Obviously, you came out of the gate once the plan was put in place and bought back a lot of shares at a lower price. But now since the stock has rebounded, how do you balance paying off debt versus buying back shares as we go forward?

Great question, Don. That's top of mind for us from a capital allocation standpoint, moving forward. One of our chief responsibilities as leaders at ProPetro is to make sure that we're being as effective as possible at allocating capital across all the opportunities that we have. Really, everything is on the table. I think we like to run a business that is low to no debt. So that definitely plays in the mix. Look, we've had great success with our share repurchase program and are very pleased to have gotten in the market when our equity value was very depressed. We also have capital to allocate to finish off this fleet transition and to make sure we're building the most long-term competitive business that we possibly can. So all of those things are competing for capital today. That said, I think we mentioned our stock repurchase program in an opportunistic sense a couple of times here on the call, and I think that's how we're looking at it. So we'll continue to be opportunistic there. We're happy to have the authorization and the flexibility to come in and out of the market as we please. And I'd just say, stay tuned.

Don, this is David. Just to add a little bit to that, we've seen our stock move up from very depressed levels, a significant discount from a market valuation perspective. We're still in a discounted situation relative to some peers, and we don't believe that we're near our intrinsic value either. So I think you've seen some others talk about that on their calls. We believe the same thing. We don't believe that the market valuation is appropriate for the business that we've built, and I think that's something that informs our strategy going forward on that as well.

This concludes our question-and-answer session. I would like to turn the conference back over to Sam Sledge, CEO, for any closing remarks.

Thanks, Irene. Before we close it out, before I close it out today I'd like to give Adam Munoz, our President and Chief Operating Officer, to talk a little bit more here briefly about our FORCE e-fleet rollout and what we're excited about there.

Thanks, Sam. Happy to provide a little more color there. Our team has been hard at work getting everything ready to deploy for our first 2 FORCE units. As you heard earlier in the call, we expect to deploy our first fleet here in August and the second expected to deploy in early fourth quarter. Moreover, we expect 2 additional FORCE electric fleets to be deployed in the first half of 2024. These fleets are best-in-class. To kind of give a brief description of the FORCE pumping units, they're 6,000-horsepower trailers, driven by 2 independent, fully redundant 3,000-horsepower pumps, and which are powered by 2 independent and fully redundant 3,500-horsepower electric motors, enabling us to reduce the pump footprint on location near the wellhead by 50%. Additionally, we will be deploying these units as a hybrid fleet alongside with our Tier 4 DGB dual-fuel units that are already providing a very high diesel displacement, as we also mentioned. And lastly, the units will be powered by a natural gas turbine generator, essentially providing 100% diesel displacement for our customer, which helps with emissions reduction and significant cost savings from natural gas over diesel.

Thanks, Adam. Like I said multiple times in the call, we're super excited to get the FORCE fleets out in the field and are excited to share more detail on that in quarters to come. Before closing out the call, I'd like to remind everyone how proud we are here at ProPetro to be a vital part of the American energy system. We're confident that oil and gas will remain the most important part of the overall energy mix, and we're confident that both our company and the Permian Basin community will continue to provide our country and the world with the cleanest, most affordable, reliable energy. Thanks again for joining us today, and we hope to speak with you again soon. Have a great day.