Good morning, and welcome to the ProPetro Holding Corporation First Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sam Sledge, Director of Investor Relations. Please go ahead..

Thanks, and good morning, everyone. We appreciate your participation in today’s call. As in the past, with me today are Chief Executive Officer, Dale Redman; and Chief Financial Officer, Jeff Smith.

Yesterday afternoon, we released our earnings announcement for the first quarter ended March 31, 2019, which is available on our website at www.propetroservices.com. In addition, this morning, we posted a presentation on our website that summarizes our results.

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 risk – to a number of 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 the 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’ll answer any questions you may have. So with that, I’ll turn the call over to Dale..

Thanks, Sam, and good morning, everyone. We appreciate you joining us for today’s call. The first quarter of 2019 was yet another impressive performance by our team, supported by a best-in-class customer portfolio operating in the premier resource play in the world, the Permian basin.

Coming off an outstanding year in 2018, our team has remained focused on serving the needs of our customers. And that focus, coupled with well site execution, allowed our operation to get off to a very fast start at the beginning of this year.

Our utilization remained high during the quarter and we saw yet another step forward in well site efficiencies. This utilization and efficient operations produced some outstanding financial results. Jeff will share more financial details soon, but I would like to provide a few first quarter highlights.

Total revenue for the quarter was $546.2 million, a 28% increase from the previous quarter. Net income was $69.8 million or $0.67 per diluted share, an increase of 35% from the previous quarter. And adjusted EBITDA for the quarter was $150.3 million, an increase of 34% from $112.4 million for the fourth quarter of 2018.

Driving a big part of the step-change in our financial performance quarter-over-quarter was the integration of the newly purchased assets from Pioneer Natural Resources, the already high performing team that came with those assets and the long-term service agreement we entered into with Pioneer.

The integration of the Pioneer equipment and personnel has exceeded our expectations, and we could not be more proud of the professionalism and focus that both our new teammates and legacy workforce have exhibited in this integration process.

This process has proven value of strong leadership and is also further validation of the bench depth that we enjoy here at ProPetro. As I mentioned earlier, also contributing to our financial success in the quarter was outstanding well site efficiencies. During the quarter, we saw our zipper stages pumped as a percentage of total stages rise to 91%.

Our continued access to large, high-priority pads from our customers continues to produce increasing amounts of throughput at the well site. We are also seeing continued adoption of West Texas regional sand. In the quarter, 81% of the sand we purchased was sourced regionally right here in West Texas.

The importance of our ability to source products closer to the well site cannot be overstated. It has numerous positive effects on our logistics operations. We look to see a continued adoption of these regional sands across all parts of the Permian basin.

Over the past year, we have talked a lot about the fact that efficiencies and well site performance are keys to being differentiated within the pressure pumping sector. We foresee this trend continuing as efficiencies and well performance will remain the largest drivers of both profitability and utilization for our sector.

Our team is constantly striving to produce value for our customers through a consistently high-performing, predictable service offering. And our ability to do this will continue to differentiate our team. I will now turn it over to Jeff for a more detailed discussion of our financial performance.

Jeff?.

Thanks, Dale. I would also like to thank our team and our customers for their continued efforts in the field. Looking specifically at our sequential results for the first quarter. Revenue increased to $546.2 million from $425.4 million for the fourth quarter of 2018.

The increase was primarily attributable to the acquisition of 510,000 horsepower on December 31, 2018. Cost of services excluding depreciation and amortization for the first quarter of 2019 increased to $381.5 million from $300.4 million during the fourth quarter of 2018, primarily due to our increased fleet size and activity levels.

As a percentage of pressure pumping segment revenues, first quarter pressure pumping cost of services remained relatively flat at around 70%. General and administrative expense was $18.5 million as compared to $15 million for the fourth quarter of 2018.

The increase was primarily attributable to overhead in connection with the added capacity from our transaction with Pioneer. General and administrative expense, exclusive of stock-based compensation, deferred IPO bonus and retention expense, was $14.4 million or 2.6% of revenue for the first quarter of 2019.

Net income for the first quarter of 2019 totaled $69.8 million or $0.67 per diluted share versus $51.8 million or $0.59 per diluted share for the fourth quarter of 2018. Adjusted EBITDA increased approximately 34% to $150.3 million for the first quarter of 2019 from $112.4 million in the previous quarter.

Adjusted EBITDA margin for the first quarter of 2019 was 27.5% as compared to 26.4% for the fourth quarter of 2018. Turning to the balance sheet and capital spending. We ended the quarter with cash on hand of $79.5 million and total debt of $160 million.

During the first quarter, we incurred capital expenditures of $86.1 million for spending on ProPetro’s growth initiatives as well as maintenance capital. Finally, total liquidity as of December 31 was up – $156.1 million, including cash, and $76.6 million of available capacity under the ABL.

As we have said in the past, all possible shareholder return initiatives remain on the table with proceeds from near-term future cash generation prioritized towards debt repayment. With that, I’ll turn it back to Dale..

Thanks, Jeff. As I stated earlier, the ability of our team to perform at the highest level allows us very unique opportunities. Because we have earned customer trust through our performance, many of these opportunities come in the form of employing new technologies on location.

As many of you may know, in the fourth quarter of 2018, we were able to test a new pump technology on one of our job sites that was developed by our long-term supplier, AFGlobal.

Before our recent acquisition, AFGlobal had manufactured nearly 90% of our legacy equipment and they have consistently proven to be a great ally in allowing us to grow our business and outperform our competition. When you hear us talk about relationships up and down the value chain, it is relationships like this we are talking about.

AFGlobal’s development of the DuraStim pump and our successful field trial late last year has led us to place orders for the first two full DuraStim frac fleets. The DuraStim frac pump at 6,000 horsepower offers the equivalent of three times the effective horsepower of a conventional frac unit while operating at approximately 10% of the cyclic rate.

We anticipate that the DuraStim pump will offer many advantages, including a substantial reduction in the fleet footprint and manpower and the potential to dramatically extend the equipment life and reduce maintenance cost.

This novel system, with – coupled with an electric drive, is expected to also deliver a significant reduction in fuel consumption and emissions. We also believe it will lead to a safer and quieter on-location experience.

Through multiple conversations with a number of our customers regarding DuraStim, it is clear to us that the frac market is not oversupplied but rather is undersupplied with solutions and service quality that drives down well cost and provides predictable outcomes to the customer.

This is why we have confidently chosen to continue our relationship with AFGlobal to get this game-changing technology to market to help lead our industry in deploying technology and equipment that is more suitable for the high-intensity pad development that we are currently operating in.

Current market conditions and vast experience within our sector has led us to three specific conclusions. First, we strongly believe that the workforce within our sector is constantly in search for opportunities that provide consistency and upward mobility.

Second, we have discovered that our upstream customers need quality service providers that are willing to constantly innovate and collaborate to drive value. Last, it has been easy to see that the investment community is in search of opportunities where there are improved through-cycle returns and capital efficiency.

Based on these conclusions, we believe that our sector is in need of significant changes in equipment to allow us to consistently compete for the right employees, customers and shareholders as we are proud to lead that charge in this arena.

We are off to a strong start in 2019 and we are very optimistic about our visibility for the remainder of the year.

A strong oil macro enhances our view of activity in the Permian, and we believe that the basin’s continued transition to more pad development, longer laterals, increasing frac volumes and working days will continue to bifurcate the pressure pumping market and produce a strong demand for efficient and quality services.

We welcome this challenge and we look forward to partnering with the best operators in the Permian.

We are also excited to be on the cutting edge of technology to allow us to strengthen our earning power over time while at the same time driving down well cost for our customers, therefore allowing the Permian Basin and our customers to remain competitive on a global scale.

We look forward to continued close collaboration with all of our partners in the value chain as we strive to drive competitive and consistent returns. We will now open it up for questions.

Gary?.

[Operator Instructions] Our first question comes from George O'Leary with Tudor, Pickering, Holt & Co. Please go ahead..

The e-frac stuff is certainly intriguing and exciting. I wondered if you could just provide some color on the dialogue you’ve had with potential customers and maybe what the outlook for dedicating those fleets or contracting those fleets with folks, just how all that’s going..

Yes. George, really good question. And obviously, we’ve had a lot of time since we tested it in the field with our conventional fleets. Those conversations have been very good and very well-received. And I would say every one of our customers see the need and are inquiring and are very anxious to see how the first test result is later on in the year.

And it’s very encouraging..

Okay. Great. And then I had one on the e-frac discussion. Could you help us put some color on the cost of these e-frac fleets? And then what you guys are going to do on the power-gen side, whether you’ll go the distributed power right – route, whether you’ll own the turbines or lease them. Just any color there would be helpful..

I’ll talk about the turbine side of it and then I’ll let Jeff talk on the economic financial side. The turbine conversation will be customer-by-customer. And we’ll collaborate with them in the manner in which we’ll work through that, the power side of it, George.

And it’s early on, on our first fleet, first couple of fleets, we’ll be providing power and are very excited about it..

As far as the economics of these DuraStim fleets, the total cost for the fleet itself is about, all-in with the ancillary equipment, is $36 million. Exactly comparable or totally comparable to what one of our conventional fleet costs today.

But the cost of the – depending on what the customer desires as far as the power source, if we’re going to provide power generation, that number is going to be $20 million to $22 million on top of the $36 million. And us making the investment decision on these first two fleets. We assumed comparable pricing to our conventional fleets.

And if you look and factor in the potential expense savings in both the form of OpEx as well as maintenance CapEx, the payback periods that we’re estimating on these DuraStim fleets is better – at or better than what our conventional fleet investment thesis was..

Okay. That’s very helpful color. I’ll just sneak in one more, if I could. When I look at the EBITDA per fleet that you guys did this quarter, it was super-impressive. To me, it seems to imply either very strong resilience of the legacy fleets in terms of margin per fleet and/or the Pioneer fleet’s outperforming expectations.

I wonder if you could bless that thought process and then maybe provide any color on which was the bigger driver of the profitability per fleet kind of clearly outperforming expectations, given the magnitude of the beat that you guys put up this quarter..

George, I think the best way to handle that is we’re just encouraged across the board with what our team is delivering on site. To get any more granular on that, we will stay away from. But what our team’s accomplishing is unbelievable. And this is about – this manufacturing mode is about efficiency and getting more things done in a 24-hour period.

And we’ve been very clear for the last year of what impact that’s going to have on your financial metrics..

The next question comes from Tommy Moll with Stephens. Please go ahead..

I wanted to start with the bigger picture on DuraStim and electric. You’ve been collaborating with your equipment supplier for some time now. They’ve developed this technology. But Dale, as you alluded to earlier, for your customers, for a lot of them anyway, it’s going to be something new that they’re less familiar with.

And so my question is how do you get them interested in and willing to be open to trying something new? You mentioned that there’s a big trust factor that I got to think as part of it.

But then how do you get to a win-win in terms of who captures the savings from labor, maintenance, fuel, et cetera? And maybe underpinning all of that, is it just fundamentally it’s new and different? But it’s a partnership, it’s a dedicated fleet model, and there’s just got to be some element of trust that it’s going to be a fair split long term..

I – Tommy, this speaks to how we’ve developed these relationships. Let me be very clear. None of our customers are interested in bringing anything that’s going to cost more and change their wealth economics, okay? But what they’re interested in is getting more done in a 24-hour period with less problems.

And this equipment checks every single box that can get our customers comfortable with trying this technology. And there’s a lot of things – we’re a long ways from validating everything.

But with our early trial, with our close relationship with AFGlobal – this is not a technology that hasn’t been around, it’s something that AFGlobal has worked tirelessly over the last five years to perfect. So yes, I think the industry’s looking for this type of change.

And this does not mean that conventional fleets are going away, and it’s going to be a long time from that. But there are tremendous needs for equipment that lasts longer, are quieter, safer, better emission metrics. This just checks every box, and we’re proud to lead that charge..

Well, and just following on there, Dale, where this is all headed. You’re the largest platform in the Permian. With DuraStim, you’re now the first mover on combining a new pump design run on electric.

So if this thing proves out as you’re hoping, how much bigger is the opportunity set to continue taking market share here? I assume you’re batting for more than just a couple of these DuraStim fleets and that, that number would be much higher at some point in the future..

Yes. Tommy, to answer that, I mean, I just – we gave you I think one of the questions on how it’s been received. Look, we got a tremendous customer base. This is the most active basin. There’s a lot of natural gas that could be used for this application. And it – we’ll be very disciplined on how we allocate capital.

The balance sheet will be the governor and we’ll balance that with what the customer asks are. So we’re in a really unique position as you kind of laid out and we’re extremely excited about what this means to the future of our company..

The next question comes from Jud Bailey with Wells Fargo. Please go ahead..

Question on some of the commentary in the release on expecting 26 fleets active in the second quarter versus 27 in the first quarter. I was hoping you could give us a little bit of color on how you see kind of your fleet count and what’s driving the decline there.

And is there any opportunity to put some work to work during the second quarter? Just curious on your visibility for work..

Yes. Let me be very clear on what that means. Don’t read anything into it. It’s as simple as this. Coming out of Q1, one of – any time you’re doing a big acquisition and an integration, you want to make sure you’ve got more capacity and you don’t lose cadence in that integration process.

We were so fortunate of how we came out of Q1 with those fleets at Pioneer that we found out and they found out we could do more with less. So it’s as simple as not needing that fleet during Q1 – after Q1 through Q2. And we’ve chosen and balanced.

Our operations team and our financial team have balanced what’s the best way to allocate and use those horsepower availability needs. And we come to the conclusion for Q2, we’re going to run 26 fleets. That could change, but that’s the way we’re going to model. And that should – we should be able to reach all of our financial metrics there..

Okay. I appreciate the color there. And then at that, you sound like you consolidated things down to 26. How should we think about the EBITDA per fleet? Typically, you get better efficiency in 2Q.

Should we anticipate a little bit stronger stages per fleet and that helps EBITDA per fleet? Or does – is there any pricing element we need to think about that stays flattish or slightly down? Help us think about the trajectory on maybe EBITDA per fleet..

I think for modeling purposes, it should be flattish or potentially slightly down. That’s more driven by the fact that Q1 was an extremely efficient quarter. Dale mentioned in his opening remarks that we had a 91% zipper percentage for Q1. And I can also tell you that our stages per fleet were up double digits in Q1.

So doesn’t mean we can’t achieve that or better. There’s still upside potential there as far as efficiency goes, but Q1 was very efficient.

So going from 27 to 26, of those separate revenue-producing units in Q2, coupled with the fact that Q1’s efficiencies were so great, we would – I would – we would guide towards flat or even potentially slightly down a hair for Q2..

The next question comes from Sean Meakim with JPMorgan. Please go ahead..

So just a couple of points of clarification, if I could.

I think – so on the e-fleets, on the e-frac, can you just clarify, suppose, if you’re planning on providing the power source or not? Or if you’re indifferent to that decision? And I guess how would that change the commercial terms with the customer? I think I’m not – it’s not clear, I guess, when you have to make that call in terms of that $20 million to $22 million or not that you’d have to outlay.

I assume you prefer to avoid putting that on your balance sheet if you can. So maybe you can just help us understand a little bit of that piece of the economics a bit better and the puts and takes there, that would be helpful..

No. I think as Dale said, we’re going to let the – as usual with this, we let the customer drive that decision as to what they – whether they want to provide that power source or we provide it.

If we provide it, I think that the payback economics based on fuel savings offset against the cost – the initial upfront cost at the turbine, those are economics and payback periods that we find very acceptable. But we will let the customer make that decision.

As Dale said, on the first two fleets, they have asked us to actually provide that power source, so we are sourcing that..

Got it. Okay. And then on the Pioneer fleets, it looks like obviously a strong start on the integration. I’m sure that’s been rewarding for the team. And Dale mentioned doing more with less.

So Jeff, how do you think about that initial fairway you laid out versus what you’ve done? And you just talked here about, hey, 1Q is particularly good, let’s not get ahead of ourselves and making a full commitment there on 2Q.

But when do you feel like you’ll be comfortable revisiting that guidance? Or how do you think about reevaluating the cadence of improvement for that fleet? How should we think about how you’ll evaluate that over the next few quarters?.

Well, I guess we would – based upon how well Q1 went with the integration process on their fleets, to the extent any of you guys were actually modeling those fleets separate from our legacy fleets, we would give guidance to think that you can stop doing that and just begin modeling all fleets on a consistent basis across the board..

The next question comes from John Daniel with Simmons Energy. Please go ahead..

Dale, one of the things that we hear from the OEMs is that lead times on turbines are as much as, like, eight months.

So I’m just curious, can you tell us how many turbines you ordered?.

No. John, we’ve – just like most of the things we’ve done here at ProPetro, rest assured, we’ve done that homework and are in a great position to be able to take care of those needs should this be accepted in a much faster pace than what – where we are right now. But I wouldn’t speak to that.

But we’re – we’ve got great supply chain partners that will help us in that. And you are correct, that is a long-lead item..

Fair enough. But I mean, this is where the market’s going, right? And customers are going to need the efficiencies. You guys can capture savings. So I mean, it would make sense from a defensive standpoint to make more orders than just the two.

And presumably, you want to continue to lock in the DuraStim supply from AFGlobal before they sell to other frac companies. So from my standpoint, unless I’m smoking crack here, it seems like you guys are going to be adding more DuraStim fleets because of the opportunity set is so great.

Is that a fair assessment?.

Well, you got to remember, the first fleet won’t be here till later in the year. So there’s a lot of validation that we’re all going to have be a part of here. But yes, you just need to know from a micro perspective, we’ve done our homework. We are planning our business. It is the future and we’re glad to lead it.

And we’ll be responsible and disciplined in how we roll it out..

Okay. And then I guess last one for me. Safe to assume the customers looking – or the first two with DuraStim are large E&Ps with very big Permian programs with healthy growth ahead of them..

Yes. I would say we’re very happy with all of our customers and all of them like this technology. And all of them will be a part of it..

The next question comes from Marc Banichi with Cowen. Please go ahead..

Dale, it sounds like the power for these fleets at this point is not a capital item for you. You’re planning to rent or at least have some sort of a lease agreement.

Is that currently how you guys are seeing it for the first two at this point?.

No. We would actually acquire those turbines..

Okay. Okay. And then – and so that would put you in a, given the numbers you guys talked about earlier, sort of in the $55 million to $60 million per fleet. I would suspect that all of that would kind of be reflected in your 2019 CapEx. So we should think about the earlier $170 million implied that you gave kind of going up by $120 million.

Correct me if I’m wrong by that. And then how much of that kind of hit in the first quarter in terms of the newbuild CapEx..

No. You’re correct in your total year assumption there. With regards to the 80s – what we had was $86 million of incurred CapEx in Q1. I can tell you that the maintenance CapEx portion of that was relatively in line with the maintenance CapEx guidance that we’ve previously given. That was $6 million per fleet that includes fluid ends.

What we incurred in Q1 was actually a hair less than that, but not enough for us to change any of that guidance.

And so the remaining portion that is growth CapEx that is in there is primarily driven by the deposits that we made on these first two DuraStim fleets as well as the one cementing unit that we put on the ground and some progress payments on the one coil tubing unit that we’ve announced..

Okay. Okay, great. And then on that maintenance CapEx number. If I just kind of eyeball the slide here that you have, it looks like you’ll be – you’re saying the maintenance is about half for the DuraStim.

So should we be literally taking that to mean $3 million a fleet when we think about your maintenance CapEx in the outyears as we kind of build this out based on whatever we think in terms of growth beyond the two you have?.

Yes. Yes, I mean – yes. And time will tell, obviously has to test that, as Dale said. But yes, we think that there are substantial savings on the maintenance CapEx side of the equation..

Great. Just last one, if I could. On your local sand, it’s become a very large proportion of what you pump, 81% here in the first quarter. Can you talk to the dynamics of switching from spot to now contracted sand? I suspect you got some benefit. If we look back at the last bunch of quarters, you guys talked about that being a tailwind to profitability.

How should we think about that as sort of everything normalizes and all those prices sort of mark-to-market, is there any kind of risk to your profitability as sort of the cost savings from that sand ultimately get passed through to customers?.

Yes. We see that as being flat. I think, Marc, you’re – the dynamics of that – what we’re concerned about is long-term sustainability of processed sand. So there’s a portion of that spot market. You’ve seen that spot market go from $100 a ton to sub-$20.

But we’re looking at this thing over the long haul and we want to make sure that those sent providers are profitable over time. Are there some things you could do to take advantage of some spot prices? Yes.

But if you’re looking at this over a decade plus, you’ve got to make sure you’ve got long-term partners on the sand supply to get you through the cyclicality of what we’re doing here. So I think that’s the best way to answer that..

Okay, great. Thanks Dale, I’ll turn it back..

The next question comes from Praveen Narra with Raymond James. Please go ahead..

Hi, good morning guys, great quarter. I guess I wanted to follow up on John’s question about how you’re thinking about further orders. Basically, they want to see something.

I guess, can you give us a sense as to when it’s in the fleet working, how much – or what you’re looking for in terms of getting comfortable with making this a bigger part of your overall fleet? And then if you could, how does this order change how you think about investing in conventional fleets and even major overhauls on your conventional fleets?.

Yes. There’s a lot in that question, Praveen. And what – I’ll try to break that down a little bit and simplify it. You know how simple I am. We’re going to continue to reinvest in our existing fleet.

As we look at it and see the changes that are going to need to be met with this manufacturing/develop of these assets out here, we have got to have a better continuous pumping apparatus to keep high performance metrics that our customers are going to desire. And what we’ve seen and tested with this pump, again, I’ll reiterate it, checks those boxes.

This is a step change. It’s disruptive. And we’re just fortunate to be in a position with the inventor of this DuraStim pump. And they’ve been a very good partner.

And where this goes, I think it’s easy to see that if it checks all the boxes we’ve laid out, all the different metrics, it will be a larger part of our product offering and it will be something that more and more of our customers will adapt.

So are we giving you guidance that we’re going to – if you’re asking if we’re building more conventional fleets this year? No..

That’s perfect. And I guess just a follow-up. When you think about the outlook for second half of 2019, can you talk about the – you mentioned in the presentation, your remarks, you have visibility into it.

Can you talk about that visibility in terms of how your customers are approaching the second half of this year?.

Yes. And that’s the beautiful part of who we work for and the position we are in here in the Permian. Praveen, we’ve got great, clear visibility in this macro oil price environment. And our customers are very disciplined, they’re in sync with The Street of what’s expected.

They’re trying to do the same thing we are, and that’s to attract long-term investors into the sector. So we know their plans. We’re in collaboration on a day-to-day basis of those plans. And we think they’re going to stay in the same cadence on a go-forward basis just as they’ve given guidance through this earnings season.

And that gives us great visibility and optimism for 2019 going into 2020 and beyond..

Perfect, thanks very much guys, good job..

[Operator Instructions] The next question comes from Vebs Vaishnav with Howard Weil. Please go ahead..

Hey, good morning and great quarter guys. So just touching on Pioneer fleet. So one less fleet, and I think, like, the eighth fleet was going to go to work for them as well. I guess that’s not going. But are you getting any standby fee for that? If I’m not mistaken, that was my understanding from the contract..

Yes. Vebs, let me kind of give you clarity. There seems to be a lot of confusion. There’s 510,000 nameplate horsepower with the acquisition. And when you do the math, it rather comes to eight fleets. When we got the equipment, made the transaction, closed it, there was roughly 65,000 horsepower in Canada in a refurbishment program. And that is coming out.

And what we’ve chosen to do with that and the 27th fleet was to choose to spread that out here in the second quarter to make sure we don’t have any hiccups operationally on location. And that was balanced with the financial team as we – it did not hurt our financial model in any way. And that’s what we’ve chosen to do.

But it doesn’t need to be confused. We’re in a great position and that’s where we need to be in Q2. And we’ll evaluate that over Q2, but that’s where we’re at..

And sorry, are you getting paid a standby fee for that? Or….

Yes. We’re not going to get into the nuances of that contract. That’s probably not appropriate here. But we’ve got a great partner on the other side. We’re going to meet the payback metrics that this acquisition was laid out when we purchased the assets..

Got it. And just I want to make sure that I understand. So when you said the paybacks on electric fleets are same as the conventional fleet, making like $22 million of fleet today.

Is that like what you’re seeing is that the new fleets could make $27 million a fleet? Or how should we think, like, that $60 million divided by 3.5 to 4 years?.

Well, I think there’s a lot of cost savings here that are yet to prove up once you put their first full feet on the ground. We think that there is that potential to have a higher profitability per fleet with those DuraStim fleets. But obviously, it’s just yet to be known whether that actually plays out the way we think it’s going to..

Got it. And last question for me. Going back to the Pioneer, the thought process was you’re going to have some more cost savings as you integrate stuff and integrate facilities and everything.

Where are we in that process? And like, there’s a way we can say how much more cost savings could come out from the transaction?.

Yes. I don’t know that we would comment on that. I think what I would say to your question is and what our focus is just how efficient both teams have been in this integration? It’s unbelievable and it’s not getting the talk that it probably deserves. At the end of the day, it’s all about the people on location and what they get done.

So we like the economics that we’re seeing and we just want to make sure our people are taken care of on location. And we’re in a really good spot, Vebs, with that acquisition..

All right, thank you for taking my question and again a great quarter..

The next question comes from Harry Pollans with Bank of America. Please go ahead..

Hey, guys. Thanks for taking my question. Look, one on your cash flow this quarter. Can you walk us through any noise in the working capital cash draw? And how we should be modeling working capital going forward..

Well, the – what you saw affect the cash flow statement for Q1 really kind of dates back to what happened at 12/31. 12/31, in Q4, we had really great collections in the last week of the calendar year which kind of depressed the AR balance at 12/31. That was the extraordinary part.

And then when you got to 3/31, that AR balance kind of normalize to a very – a DSO that was very consistent with our past history. And that change in and of itself is what drove that effect on the Q1 cash flow statement. So it’s just kind of a return to normality at 3/31, and the extraordinary part was really at 12/31..

I see, okay.

And modeling that going forward, is there a good way to think about that?.

I would presume that where we were at, at 3/31 and whatever DSO you may be presuming in there is consistent with past history, and you ought to use that for modeling purposes..

Got you. That makes sense. And then one more on 2Q efficiencies.

How much more efficiency are you – do you think that you’ll get above 1Q? Is there much more efficiency to be squeezed out? Or how much more runway do you think that has?.

We think we’re in a great spot where we are and would not guide any differently..

I think that within Q1, I wouldn’t actually model anything better than Q1 certainly for Q2. And we’re kind of giving guidance that it could actually be a little bit lower than that, based upon the way the frac calendars played out. Within Q1, is there – for future reference, is there potential for improved efficiency? Absolutely.

So don’t believe that Q1 capped us out on where we can actually get to..

And Harry, that efficiency is driven by zipper work. And as you saw, we were at 91% Q1. Could that go up? Yes, over time..

Okay, awesome thanks guys..

The next question is a follow-up from John Daniel with Simmons Energy. Please go ahead..

Hey, guys. Dale, just one quick one on the DuraStim.

There’s six DuraStim units per fleet, correct?.

Right..

So you’ll have, going forward, on the fluid end side, obviously a dramatic reduction on fluid ends just because you have fewer units.

Do the fluid ends on DuraStim, are they expected to last longer than what you would see on the conventional fleet?.

Significantly longer..

And cheaper..

Got it, good news. Thank you guys..

This concludes our question-and-answer session. I would like to turn the conference back over to Dale Redman for any closing remarks..

In closing, I want to again express my sincere admiration and respect for the men and women that have built ProPetro into the company that it is today. I am in awe of the culture each of you have created as you humbly serve our incredible customer base.

I also want to commend our industry for the relentless pursuit to help our nation become energy independent. No other industry over the last 100 years has had a more important role in helping our nation and nations around the globe improve the quality of life for their citizens.

Thank you for supporting our industry and our company, and have a blessed day..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..