Good morning and welcome to the ProPetro Holding Corporation’s Third Quarter 2019 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [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. With me today is Chief Executive Officer, Dale Redman; as well as other members of management. Yesterday afternoon, we released our earnings announcement for the third quarter ended September 30, 2019, which is available on our website at www.propetroservices.com.

In addition, we also 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 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 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.

In addition to releasing our preliminary third quarter results yesterday, we announced that the company and certain of its officers and directors have been named in a shareholder class action lawsuit that was filed in September 2019 and remains in its early stages.

The company has also been advised by the SEC that the SEC has opened an investigation into the company. We will provide updates on these matters in the future as appropriate based on material developments. The Audit Committee has continued to review the matters previously disclosed in the company's reports on Form 8-K filed with the SEC.

Importantly in connection with the review, our Board's Audit Committee and management have not identified to-date any items that would require restatement of our previously reported balance sheets, statements of operations, statements of shareholders' equity, or statements of cash flows.

However, the Audit Committee identified one related-party transaction that was not previously disclosed, the details of which can be found in our most recent 8-K.

Our management team continues to work closely with our independent registered public accounting firm and we hope to become current in our SEC filings as soon as possible, although we do not expect to become current in our filings prior to the end of 2019.

We believe the steps we have taken and will continue to take will result in a stronger ProPetro and allow us to focus even more energy on optimizing and growing our business. Finally, after our prepared remarks, we will answer any questions related to our results and operations. 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. We're going to focus on our financial results for the third quarter, but since we did not hold a call last quarter, we'll make the review of our operations and recent initiatives as comprehensive as possible.

During this time, we've been very pleased with the impressive performance by our team, which has been supported by a best-in-class customer portfolio, operating in the premier resource play in the United States, the Permian Basin. Our operating team in tandem with our customers, continue to find ways to improve efficiencies.

Under challenging market conditions these efficient operations produced some outstanding financial results. Sam will share more financial details soon, but I would like to provide a few highlights for the third quarter. Total revenue for the quarter was $541.8 million, a 2% increase from the previous quarter.

Net income was $34.4 million or $0.33 per diluted share, compared to $0.35 from the previous quarter. And adjusted EBITDA for the quarter was $131.9 million, an increase of 4% from $126.6 million for the second quarter of 2019.

As I mentioned earlier, our efficiencies and the efficiencies of our customers have allowed us to continue to realize favorable returns and stay utilized. During the third quarter on a per effectively utilized crew basis, our team completed a record number of frac stages and pumping hours while also pumping record volumes of sand.

The zipper stage percentage of approximately 92% also a record highlights our ability to perform at this level. As we have said in the past, our continued access to large high priority pads from our customers positions us to produce these impressive levels of throughput at the well site.

And with that, I'll turn it over to Sam to go over our financial results in more detail.

Sam?.

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 third quarter, revenue increased to $541.8 million from the $529.5 million for the second quarter of 2019, an increase of 2%.

The increase was primarily attributable to efficiency gains and beneficial changes in work mix. Cost of services, excluding depreciation and amortization for the third quarter of 2019, increased to $396.9 million from the $386.2 million during the second quarter of 2019, generally in proportion to our increase in revenues.

As a percentage of pressure pumping segment revenues, third quarter pressure pumping cost of services, remained relatively flat, around 73%. General and administrative expense was relatively flat, totaling $27.6 million as compared to $27.9 million in the second quarter of 2019.

Exclusive of $10.8 million of professional and advisory fees, associated with our internal review, $600,000 of stock-based compensation and $3.2 million of retention bonus and severance, general and administrative expense was $13.0 million or approximately 2.4% of revenue for the third quarter of 2019.

Net income for the third quarter of 2019 totaled $34.4 million or $0.33 per diluted share versus the $36.1 million or $0.35 per diluted share for the second quarter of 2019. Adjusted EBITDA increased approximately 4% to $131.9 million for the third quarter of 2019 from the $126.6 million in the previous quarter.

Now turning to the balance sheet and capital spending. We ended the third quarter with cash on hand of $109.2 million and total debt of $130 million. During the quarter, we incurred capital expenditures of $87 million from spending on ProPetro's growth initiatives as well as maintenance capital.

Finally, total liquidity, as of September 30, was $173.5 million including cash and $64.3 million of available capacity under our ABL. Capital expenditures incurred during the third quarter of 2019 were $87 million.

As of September 30, 2019, ProPetro had spent approximately $120.8 million on its DuraStim growth initiatives and expects to spend an additional approximately $58.3 million through 2020 on the first three DuraStim fleets. This total includes a third turbine that the company has not yet agreed to purchase.

We believe a strong balance sheet and ample liquidity is a requirement to compete at the highest level in our sector and we will continue to be responsible stewards of capital with a view to maintaining a conservative capital structure that provides us flexibility through market cycles.

With that said, we will always keep all potential uses of capital as options moving forward. With that, I'll turn it back over to Dale..

Thanks, Sam. Now I would like to take the opportunity to provide an update on the deployment of our upcoming DuraStim fleet.

We continue to work alongside our equipment partners to ensure that our movement not only into electrically driven equipment, but also that our adoption of an innovative new pump technology is given the appropriate opportunity to succeed once it is delivered to the well site.

To do this, we have been pushing the limits of the new equipment as much as possible, while it is still at our manufacturer's facilities to avoid as much as possible having to optimize these fleets on the well site at the expense of our customers.

We have multiple parties involved from the generation of electricity, all the way to the new long stroke, automated DuraStim pumps. And we will continue to tweak and fine-tune the entire package, until we believe it is ready to perform at the well site.

Our expectation is to have the first fleet operational in the Delaware Basin by the end of this year. And the first deployment date will depend on the final adjustments, we're currently making, which could push initial deployment into early 2020.

That being said, we are in close alignment with our suppliers and our initial DuraStim customer to give the new technology the best opportunity to succeed.

We, along with many of our current customers, remain very excited about the DuraStim's opportunity to drive down well costs for our customers, while at the same time, reducing our footprint and increasing our own operational efficiencies. Next, I would like to give you a brief update on the market and what we are seeing out in the Permian.

The back half of 2019 has no doubt been a challenge for our sector, as we adjust and adapt to swings in activity and a change in approach from our customers. The drawdown in activity has pushed us to intensify our focus on our own profitability and cost structure to maintain acceptable returns and utilization.

We expect the E&P space that we serve to remain very disciplined with their capital through the end of the year and into 2020. That said, we currently expect to see a small increase in activity going into 2020, but we do not expect it to come with an increase in per fleet profitability.

Because of this dynamic and the way the playing field has changed, we are constantly looking for better ways to measure and position our company. Over the past couple of years, we have also seen a hard shift in the Permian Basin to pad development, longer laterals and larger job volumes.

From an operational standpoint, throughout this transition we quickly discovered that one, reinvesting in our fleet to keep it young and high performing is a requirement not only to provide our customers with quality service, but also to allow us to make a return while doing so.

And second, we must continue to work with innovative partners to pull new technology to the well site that address the evolving requirements of today's frac jobs and the needs of our customers. As always, our competitive position and success in the Permian Basin will rely on our ability to work with our customers and suppliers across the value chain.

We believe that our ability to do these things has been the cornerstone to our success in the past and will remain so in the future. Now, I'll briefly turn it over to Sam before we begin a question-and-answer session.

Sam?.

Thanks, Dale. Before we open it up for Q&A, I would like to make clear that we are not able to discuss or answer any questions related to the internal review, shareholder litigation, SEC investigation or other related matters.

While we are working to resolve matters as quickly as possible, all the details we can share at this time with respect to those topics can be found in our SEC filings and disclosures. We would therefore respectfully request that you direct your questions today on our business and current operating environment.

With that, we'd like to open it up for questions.

Operator?.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question today will come from John Daniel with Simmons Energy. Please go ahead..

Hi, guys. Good quarter. Dale, a question for you.

Have there been any customer disruptions or customer losses as a result of the investigation process?.

No, sure the -- here in Q4, the budget exhaustion, seasonality, and just the softness of the market to date is the reason for what we're seeing..

Okay, cool. And then, last one is, a lot of your customers right now are going through the normal RFP process and I presume it's reasonable to see your per fleet profitability decline next year.

Is that a fair assumption just because of where we are in the budgeting season in the process for bids?.

Yes. I think it's early to make that statement, John, but obviously there's pressure on pricing and everybody's looking to reduce well costs. And we're in those discussions with our customers at this time..

Okay. I'll turn over to others and chime back in later. Thanks guys..

Thank you, John..

Our next question will come from Tommy Moll with Stephens Incorporated. Please go ahead..

Good morning and thanks for taking my questions..

Good morning, Tommy.

So on pumping hours per crew, it looked like it was a company record in Q3 and so I wanted to ask if you could unpack some of the drivers for us there.

And then, how much more room do we have to go to keep pushing those efficiencies higher, forgetting about Q4 for a minute, which will be seasonally weak, but I'm thinking more into 2020?.

Yes. Tommy, this is Sam. I'll take that one. You are correct on the pumping hours per crew basis. It was another slight increase. A lot of that had to do with, I guess, what we would call an improving job mix. We continue to see our customers add more wells per pad.

We've migrated from what traditionally was a one-well pad operation out here in the Permian Basin over the last few years to many more four and six-well pads. So during the quarter, we did see a higher percentage of three and four-well pads as compared to two-well pads. That just gives us more opportunity to pump more hours in the day.

Thank you, Sam. And just following up on what 2020 could look like. Dale you mentioned in your remarks, it seems like utilization could pick up some as we enter into the New Year.

I realize it may be a little bit early to know exactly what that looks like, but could you hazard a guess? Do we get back to maybe Q3 levels sometime in the first quarter, or do you think the acceleration next year may be a little bit more delayed versus traditionally?.

Yes. Tommy, I guess a couple of things there. I think it's a little early to talk about full year 2020. We have seen several of our customers delay completions here going into the end of 2019 that will pick up in 2020.

And that's really the uptick we're talking about with quite a few of our customers that has delayed completions, but continue to drill through the end of the year, but a little early to tell the market conditions and what that's going to look like full year 2020..

Okay. Thank you. That's all for me..

Thanks, Tommy..

Our next question will come from Byron Pope with Tudor Pickering Holt. Please go ahead..

Good morning, guys..

Hey, Byron..

I appreciate the color on the remaining capital to be spent on the DuraStim fleets through 2020.

I was just wondering, if you guys could help frame how outside of that that DuraStim-related CapEx, how you guys might be thinking at this point about CapEx as we step into next year?.

Yeah, Byron, I'll take a shot at that. I mean, right now, I think we quoted that we had around $58 million remaining on what the total spend was going to be on these first three DuraStim fleets. The total spend we outlined previously was going to be around $180 million for all three fleets.

And that was assuming that, we were to purchase the power source or the turbine for the third fleet of which we've not yet agreed to purchase. We still could obviously make that purchase ourselves, but we're in talks with that customer in terms of what will be best in terms of, if our customer wants to own that third turbine or if we want to.

But on that remaining approximately $58 million it's – I could say, it should be relatively split close to 50-50 between the last couple of months of 2019 and early 2020 in terms of how that capital is split up. So we will see a portion of it leak into 2020. Right now, we don't foresee anything substantial that's going to add to that number.

Does that answer your question?.

Yeah, it does, Sam. I appreciate it. And I was just trying to think about kind of a base level of CapEx as you think about 2020. But if it's too early to really opine on that that's fine..

Sure. Yeah, I think I – to maybe help you out a little bit there. I mean, we obviously have most recently have guided to maintenance CapEx on active crews being between $6 million and $7 million on an annualized basis per crew. We would probably say that, it's more realistic for next year to be at the top of that range around $7 million per crew.

So that would be the baseline, if you're trying to make an assumption on maintenance capital that probably use that $7 million per active crew..

Okay, that's helpful. And then just on the working capital front, nice improvement in receivables. It doesn't seem as though there'd be any reason why Q4 wouldn't be a free cash flow positive quarter for you guys.

Is that a reasonable way to think about it?.

Yeah, I think that's reasonable. I mean, we obviously can have some pretty significant swings in short periods of time on things like receivables, but cash and liquidity are king. And we'll be focused on that through the end of the year and going into next year..

Great guys. Thanks. Appreciate it..

Thanks, Byron..

Our next question will come from Sean Meakim with JPMorgan. Please go ahead..

Thanks. Hey, good morning..

Good morning, Sean..

Could you maybe talk a little bit about how pricing discussions with customers are progressing? And I'm just curious, if there's any – as they're trying to stay within their budgets, is there any horse-trading between volumes versus price in the fourth quarter versus what could materialize early in 2020? Just curious, how you ought to think about that in terms of trying to help your customers get where they need to be from a capital perspective but also putting ourselves in a good position into next year?.

Yeah. Sean, that's a very fluid conversation and obviously we're working with them and doing what we can to drive their well costs down. Really focused at doing that at the field level, but that's carrying over into pricing discussions. And we'll continue to do that through the end of the year.

And we got a lot of customers there wanting to lock in something next year and those talks are fluid. But just like in our history our ability to execute and be efficient on location helps those discussions. And we'll continue to work with them to get them where they need to be, and us to make a return on our equipment..

Right. That's fair enough, Dale. I appreciate that.

Thinking about the DuraStim fleets, could you talk a little bit about the factors that could determine whether or not you end up purchasing that third turbine or the customer does? And I guess in light of the market conditions outside of these three fleets, any changes with respect to expectations on cash paybacks on those? Anything else that we should be thinking about prior to what we've discussed previously?.

No. I would say no changes to those discussions. And again, that's a very fluid conversation with that third turban -- turbine. And we've got plenty of time to make that decision between the two of us..

Our next question will come from Kurt Hallead with RBC. Please go ahead..

Hey, good morning..

Good morning, Kurt..

Good to hear from you Dale..

Thanks..

So I appreciate the color commentary you guys have been providing with respect to some of the dynamics at play in the market. And I just wanted to kind of come back around and try to kind of help differentiate where you guys are from an operational standpoint vis-à-vis some of the other competitors out in the marketplace.

So when you guys talk about the pricing dynamics and you guys talk about the ability to potentially find ways to reduce your cost, I was wondering if you can just kind of give us some general sense on how that may or how you may see that impacting say, incremental or decremental margins from here.

And the context is simple, right? In virtually every other instance where we look at a service company when revenues are going down, the initial phase usually is like a 50% decremental margin because you can't cut costs fast enough.

And I just wanted to kind of give you an opportunity to kind of talk about some of the things that you're doing that could potentially mitigate that decremental margin risk..

Yes we're doing everything we can to hang on to margin. And just like any other cyclicality that we've been through it's good to have great supply chain partners that help you do that. And it's also great that your people on location don't give way for your customer to look for reasons to treat you unfairly.

So those are the things we're doing at this time..

Yes Kurt this is Sam. I'll maybe try and add on to that a little bit more. I think the last time we saw this specifically to ProPetro was probably Q4 of 2017, where we saw utilization dip going into the end of the year. We obviously had a decremental margin that year but we had a pretty significantly improving job mix that allowed revenue to trend up.

So with revenue most likely trending down due to utilization in the fourth quarter this year, I think there's an opportunity where the decremental margin hit could be slightly more than what we saw in Q4 of 2017.

Although, like Dale said, we're doing everything we can today and through the end of the year to preserve as much of that margin as possible..

Right. And then Dale I appreciate you being a little bit kind of cautious on your commentary regarding the pace of activity going into next year. I guess I'm kind of curious just along the lines of in maybe the indications that your customers have given you in terms of when they plan to start getting active again.

Is that something that you feel is kind of like at the very early parts of the year? Or do you think it's kind of more of a gradual phase-in throughout the course of the quarter? Any color on that would be helpful..

Kurt I think that's a customer-by-customer situation and I don't think you could draw a straight line to that ramp. And there are some that are telegraphing it's going to be quick after the first and others gradual. So I think that's how I would answer that question..

Okay, that's fair. And then if I can maybe just layer in one more just on the loss on asset disposals. It looks like you've been running about 6% of revenue over the course of the past couple of quarters.

Is that something that will probably normalize at that level going forward? Do you expect that to trend a little bit lower?.

Hi, Kurt. This is Sam. It has undoubtedly been elevated in second and third quarters this year. I think previously we had tried to outline that a lot of that was due in part to a rebuild program with the equipment that we had purchased from Pioneer early this year.

We have since accelerated that rebuild or refurbishment program and thrown some legacy equipment into the mix. Fluid ends as a proportion of that number has gone down each of the last two quarters.

Therefore, I guess, I would say it's the increase in that line item, I would say would be more due to a traditional sense and the fact that we're retiring equipment and large components earlier than usual to renew the life of those components and get them back working.

We have a few things to finish up on that kind of accelerated refurb program toward the end of this year. We're -- and we're kind of in the works of evaluating of what that would look like next year. Our hopes is to minimize that number as much as possible moving forward..

Okay. Great. Thank you. Appreciate that..

Our next question will come from Chris Voie with Wells Fargo. Please go ahead..

Good morning, guys..

Good morning, Chris..

Just curious, so you have 25.1 utilized fleets and you're guiding to 18 to 20 in 4Q.

Can you give the number of fleets that you had crewed in 3Q and you expect to have crewed in 4Q?.

We probably wouldn't speak to that. Yeah, I mean, it's the number of -- so the range of effectively utilized crews in the fourth quarter being 18 to 20, we will be crewed and active in excess of that due to white space. The effective utilization comes down within that range..

Okay.

In terms of -- it's early thinking about 1Q 2020, but do you expect revenue rebounds in 1Q 2020 to be driven primarily then by just getting more work on the calendar for the crews that you do have active versus -- what are the prospects for fleet reactivations then?.

I think the short answer to that question is yes. The increased revenue would come from increased activity. And like Dale spoke to earlier, we'll be doing everything we can from a pricing and cost control standpoint to maximize margin below revenue..

Okay. And if I can just squeeze one last one in. Do you feel like your pricing on a per stage basis is pretty much in line with the market in 3Q or higher? And then in discussions with competitors, I'd say consensus is that pricing is probably down 5% to 10% for dedicated work.

Does that sound about right to you guys?.

I think it's in line, Chris..

Okay. Thanks a lot..

Thank you..

Our next question will come from Stephen Gengaro with Stifel. Please go ahead..

Thanks and good morning gentlemen..

Hello, Stephen..

Thanks. Two things one quick. The D&A has trended up the last couple of quarters.

Any guide for that as we go forward here?.

Yeah, it's mainly investigation fees I guess, Stephen..

Oh, that's showing up in the depreciation, okay, in the depreciation and amortization line?.

No. D&A.

D&A or G&A?.

D&A, sorry, depreciation..

Depreciation and amortization, it's just mainly the expanded asset base..

Okay.

And then as we think about the -- as you fold in the DuraStim fleets, what's the -- how do we think about the EBITDA contribution per fleet there? I mean, are we looking at something similar to the existing fleet? Do you think that's the best way to look at it in the near term? Or how should we think about that as we've -- given how market has evolved here over the last couple of quarters?.

I think at this stage in line with what we currently experience with our other fleets and to be determined as we identify cost savings and collaborate with our customers..

And then just as a follow-up to that, have you -- what's been sort of the conversations with customers around e-fleets over the last couple of quarters? Is it -- how is it evolving? And are you seeing sort of greater interest? And just trying to get a sense for how you see that unfolding over the next year or two..

Yeah. I think that's going to be a very fluid situation and conversations to -- in different parts of the Permian conversations are picking up, because of some of the mandates in parts of those basins. So we'll be able to share more as we bring ours to market and look forward to giving more color then..

Okay. Thank you, gentlemen..

Sure..

Our next question will come from Scott Gruber with Citi. Please go ahead..

Yes. Good morning..

Good morning, Scott..

Dale as you continue to test the DuraStim technology, what have you learned during the testing? And is there any specific issue that needs to be addressed ahead of deployment?.

Yeah, I think it's a little early to discuss mini issues. The software is great. We're not seeing any major issues there, which is very important. And no alarming concerns at this point and look very forward over the next couple of weeks of having that in our yard. And look forward to sharing more with you as we move closer to having on the well site..

Got it. And then just on the last question around kind of general appetite for e-fleets. I mean, you guys have options for traditional three more DuraStim fleets.

Do you think you'll exercise one of those options in 2020 one or more?.

Yeah, the market conditions are going to dictate that and it's not a decision that we rush to make before June 30 of next year. So, there's a lot of things we'll learn between now and then and look forward to that..

Got it.

And just overall assuming the economics are still in the money, is there any change in appetite on your behalf to pull the trigger on those options or would you still want to do so if the economics suggest that you're still in the money?.

Well, we'll make sure that our customer on the other side of that is partnering with us to make that a good financial decision for our stakeholders..

Got you.

I guess I was coming at it from the standpoint of deploying capital to grow the business versus giving more cash -- or giving cash back to shareholders, any change on that front?.

Yes, I think we'll be listening to our shareholders and making that decision at the proper time and I think that's how I would answer that..

Appreciate the color there. Thank you..

You bet. Thank you..

Our next question will come from Vebs Vaishnav with Howard Weil. Please go ahead..

Hey. So, you have asked us not to ask on those SEC investigations, I'll respect that.

But can you talk about how are the conversations with NYSE and bondholders regarding delays in 10-Q ongoing?.

Yes Vebs, we're doing everything we can and collaborating with all the appropriate entities to make sure our company is in good standing everywhere it needs to be. That's about all we can comment there..

Okay. All right. Maybe I missed, if I did, I apologize.

Did you speak about like how should we think about the fourth quarter profitability? Like you talked about the number of fleets, but is there any way you can help us think about what the profitability could be in Q4?.

Yes, I did mention that a little bit earlier in just trying to make a quick comparison to our per crew profitability trend in 2017 when we experienced a slightly similar drawdown in utilization.

So, it's probably going to be given that revenue is coming down quarter over quarter when it wasn't in 2017 that we could experience a slightly larger decremental margin than we saw in the fourth quarter of 2017..

That makes sense..

No. No problem..

Can you help us just think about when we think about cash breakeven profitability per fleet and I'm thinking about like fluid ends SG&A per fleet whatever you need to replace the fleet over the next like one, two, three years for engines and transmission.

What's that level of profitability per fleet that is at minimum that you require to be cash breakeven?.

Yes, I mean we -- I guess, we would kind of define a fleet level cash flow is just simply EBITDA minus maintenance CapEx. That should normalize for things like fluid ends that you mentioned. I'm not sure if we're willing to run the number absolutely to breakeven just to stay active.

But those are types of things that we're working through on a consistent basis to make sure we're measuring our business in the most appropriate manner so that we can react to swings in the market..

All right. That's all I needed. Thanks so much..

Our next question will come from with Waqar Syed with AltaCorp Capital. Please go ahead..

Thank you for taking the question and congrats, Dale, Sam, for a good quarter. In terms of your guidance regarding first quarter, you said profitability may be flattish.

Is that referring to the fourth quarter profitability or third quarter profitability for the first quarter?.

We're caught probably somewhere between at this point the best of our ability to gauge..

Okay.

And then could you let us know what the cost of fluid ends was in the third quarter?.

Yes, Waqar I mean we were -- with the maintenance capital spend in the quarter, we were probably just off the top end of our $6 million to $7 million range on an annualized basis. And really all we can say I mean traditionally we pointed to fluid ends being half or a little more than half of that maintenance CapEx number.

I can tell you that during the third quarter this year, it was below 50% of that number..

Okay. And so normally the loss of -- on disposal assets is generally a good indication of what the fluid ends cost could be. That was relatively flat quarter-over-quarter around $31 million.

How much of that would be fluid ends? Or what was all in that number?.

Well below half of that number due to what I guess, I mentioned earlier a more traditional sense of that line item and being our voluntary retirement of some large components and pieces of equipment in this rebuild program that we talked about..

Okay, great. That's all I have. Thank you very much..

Thanks for call..

Our next question will come from Tom Curran with B. Riley FBR. Please go ahead..

Good morning..

Good morning, Tom..

When it comes to the active spread count you have just with Pioneer, could you tell us what that averaged to for 3Q where it exited the quarter and whether you have any better visibility on just that specific demand into 2020?.

Yes. I mean we usually don't quantify utilization or active crews in specific customers. Pioneer's been a great partner throughout this year in terms of utilization. We think they'll continue to be so going into next year and it's all on an individual customer-by-customer bases how we're getting to activity early next year..

Are you -- over the course of the quarter in terms of the churn you might have had within your active spread count have you already been able to exploit or do you see signs of being able to take advantage of rivals whose customers are becoming concerned about their financial health or even viabilities of going concern? Are you already poaching jobs here or there, or do you expect that type of opportunity to ramp from here?.

Yes, Tom, we're so focused on the customers that we're serving. We're just trying to make sure we take care of their needs and that's really what we're focused on..

All right. Thanks for taking my questions..

Our next question will come from Harry Pollans with Bank of America. Please go ahead..

Hi, guys. Can you talk in more detail about your effective utilization guidance and helping us kind of understand your cost structure? Have you stacked any fleets? Or is that 18 to 20 fleets effectively utilized on your total 27 deployed fleets? Thanks..

Yes, Harry, I'll take that one. So just to level set, we define an effect -- fully effectively utilized fleet as working 75 days in a quarter or 25 days in a month. So like we said earlier, there's many cases where we can have staffed an active crew -- a number of crews in excess of our what we will call effectively utilized crews.

So knowing that this is the people business and our performance is mainly totally dependent upon the strength of our team we'll do our best to hang on to as many key personnel in times like this when activity draws in.

So we will be staffed in excess of that effectively utilized number that we quote or guide to therefore probably dinging margins, dinging something like EBITDA margins due to that..

Okay. Thanks.

One more so on the second two DuraStim fleets, have you talked about timing with regard to deployment on those two? Should we expect those in the beginning of the year? What's kind of the time line there?.

Yes, it'll -- they'll be spread throughout 2020. And we'll have a much better sense as we roll out the first one, Harry..

Got it. Thanks guys. Appreciate it..

Thank you..

This will conclude today's question-and-answer session. I would now like to turn the conference back over to Mr. Dale Redman for any closing remarks..

Again, we appreciate all of you participating in today's call and have a great Thanksgiving and holiday season..

This concludes today's conference. Thank you for attending today's presentation and you may now disconnect..