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Edited Transcript of USWS.OQ earnings conference call or presentation 7-Aug-19 2:00pm GMT

Q2 2019 US Well Services Inc Earnings Call

Aug 30, 2019 (Thomson StreetEvents) -- Edited Transcript of US Well Services Inc earnings conference call or presentation Wednesday, August 7, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Joel N. Broussard

U.S. Well Services, Inc. - President, CEO & Director

* Josh Shapiro

U.S. Well Services, Inc. - VP of Finance & IR

* Kyle P. O'Neill

U.S. Well Services, Inc. - CFO

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Conference Call Participants

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* Chase Mulvehill

BofA Merrill Lynch, Research Division - Research Analyst

* Daniel Joseph Burke

Johnson Rice & Company, L.L.C., Research Division - Senior Analyst

* Derek John Podhaizer

Barclays Bank PLC, Research Division - Equity Research Analyst

* George Michael O'Leary

Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research

* John Matthew Daniel

Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service

* Michael William Urban

Seaport Global Securities LLC, Research Division - MD & Senior Analyst

* Stephen David Gengaro

Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst

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Presentation

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Operator [1]

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Greetings, and welcome to the U.S. Well Services Second Quarter Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Josh Shapiro, Vice President of Finance. Thank you, Mr. Shapiro, you may begin.

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Josh Shapiro, U.S. Well Services, Inc. - VP of Finance & IR [2]

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Thank you, operator, and good morning, everyone. We appreciate you joining us for the U.S. Well Services conference call and webcast to review 2019 first quarter (sic) [second quarter] results.

With me today are Joel Broussard, Chief Executive Officer; and Kyle O'Neill, Chief Financial Officer. Following their prepared remarks, the call will be open for a Q&A.

Yesterday evening, U.S. Well Services released its second quarter 2019 earnings. The earnings release can be found on the company's website at www.uswellservices.com. Company also intends to file its second quarter 2019 Form 10-Q with the SEC later this week.

Please note that the information reported on this call speaks only as of today, August 7, 2019, and therefore, a time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of U.S. Well Services management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management.

The listeners are encouraged to review yesterday's earnings release and the company's filings with the SEC to understand those risks, uncertainties and contingencies.

Also, during today's call, we'll 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.

And now, I'd like to turn the call over to U.S. Well Services' CEO Mr. Joel Broussard.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [3]

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Thanks, Josh, and good morning, everyone. We appreciate you joining us this morning. U.S. Well Services delivered strong results for the second quarter. I'd like to begin with this morning's call by reviewing the key financial and operating highlights from the quarter.

Revenue grew 8% sequentially to $151.4 million and adjusted EBITDA grew 52% sequentially to $42.6 million with adjusted EBITDA margins improving to 28% from 20% in the first quarter of 2019. U.S. Well Services exited the second quarter with 13 available fleets, consisting of 9 conventional diesel fleets and 4 electric fleets. At the end of the quarter, 11 fleets were active and we averaged 10.4 fully-utilized fleets during the quarter.

On a fully-utilized basis, USWS generated approximately $16.4 million of annualized adjusted EBITDA per fleet as compared to $11.4 million for the first quarter of 2019, which equates to a 43% increase. We deployed 2 new electric fleets during the quarter, with 1 beginning to work in the Permian Basin in April and the second going to work in the Northeast in June. Our growing electric frac fleet has not only helped building our financial performance, but also has solidified our position as a market leader in the electric fracturing services.

USWS continues to differentiate the company from its competitors and demonstrated its commitment to technology during the quarter. During the second quarter, we granted an additional 4 patents, bringing our total granted patent portfolio to 22, and we also have 82 patents pending. In June, we announced that we had begun work using our patent pending PowerPath technology. PowerPath enables USWS to position power generation equipment in a fixed location and transmit electricity via power lines over a long distance to power hydraulic fracturing equipment. In doing so, we were able to achieve significant reduction in cost and time associated with mobilization.

USWS has been a leader in collecting and analyzing the equipment vibration data since 2014 using our FRAC MD technology. The data we collect allows our operators to enhance decision-making and real-time by catching irregularities and reacting before costly equipment failures occur. This technology helps to allows us our engineering and development teams to design and configure equipment in a optimal manner that we believe reduces repair, maintenance and maintenance capital costs.

During the quarter, our operator submitted 136 FRAC MD catches and I'm pleased to announce that we recently recorded a 600 catch use in this technology. From the second quarter of 2019, all but 2 of our fleets were using 7-inch large-bore iron packages. We believe we have more 7-inch iron deployed than any other frac company operating currently. These large-bore packages enable us to significantly shorten rig-up times, reduce costs associated with the failures and leaks, and extend the useful life of our frac iron by much as 4x.

The shift time is no surprise to market observers and that hydraulic fracturing industry currently faces numerous headwinds. E&P operators are under considerable pressure to spend within cash flows and have reduced capital budgets for drilling and completions accordingly. The result of this dynamic has been sustained pressure on pricing for conventional frac services. Meanwhile, the demand for services -- service companies to continue to grow with customers demanding increasing pump hours per day. For our industry, this being short equipment, useful life and higher repair and maintenance costs added to these challenges is the macroeconomic uncertainty that continues to weigh on crew prices.

U.S. Well Services taken proactive measures to position the company to continue delivering best-in-class execution for our customers and creating value for our shareholders. First, USWS continues to shift our equipment portfolios towards electric frac fleets. For our customers, this creates opportunity to benefit from significant fuel cost savings, enhance equipment reliability and reduce noise and carbon emissions. We believe electric fleets are better suited to withstand harsh operating conditions and rising service intensity. This should result in lower cost of ownership as well as a longer equipment useful life. As a result of the fuel savings these fleets deliver, we believe electric fleets also offer their ability to go on a premium pricing relative to prevailing market pricing for conventional frac services.

Second, U.S. Well Services employs a partnership model with its customer, whereby we work closely with them to ensure the highest levels of service quality. Exiting the same quarter, 9 of our 11 active fleets were working under contract and 2 were working under dedicated agreements. Approximately 1/3 of our contracts will be up for renewal during the second half of 2019 and we are actively evaluating the new alternatives as well as possibility of replacing the fleets in the spot market. We believe the partnerships we have with our customers help us maintain the utilization level of our fleet and mitigate adverse impacts of cycles.

Finally, USWS remains focused on reducing costs. Our team worked diligently during the second quarter to reduce the cost of lodging, heavy equipment transportation and SG&A, which helped us expand our adjusted EBITDA margins quarter-over-quarter. U.S. Well Services has and will continue to react swiftly to changing market conditions. We ordered 1 fleet during the second quarter and constantly evaluating opportunities for our fleets working in the spot market.

Looking forward, we believe the company is well-positioned to respond rapidly to changes in the operating environment. In summary, U.S. Well Services has a solid second quarter. I'm proud of the work our team has done to consistently deliver high-quality service for our customers and look forward to building on our success in subsequent quarters.

With that, I'll turn the call over to Kyle O'Neill, our Chief Financial Officer.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [4]

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Thanks, Joel, and good morning. Revenue in the second quarter rose 8% sequentially to $151 million. Service and equipment revenues rose 11% quarter-over-quarter and revenues from consumables, including sand, chemicals and transportation increased 1% sequentially. The quarter-over-quarter increase in revenue was primarily attributable to higher number of fleets working and improved utilization of active fleets. As Joel mentioned, we averaged 11.3 active fleets during the quarter with the utilization rate of 92%, resulting in fully-utilized equivalent of 10.4 fleets. This compares to 11 active fleets during the first quarter of 2019 with the utilization rate of 89%, resulting in 9.8 fully-utilized fleet equivalents.

Cost of service in the second quarter declined by approximately 2% sequentially to $107.5 million. As compared to the first quarter of 2019, our labor costs rose approximately 11% driven by an increase in the number of fleets working. Our team achieved great success reducing cost during the quarter as was evidenced by sequential decrease of 25% and 17% for repair and maintenance costs and other operating costs, which include lodging and heavy equipment, respectively.

SG&A declined to $7.6 million in the second quarter from $8.6 million in the first quarter. After adjusting for stock-based compensation and onetime transaction fees, SG&A was $5.9 million as compared to $6.5 million in the first quarter. Reduction in SG&A is primarily attributable to lower professional fees incurred during the period.

Adjusted EBITDA rose 52% sequentially to $42.6 million, on an annualized rate of $16.4 million per fully-utilized fleet as compared to $28 million in an annualized rate of $11.4 million per fully-utilized fleet in the first quarter. Adjusting for maintenance CapEx associated with our fluid ends, our annualized adjusted EBITDA per fully-utilized fleet was $14.9 million as compared to $7.7 million for the first quarter of 2019.

Turning now to capital expenditures. During the quarter, U.S. Well Services spent approximately $87.6 million on capital expenditures. Of this, approximately $71.8 million was attributable to growth CapEx and related to the electric fleets we deployed during the last quarter as well as the new electric fleet currently on order.

Last quarter, we indicated that we would spend between $80 million to $100 million of growth capital to complete our fleets on order. We anticipate that U.S. Well Services will incur an additional $25 million to $30 million throughout the second half of the year.

In the second quarter, U.S. Well spent approximately $9.1 million on maintenance capital expenditures, of which $3.8 million or 42% was related to fluid ends. We also spent approximately $6.7 million on fleet enhancement, which includes 7-inch iron packages with certain of our fleets.

As of the end of the second quarter, U.S. Well Services had a -- had total cash on hand of $51.7 million as well as $35 million available under our asset-backed revolving credit facility, bringing our total liquidity to $86.7 million.

With that, I'd like to turn it back to Joel for some closing comments.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [5]

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Thanks, Kyle. Before we get into Q&A, I'd like to offer some thoughts on the current state of the industry. Many market observers focused on their nameplate capacity of the U.S. pressure pumping fleet and point to the oversupply as a chief cause of the deteriorating market conditions. While we recognize the challenges, we believe that oversupply is understated due to the ex-potential rise in service intensity. Just a few years ago, our customers were pleased when their service provider was able to pump 10 hours in a day. Now customers routinely demand 16, 18 hours of pumping time per day. As an industry, we have become adept to at meeting our customers' needs, performing nearly all the maintenance in the field and adopting new technologies that have enabled us to achieve greater efficiencies.

While the increasing efficiency is admiral, it comes with significant cost and has considerably shortened the useful lives of conventional frac equipment. This is why we believe that the industry has no choice but to adapt to electric frac technology that is better suited to withstand harsh operating conditions. The electric frac fleets powered by natural gas turbine generators, maximize frac equipment useful life and offer a lower cost of ownership relative to conventional fleets. We believe that proprietary technology and first-mover advantage in going electric will position USWS to succeed as a market leader in this rapidly changing industry.

Thank you. I will now turn it over to the operator and open the call up for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chase Mulvehill with Bank of America.

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Chase Mulvehill, BofA Merrill Lynch, Research Division - Research Analyst [2]

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First question, if we can kind of come back to electric fleets, you deployed 2 new build electric fleets in 2Q, you got another one in the first quarter of 2020. To the extent that you would, could you provide some color around the contract terms and maybe the cash on cash paybacks that you're getting on some of these new build electric fleets?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [3]

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Yes, Chase, with respect to cash on cash payback, we targeted 3.5-year payback. We evaluate this based on EBITDA and less maintenance CapEx. The contract terms are generally 1 and 2 years and containing a fixed monthly fee with a variable service charge. The fleet we'd deploy for Shell early in 2020 is a 2-year contract. Based on our current dialogue, we believe demand for these fleets far exceed our available supply, with no short of the customers who are willing to sign long-term contracts.

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Chase Mulvehill, BofA Merrill Lynch, Research Division - Research Analyst [4]

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Okay. Great. That's helpful. And then are there ongoing conversations regarding more electric fleets? I know you got the one that's coming in 1Q 2020, but what are the conversations look like today about adding potentially more fleets in 2020 or is one coming with Shell in 2020 is kind of what we should be thinking about for 2020?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [5]

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Absolutely. We're talking, negotiating with nearly every E&P operator of scale. Currently, the demand for electric fleets exceeds the supply quite substantially. We don't believe any future deployment as cannibalizing conventional. Demand for our conventional fleets remain strong as a result of our high service quality. Over time, new electric fleets will replace our conventional hydraulic horsepower, but in the near term, we have customers who don't have sufficient work to justify sign a long-term contract for an electric fleet. And they are more happy to take our conventional crews.

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Chase Mulvehill, BofA Merrill Lynch, Research Division - Research Analyst [6]

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Okay. All right. A quick follow up, can you talk about your PowerPath technology? I know you had a press release out on it a few, I guess, a few weeks or may be a month or so ago. Maybe talk a little bit about the advantages and maybe any issues that you've dealt with as you rolled us out this in 2Q and also maybe touch on the potential cost savings and how much of those cost savings you're able to capture with the new PowerPath technology?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [7]

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PowerPath is a patent-pending. It's our system of transmitting power over the long distance to our frac equipment. This key is what they generate high voltage power, which allows us to transmit our electricity over long distance through power lines. So we'll keep the power generation in 1 location, run 3 or 4 miles of power lines and frac 5 or 6 pads. Over 2.5 miles, it's very little power loss. So we -- it helps mobilization and also cost savings for the client.

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Operator [8]

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Our next question comes from the line of Daniel Burke with Johnson Rice.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [9]

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Appreciate the detail on both stages and hours and the ability to put those metrics together. As you look at Q3 and there's a little uncertainty around the edges, I guess. But do you think that the efficiency metrics you posted in Q2 will be sustainable in Q3?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [10]

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Yes. I mean, I think that the reason we put a lot of those metrics out there was so that we have total transparency for analysts and investors, and they can see the trends that we're all seeing with equipment utilization and really a service intensity. And so I think, right now, we've got visibility into Q3 and we feel like our fleets and our crews will continue to operate at pretty healthy levels.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [11]

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Okay. Great. Appreciate that. And then maybe Kyle, just to stay with you, in terms of CapEx, I think, you mentioned $25 million to $30 million of remaining spend, and just to complete the 4 currently committed electric fleets. And just to get a little clarification, as $25 million to $30 million that's not yet reflective of that. Can you talk about what's embedded in accrued -- may be accrued CapEx in your payables right now, is that incremental to the $25 million to $30 million?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [12]

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Yes. So the $25 million to $30 million is what we have left to spend on the fourth fleet that is coming online at the beginning of first quarter. What's in our current payables right now is about a little over $30 million, call it, $32 million of growth CapEx that's in our payables number that will get paid out here or has been paid out after the end of the quarter.

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Daniel Joseph Burke, Johnson Rice & Company, L.L.C., Research Division - Senior Analyst [13]

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Okay. Great. Well, I'll append one more. Can you talk either qualitatively or maybe quantitatively on, when you look at the sequential improvement in your results from Q1 to Q2, I mean, would you differentiate in any way what the relative improvement in performance from your conventional fleets versus the Clean Fleet?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [14]

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We're not providing specific fleet profitability performance, but we did realize some cost reductions, which helped profitably, but a large part of that improved performance quarter-over-quarter was a result of having more electric fleets deployed and fully utilized for the period. So I can think you can use that as directionally proof of improved profitability for those electric fleets.

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Operator [15]

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Our next question comes from the line of Mike Urban with Seaport Global.

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Michael William Urban, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [16]

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So you've made a number of announcements around exclusivity with vendors and a number of technology initiatives that you've spoken to. What all exactly have you locked up? What part of the either IP process or equipment do you think is most difficult to replicate as you look at the competitive landscape for electrics?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [17]

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We announced that we formed an alliance with AmeriMex and they will be producing our electric motors. We've been with them since the beginning of 2014. We think they're best-in-class and best fit for fracking. They specifically build for the oilfield. We also have a sign-up exclusivity with PW Power Systems through 2020. We feel that the 30-megawatt generator they have is off-the-shelf is probably the best one out there right now. And one more exclusive agreement we executed with Gaumer Processing. Gaumer is the premier provider of mobile gas conditioning systems. Over the years, gas conditioning treatment has become a core competency of USWS, and always allows us to use field gas on nearly every pad we work. Our move to foreign partnerships and strategic alliances with key suppliers directly translates into a first mover advantage. We believe it will also take our future competitors a long period of time to identify the right partners and build fit for purpose equipment.

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Michael William Urban, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [18]

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Okay. Got you. That's helpful. And then a couple of, I guess, more housekeeping type questions. I'd echo the comments of others in terms of just, we appreciate the additional disclosure. The metric in terms of looking at fully-utilized fleet equivalents for profitability, it's something we've seen others in the industry move toward. Can you just talk about how specifically you calculate that? Why do you think that's the best way to look at your profitability? And is that the most comparable way relative to your peers?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [19]

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Sure. Yes, no problem. Thanks for asking. We've spent a lot of time thinking through how best to give kind of total transparency into our business. And we look at active fleets being fleets that were operational during the period. We then calculate utilization by taking a look at each day during the period whether that fleet was mobilizing to or from a pad location or actually pumping, and that's considering the active day and we divide that by the number of days in the period to get through utilization. And the idea is to really be able to -- when looking at on a fully-utilized basis to really show what the true earnings ability of those fleets are on a normalized basis. We've put out all 3 metrics so that the reader can see and use all that information and to build their models. I think ultimately, you get to the same point depending on how you want to structure models. But it's -- we want to make sure all those metrics are out there so that everyone can compare us to our peers on an apples-to-apples basis.

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Michael William Urban, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [20]

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Got you. Appreciate that. Then one last one for me, I apologies if I missed it. Is kind of $5 million to $5.5 million per fleet still a good maintenance CapEx number?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [21]

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I mean that was -- when we originally put that guidance out, that was really based on what we had experienced historically with our conventional fleets. So for our 9 conventional fleets, we still think that's an accurate assumption. But with the increase in electric fleets as a percentage of our total company-wide fleet, I think, we're seeing dramatically lower numbers on maintenance CapEx. So I would be reasonable to use $2 million, $2.5 million we're seeing about (technical difficulty)

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Michael William Urban, Seaport Global Securities LLC, Research Division - MD & Senior Analyst [22]

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Is that fleet-wide or is the $2 million, $2.5 million on the electrics and $5 million, $5.5 million on the conventional that is the right mix. Or just a way to think about it?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [23]

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Correct. Yes, $5 million, $5.5 million on conventional, call $2.5 million on electrics.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [24]

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And that includes fluid ends.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [25]

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Correct.

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Operator [26]

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Our next question comes from the line of John Daniel with Simmons & Company.

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John Matthew Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [27]

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Nice quarter. Want to try to pin you down a little bit on guidance, if I can. You got some moving parts here with the fleets, half the fleets up for renewal in the second half. I'm just curious as you look out, what's the threshold in terms of when you might ideal it? Basically if you go to spot pricing and it's too low. And then also just given the full quarter impact of the 2 electric fleets in Q3, does that -- is that additive to your overall EBITDA per fleet metrics in Q3? Or given the fleet renewals, is it likely going down? Just so trying to bracket that for us would be helpful.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [28]

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Sure. We're still not going to issue full guidance. But we continue to monitor the market obviously very closely and we're committed to reacting quickly depending on market forces, right now. I think that in terms of our threshold to keep our fleet working, we just talked about what our maintenance CapEx is and we need to earn in excess of our maintenance CapEx to keep our fleet active, which is clear. We're not going be out there wearing out our equipment and not be able to generate profits with it.

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John Matthew Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [29]

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Fair enough. But okay -- I mean, it would seem to me, and I'm not trying to be too pushy, just a little pushy is, the market is choppy. But you guys -- I mean, you alluded to, you called it out. I mean, it's choppy out there. We all know that now. You had a good quarter. And it's just with a lot of fleets up for renewal, it would seem that we could see, I don't know, I would think potentially healthy downside in the near term on the EBITDA per fleet metrics, notwithstanding the improvements you're getting from the electric. I just -- I don't want to -- if I'm missing something, please let me know.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [30]

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Right. You're absolutely right, the market is very choppy right now. Our pricing is holding up on our electric fleets and we're committed to keeping our conventional fleets working at rates that kind of earn our targeted rates of return. So I think, you nailed that we do have some fleets that are rolling over in the second half of the year, and obviously there's -- that add (technical difficulty) but we haven't lost sight on keeping our fleets active.

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John Matthew Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [31]

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And I guess, the last one for me, just given the growing demand for electric, Joel, I mean, if you were a gambling man, do you expect to sign any contracts in the back half of the year for another fleet? Or do you think people are going to wait till next year before they start signing contracts again?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [32]

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Like we've always said, we're negotiating with a lot of potential clients and we're in active dialogue on signing contracts with new clients.

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John Matthew Daniel, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [33]

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You're feeling pretty good, fair or not fair?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [34]

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Yes.

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Operator [35]

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Our next question comes from the line of Stephen Gengaro with Stifel.

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Stephen David Gengaro, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [36]

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Two things, just first sort of following up on that last question. When you think about the conventional fleets, do you have a threshold where you sort of idle -- where you idle equipment, is there a -- how do you think about if the market is soft and the cash flow per fleet is softening? Is there a level at which you just park it for a while?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [37]

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Well, we'll look at our maintenance CapEx, a positive cash flow and we're also add in the fact of wear and tear on our equipment, whether it is worth doing the work or not.

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Stephen David Gengaro, Stifel, Nicolaus & Company, Incorporated, Research Division - MD & Senior Analyst [38]

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Okay, okay. The -- when you think about -- on the e-fleet side, one of the things we hear a lot about is, and I know your guess is a little bit earlier but it's sort of the mobilization and how that sort of impacts utilization et cetera? How do we think about the mobilization? What you've done to sort of lower mob times and help increase utilization levels? And how do you think that evolves as we go forward here?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [39]

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Well, from the first fleet we've built in 2014, we've reduced the cabling from 159 cables to 39 cables, reduced it from 4 generators with 20 crane lifts to 1 generator with 5 crane lifts. We can mobilize that generator within 24 hours. And mobilization is fine. Some previous -- our last 2 fleets that we deployed, our -- the customers they're working for actually reported in their -- this quarter earnings that we saved them over $250,000 per well. So I think it's working out pretty well.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [40]

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In addition, we've got the ability to use our PowerPath technology that we talked about in our release. I'd also like to point out that when we talked about utilization, we do -- we include the mobilization days because that's effectively an active fleet. Mobilization is part of your activity levels.

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Operator [41]

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Our next question comes from the line of George O'Leary with Tudor, Pickering, Holt & Co.

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [42]

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Just wanted to tack on a question related to one of the prior questions around repair and maintenance. It's a notable gap on R&M CapEx for the e-fleets versus the conventional fleets. Wondered if you could just frame the biggest drivers of the delta there. And is that largely on the fluid inside? Is the fact that you've removed the engine and transmission? Does it have to do with vibrations on the trailer, maybe just kind of walk through those buckets and what's most impactful to that gap in R&M expense per year?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [43]

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Yes. Sure. I mean the biggest driver of that is absolutely the removal of the engine, transmission, radiator. We don't have to do oil changes. So that's the biggest driver for sure. We don't have to rebuild those every 3, 4 years. We do see lower vibrations on these electric pumps that does help with the life of our fluid ends and power ends. We -- everything helps, kind of, all kind of plays together, but by far the biggest cost saver there is the removal of the conventional diesel engine and transmission.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [44]

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As the service intensity increased, we used to do an oil change, I don't know, once a month, once every 1.5 months. Now we're doing them sometimes twice a month. An oil change can be $150,000 of fleet. To do 2 of those in a month $300,000 per fleet and you don't do an oil change in the turbine.

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [45]

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That's very helpful. And then you guys have moved from the 2 pumps per trailer and you're going forward to e-fleets you build will have just 1 pump per trailer. Wondered if there's anything you guys are mauling over on the pump technology side such that you might be able to move to a larger pump on board those trailers to reduce the amount of trucks on-site. Just curious if there's anything on the power and fluid end side that you guys are mauling over to help reduce the truck count.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [46]

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We're constantly evaluating all the technologies. We feel that the larger pumps aren't there yet, but as soon as they are, we think, it's something we would definitely entertain doing. But for right now, we think the system we have now is the best out there.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [47]

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Yes. We really benefit from our use of the FRAC MD technologies. We're able to really evaluate these different technologies and understand exactly how it's going to play. Cavitation is something that we spend a lot of time focusing on just like vibrations and making sure that we get the right equipment out there to be able to operate at the service intensity levels that are needed.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [48]

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The vibrations on our new pumps, we have well exceeded our expectations. And the damage accumulation numbers are coming in super low.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [49]

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Which should translate into longer useful life especially on components like fluid ends and power ends.

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [50]

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I'll sneak in one more, if I could. Just on the centralized or distributed power that you guys are trailing right now, I just wondered if you could kind of update us on how that's progressing and then the potential for that to become more pervasive within your fleet mix related there is some distance limitations but that may be offset by you can run that turbine more efficiently and maybe turn it off and on or idle it less frequently, if it's also powering things like compression, heater/treaters, ESPs, et cetera. So just curious to know how that's going and then the market opportunity for that moving forward?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [51]

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Sure. I think that that's something that we're having a lot of discussions about. And I think there are a lot of people really interested into kind of the electrification of the overall oil patch. For the most part right now, we are setting up our power generation assets in 1 central location typically closer to the source gas, so it helps to reduce some infrastructure that may need to be run. And then we're just hooking in and distributing our power over power lines. Definitely helps with mobilization time. As of right now, we're not powering any other ancillary equipment, but it's something that we're constantly talking to folks about as we're trying to figure out what's the next step in the evolution of all of this.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [52]

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You mentioned turning on and off the turbine, could you elaborate on that a little bit?

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George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [53]

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Yes. So my understanding is either you just have to idle that turbine on occasion between stages or occasionally even if it's just when you're moving between pads or wells, turn off that turbine. And my understanding from having covered the power industry previously is turbines would rather not shut off and on, which is, I think, why you end up idling them, rather than shutting them off. So just, if you could move that centralized power out and power your compression or heater/treaters or even ESPs out in the field, it might mitigate the time that turbine has been idling and kind of burning gas when you're not pumping or having to turn that turbine off on occasion. You may just be able to have a smoother load running through that turning at all times, that's at least my understanding.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [54]

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Yes. I agree with that. However, I think some of the customers that have E&P came out yesterday saying it costs them $0.45 to get rid of that gas. They probably want to keep the turbine running as much as possible in the Permian.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [55]

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Yes. And the power allow those other ancillary services, I mean, it's -- the frac equipment takes a lot of power. So you're going to still have peaks and valleys, but I think, it'll take time for that all to get built out to where you can keep a constant load on these units.

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Operator [56]

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(Operator Instructions) Our next question comes from the line of Derek Podhaizer with Barclays.

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Derek John Podhaizer, Barclays Bank PLC, Research Division - Equity Research Analyst [57]

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There has been a lot of recent comparisons between the dual-fuel offering, such as the new Cat engine versus an all-electric offering like yourself. Wanted to get your take on how customers, specifically the majors, view ESG, and if dual-fuel actually checks all the boxes there? Or two, ESG's strategy, we need to use an all-electric offering?

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [58]

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Well, on the customer side, we feel that dual fuel is not as environment friendly as TFO because of methane slip. On our side, you still run to the same issue with running these pumps, it's a diesel -- it's really a diesel engine running them 18 hours a day and we feel that the diesel equipment cannot hold up to the service intensity requirements that our clients are demanding on this current market.

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Derek John Podhaizer, Barclays Bank PLC, Research Division - Equity Research Analyst [59]

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Okay. Great. Wanted to go back to some of the questions around power. Obviously, we're still in the early days here, but wanted to get your thoughts on how the ownership of the power could evolve such a big piece of the capital investment. Do you foresee sharing these costs down the road with your customers? Or if the customer would want to take a 100% of that? Just thinking about powering those ancillary equipment that we discussed previously?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [60]

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It's really too early to speculate on how that relationship will evolve over time. I can't give you any good guidance.

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Derek John Podhaizer, Barclays Bank PLC, Research Division - Equity Research Analyst [61]

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Okay. And then just last one for me. Just can you help talk us through how activity utilization trended through the quarter, maybe you can compare June to the start of the quarter and April and then now, with July in the books, how that looked versus second quarter?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [62]

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I mean for the most part, we had a pretty consistent quarter. I think our activity levels -- individual fleets kind of -- you saw a little bit of variation there, but as a company, as a whole, across all of our fleets, it's pretty consistent quarter, month-to-month. It definitely helped with bringing on our latest electric fleet in June.

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Derek John Podhaizer, Barclays Bank PLC, Research Division - Equity Research Analyst [63]

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And then with July in the books now, can you give us a comparison on the -- versus Q2?

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [64]

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We're not providing guidance right now.

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Operator [65]

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There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

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Joel N. Broussard, U.S. Well Services, Inc. - President, CEO & Director [66]

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Thank you all for joining the call. We look forward to talking on next quarter. Thank you.

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Kyle P. O'Neill, U.S. Well Services, Inc. - CFO [67]

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Thanks.

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Operator [68]

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Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.