Q4 2023 ProPetro Holding Corp Earnings Call
Participants
Matt Augustine; Investor Relations; ProPetro Holding Corp
Sam Sledge; CEO & Director; ProPetro Holding Corp
David Schorlemer; CFO; ProPetro Holding Corp
Luke Lemoine; Analyst; Piper Sandler
John Daniel; Analyst; Daniel Energy Partners
Arun Jayaram; Analyst; JPMorgan Chase & Co.
Scott Gruber; Analyst; Citi
Presentation
Operator
Good day, and welcome to the ProPetro Holding Corp. fourth-quarter 2023 conference call. (Operator Instructions) Please note this event is being recorded.
And I would now like to turn the call over to Matt Augustine, Director of Corporate Development and Investor Relations for ProPetro Holding Corp. Please go ahead.
Matt Augustine
Thank you, and good morning, we appreciate your participation in today's call. With me today is Chief Executive Officer, Sam Sledge; Chief Financial Officer, David Schorlemer; and President and Chief Operating Officer, Adam Muñoz.
This morning, we released our earnings results for the fourth quarter and full year 2023. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC.
Also, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Lastly, after our prepared remarks, we will hold a question-and-answer session.
With that, I would like to turn the call over to Sam.
Sam Sledge
Thanks, Matt, and good morning, everyone. 2023 was another transformational year for ProPetro and we're pleased to be entering 2024 with a strong foundation before David walks through our financial results for the fourth quarter and the full year 2023. I'd like to highlight some of our key accomplishments over the last two years, we have worked to create the next generation fleet to meet the needs of an evolving industry both today and into the future, we have invested approximately $1 billion to recapitalize our fleet, state-of-the-art technologies and services results in 2023 and our start to 2024 are a clear indicator that our strategy is and will continue working supporting the resiliency of our business are three primary strategic areas of focus. I'd like to take a moment to walk through first is our ongoing fleet transition from legacy equipment to next generation offerings as we continue to transition our fleet in a manner that minimizes our overall capital cost demand for our next-generation offering remains strong and our outlook positive. Our first electric fleet offering is uniquely positioned to bring state-of-the-art technology and service to the Permian Basin and to create value for our customers. We now have to force electric fleets in seven Tier four DGB dual fuel fleets, operating with outstanding diesel displacement performance. Building on the success of our force offering, we deployed our second force electric fleet in early November. Our first force electric fleet has been in the field since August of 2023 and mostly to producing strong results with efficient performance and customer satisfaction. Both electric fleets are on contract, and we're excited to build upon this success. To that end, we expect our third and fourth force electric fleets to head into the field on contract over the next few months.
Second, I want to discuss the core elements supporting our results. Value-enhancing acquisitions. Our Silvertip wireline business continues to be a strong tailwind for earnings power and free cash flow generation, building on our successful track record of accretive M&A.
During the fourth quarter of 2023, we acquired par five energy services, which added additional scale to our cementing business. The acquisition also expanded our operations to better serve both the Midland and Delaware Basin areas of the Permian. Additionally, ProPetro is well positioned to capitalize on potential revenue synergies, leveraging our fiber capacity in tandem with the strong commercial architecture and established customer relationships and proprietary, we are pleased that the accretive earnings and expected revenue synergies are already coming to fruition. Value-enhancing acquisitions like Silvertip and R5 are evidence of our ability to capitalize on accretive growth opportunities that increase our free cash flow generation moving forward we will continue to be disciplined and opportunistic in pursuing value-accretive M&A opportunities as they arise.
Finally, another key element of our strategic focus is our capital allocation philosophy. We continue to execute on our 100 million share repurchase program, which our Board authorized last May. We view share repurchases in the overall return of capital to shareholders has an important part of our strategy, showing our conviction in the future of the Company while creating value for our shareholders and a key pillar of our value proposition for investors.
Our financial results over the past year are direct result of the continued execution of our strategic initiatives with the ultimate goal of generating strong returns and value for our shareholders. Our results also demonstrate that our strategy and our business are resilient as we navigated a turbulent fourth quarter fourth quarter. Like other industry participants, ProPetro utilization was hindered by increased seasonality and holiday breaks, as well as budget is up exhaustion amongst certain of our customers. We printed these challenges last quarter, but the impact on our activity in the fourth quarter was more than we had expected. And David will provide more color on our guidance in a moment, but I would like to say a few words about the activity we have seen as we've entered the new year yes. Importantly, we believe the seasonal impact we discussed has no impact on our long-term outlook despite short-term activity drawback during the holiday season. As we moved into the first quarter, we are picking a brand where we left off and remained focused on the long term. We continue to believe that ProPetro stock represents a unique investment opportunity given the discrepancy between our equity value in our financial results and strong outlook with our share repurchase plan, we are showcasing our conviction in this opportunity Fastly.
Moving more to our macro outlook. We believe ProPetro is uniquely positioned to capitalize on the recent transactions in the E&P space. These transactions reinforce our disciplined approach to capital deployment has the right strategy for ProPetro. We offer differentiated service quality and equipment and have an outstanding customer portfolio and operational density in the Permian, all of which insulates us from the uncertainties outside the Permian and in the spot market.
Our goal is to be the service provider of choice for the consolidating Permian E&P space, and we are well on our way to achieving that goal. We remain optimistic on the strength of the North American land and the oilfield service sector potential over the next several years. We continue to believe we are in the early stages of a sustainable up-cycle that will be supported by the industrialization of the frac space, which is now more resilient than in previous cycles, very confident that we have the right strategy in place to benefit from our position as a sophisticated quality service provider. Our proven discipline and transformed bifurcated fleet gives us confidence in our strategy and earnings potential as we continue to industrialize, we're creating durable and repeatable results. Industrialized model than ProPetro has implemented, will continue to pay off and produce benefits for years to come.
I'll now turn the call over to David to discuss our full-year and fourth-quarter financial results. David?
David Schorlemer
Thanks, Jim, and good morning, everyone. Professors performance in 2023 showcased continued improvement over 2022 revenue for the full year 2023 was $1.6 billion, a 27% increase year over year. The Company posted net income of $86 million, which is a significant improvement as compared to net income of $2 million in 2022. Equally impressive adjusted EBITDA for 2023 increased 28% year over year to $404 million. Our strong financial profile enabled us to return significant capital to shareholders totaling approximately $52 million in only eight months in 2023 through our share repurchase program.
The first time in our company's history to do so since the plan's inception in May 2023, we repurchased and retired approximately 5.8 million shares in 2023. Subsequent to year end through February 16th, 2024, the Company repurchased an additional 0.8 million shares, bringing the total repurchases to 6.6 million shares, representing approximately 6% of our outstanding common stock since plan inception in May of 2013.
In addition to share repurchases in 2023, we began to see the benefits of the investments we made to recapitalize our fleet transitioning from majority diesel only to natural gas burning equipment and executed an accretive acquisition with part five. We accomplished all of this while protecting the company's strong balance sheet and liquidity. As Sam mentioned, over the last two years, we have invested over $1 billion transitioning our fleet and bringing next-generation technologies and services to ProPetro. We are confident these investments will continue to accelerate the cash-on-cash return profile of our business and create meaningful value for our customers and shareholders.
Moving on to our fourth quarter financial results, we reported $348 million of revenue for the quarter. Net loss for the quarter was $17 million, or $0.16 per diluted share. Net loss for the fourth quarter of 23 included $8 million of true-up depreciation related to change in the useful lives of certain equipment. Adjusted EBITDA was $64 million. As Sam mentioned, our financial performance for the fourth quarter was impacted by lower utilization resulting from higher than expected white space from deferred customer activity primarily later in the quarter. Our desire to maintain crude continuity and ongoing fleet performance led us to retain our crews and associated labor costs despite a temporary decline in utilization as our customers were starting back in earnest in early January this recovery has transpired as expected. Additionally, and important to note, when comparing to previous quarters, we incurred and lease expense related to our force electric fleets of $4.3 million for the fourth quarter. Our effective frac fleet utilization in the fourth quarter was 12.9 fleets, which was slightly below our guidance due to reasons noted earlier, our first quarter 2024 guidance for frac fleet utilization is 14 to 15 fleets, and we have 14 fleets active today.
Moving to our capital spending. We incurred $39 million in CapEx in the fourth quarter, a 35% decrease from $59 million last quarter. That $20.5 million decrease in CapEx essentially paid for our five acquisition which we expect to yield consistent free cash flow well into the future. This is another example of high-grading our capital allocations for the Company's long-term benefit. Our incurred CapEx for the year was $310 million, which also compares favorably to $365 million in 2022. However, and this is an important item to understand the cash utilized for capital expenditures in our cash flow statement was $371 million, which included $82 million from our accounts payables balance at year end 2022. This contrasts to only $22 million in CapEx AP at the end of 23, which is a significant unwind of liabilities. What this demonstrates is that we're in a much healthier working capital position and that our capital spending is trending significantly lower as we exit 2023, given that we completed our large reinvestment cycle and are realizing the benefits of our optimization efforts undertaken over the last 18 months, we anticipate our 2024 24 and current CapEx will be between $200 million to $250 million. The range is largely a function of activity potentially ramping higher as we head through the year. We expect the lower capital intensity relative to prior recent years will support our ability to direct more capital to higher-quality and longer-term investments and capital returns in the form of opportunistic M&A and share repurchases.
Our liquidity has remained strong, and we ended the fourth quarter with $134 million of total liquidity. With the anticipated decline in capital spending and our much improved working capital position, we expect our company's liquidity to remain strong in 2024, allowing for a more dynamic capital allocation strategy.
I'd also like to reiterate that ProPetro balance sheet remains strong, and we are committed to disciplined capital allocation for the long term. Finally, we believe we're in a low to no growth environment with customers that will remain disciplined in their own capital spending. The industry continues its consolidation and the large Permian producers are pursuing strategies that require equipment like our forced fleets that are compatible with their desires to pursue further electrification, lower completion costs and lower emissions. We believe our business is good for more durable earnings and cash flows in the current flat market environment, and we are confident our ProPetro will continue to deliver for our customers and shareholders through the market cycles.
I'll now turn the call back to Sam for some closing remarks.
Sam Sledge
Before turning it over to Q&A, I'd like to summarize ProPetro has 2023 performance, our go forward strategy and why we are confident the future of our company in our industry. Our differentiated and top-tier offering is generating durable and repeatable results despite headwinds in the energy service space. Propetro is ideally positioned to showcase its earnings power and free cash flow potential in 2024 and beyond. For bifurcation with our service quality and equipment with our top-notch customer portfolio and operational density in the Permian, we are well insulated from the uncertainties outside the Permian and in the spot market. We have been successfully optimizing our operations and industrializing our business as we execute the transformation of our fleet, buy back shares opportunistically, pursue accretive M&A. We are successfully advancing our strategy and strengthening the business for the long term while maintaining a strong balance sheet and healthy liquidity profile.
Looking ahead, we're excited to capitalize on ProPetro, improved performance and realize the benefits of our strategy. The results of which became evident in 2023. Our key priorities continue to be optimizing our operations and industrializing our business core remain opportunistic on value, accretive value, accretive transactions to accelerate our free cash flow, all while continuing to return capital to shareholders through our share repurchase program, everything we do from operating safely and sustainably to growing our business in a disciplined manner to deploying capital to buy back stock, enable strong returns for shareholders.
I'd like to end by thanking all of our teammates across ProPetro for their outstanding performance as we continue to lead in the Permian Basin play an integral role in the overall energy industry.
With that, I'd like to now open up for questions. Operator?
Question and Answer Session
Operator
We will now begin the question-and-answer session. (Operator Instructions) Luke Lemoine, Piper Sandler.
Luke Lemoine
Asian warning on or look, Sam, Sam, you've had the first two force fleets in the field for several months now, can you just talk about some of the operational milestones and how the switch has been performing relative to your expectations and then possibly future for suites beyond three and four, how you're thinking about that at this point?
Sam Sledge
Sure. I guess to your first question, my simple answer is better than expected. This is a learning curve that we need and we need to get up pretty quickly to maintain our quality service reputation and where these first two fleets have landed the customer, not only the customers that they've landed with but how they've performed with those customers has been been great. I think we're learning some things around maintenance cycles and how to just optimize. But to be just this many months and kind of already working towards the optimization point and not the off the learning curve on that optimization point is it's a pretty big deal that I think our team has been been really, really pleased with. So as it pertains to future forced fleets, we've got three and four number three and four coming here in the coming months. Standby on kind of where and how those land. But we've got a lot of good things going as it pertains to those. And beyond number four, look, demand is really strong. This is really continuing to convicted about our strategy to continue to transition our fleet in this manner because the customers kind of continue to inquire and line up. And I come to the table for contractual negotiations and talks. So it would be a very positive sign if you see more forced fleets from us in the future. And that's definitely our intent as we sit here today, there's no there's no additional orders beyond number four.
Okay.
Luke Lemoine
And then, David, you gave us the fleet count guidance for 1Q rebounds pretty nicely versus 4Q and almost back to 3Q levels. But in 4Q, you had some whitespace on you retain the crew CMI kind of fixed costs that you're carrying there. Can you kind of help us frame maybe 1Q profitability a bit relative to 3Q or 4Q, or however we should think about it?
David Schorlemer
Well, I think I think we want to be careful about giving too much guidance there but what I would say is activity levels were similar to what we saw back in the third quarter. And there's still a lot of decision making being made by our customers a lot of consolidation happening. So I think I think we feel very good about the first quarter. But I think just speaking to some of that comparisons of the third quarter may give you some perspective of what we're seeing so far.
Luke Lemoine
Okay, perfect. Thanks much.
Operator
Derek Budweiser, Barclays.
Hey, good morning, guys. I just wanted to ask about the level of free cash generation in 2020 for how we should think about shareholder return. So in your deck, you talked about you have $42 million remaining on the buyback program. I mean, with the free cash flow generation you're talking about doesn't feel too hard to reach that. So should we expect you to up the authorization maybe layer at a dividend or both? Just how should we think about that framework in 2024 with shareholder returns and the level of free cash flow you expect to generate.
Sam Sledge
Sure. Great. Great. Great question, Derrick. And I think kind of a key a key theme to our value proposition going forward. Before I talk about necessarily shareholder returns is talk about zoom out a little bit more and talk about Cal capital allocation in general. We've said this a number of times here recently, but we're really, really proud of the fact that here recently in the fourth quarter back half of last year, we've invested heavily in our fleet transition through FORCE and dual fuel, and we have returned capital to shareholders through our buyback program and we participated in accretive M&A all three within the same quarter in the fourth quarter. So I think it's really important to point that out that a company of our size in the business that we're in is in can multitask through all three of those categories and will likely continue to do so going forward. And we've operated our buyback program relatively opportunistically on trying to take advantage of what we've stated is a disconnect between our value proposition and the current equity value. We will continue to do that and you're probably correct that if our kind of our equity values valuations stay where they are, we'll we'll continue to hammer away at the share buybacks. I'll stop short of giving you guidance of if it renews and when and how much and all of that, those are just decisions that we'll make in the boardroom here over the next couple of quarters. And report back with that progress.
David Schorlemer
But we're pleased to be in the market buying what we think is the best deal in the oilfield services space from a valuation standpoint and Terry, just to add a little bit, I've made some remarks around kind of the 2022 CapEx hangover that we had in the balance sheet. This is also not just a story about our performance. I've been being more durable, but also our balance sheet improvements were in significantly better position from a working capital perspective than we were at the end of 2022. So I think that's something to really take a look at to see how we'll be able to really high-grade our capital allocations going forward.
Got it. That's very helpful. And also, I wanted to ask about the displacement of diesel on the dual fuel fleets. You had a chart in there that showed 20% increase through 2023. I guess maybe just talk about what are the what are the drivers behind that of bringing you that 60% to 70%? And where could it go beyond that? And then separately, is there areas of M&A for you as far as the diesel displacement or see you delivering fuel gas? Just anything around another potential bolt-on for you?
Sam Sledge
Yes, good, good good question and I think is a diesel displacement inside of a dual fuel offering. It is likely times hard for public investor. Someone like yourself to see what type of benefits that we bring not only what type of benefits does bring. But what I think the question you're asking is how do you do that from whom I mean to put it plainly is just operational excellence. I think what we began to learn when we were deploying dual-fuel equipment is that you don't just put these things on and put the gas on and expect there to be high displacement rates. You have to make operational decisions almost in a real-time basis, 24 hours a day to ensure high displacement. You also have to have a gas value chain, which I think is your kind of your second question there that they can supply the appropriate at times and condition of fuel on an ongoing basis that also enables high displays, right? So it's a combination of a few things. But for us, it starts with operational excellence, being able to work inside of our team to make it operational decisions and work with suppliers, vendors, customers to get the right gas to the location to get the right kind of gas to location in the right amounts at the right time. And we've talked a lot about in the past our interest in integrating more of the well site. Our first step to do that was with Silvertip getting into the wireline services a little more than a year ago. We've stayed inquisitive about things like the gas value chain. And I think we've you not seen any movement from us on that yet because we've seen movement within our customer base as it pertains to the preference for CNG versus fuel gas and the different acreage positions that our customers have and their ability to move around and get the right kind of gas to the wellsite. So a little bit of a learning curve there, but it's something that we're, you know, that's that's on our radar that we continue to watch evolve as it pertains to the gas, the gas value chain.
Great. Very helpful. I'll turn it back to you.
Operator
John Daniel, Daniel Energy Partners.
John Daniel
Please go ahead, Chris, and thanks for having me on the call. I have just one question. Can you guy actually said this in the prepared remarks, I apologize, but what's the quoting activity right now for some more time we'll frac work? And how do you see that the evolution of that and just the impact to your business.
Sam Sledge
You have tried to simul-frac. John feels like a pretty small niche right now. It's something that we're watching competitively, but it's nothing that we're participating in right now. I know we talked a lot about the industrialization of our business, and that's that's a pretty evident example of where things could go, right? And we'll we'll we'll take that as it comes. We had a very successful transition from zipper frac into simul-frac a few years ago and operated very successfully. So I have no doubt and have all the confidence in our team. If something like that comes in the future, that will be we'll be a player and we'll will will prove out our operational excellence and an operational benefit. So that's all I got.
John Daniel
Thanks for including me, guys.
Sam Sledge
Thanks, Chuck.
Operator
Arun Jayaram, JP Morgan Chase.
Arun Jayaram
Good morning, gentlemen. Sir, my first question is a question regarding seasonality. In comparing your results to some of your North American frac peers, it appears that your business just had a little bit more seasonality related to holidays and other things. So wondering if you can just help us sort through, you know, why do you think your business had that level seasonality? Is it just the customer you're working with, but anything more nuanced than that?
Sam Sledge
Yes, good question, Ren. I think what makes us unique is our geographic focus in the Permian Basin and our fairly consolidated customer portfolio. You know, it's really a no you can you can count all of our kind of chunky customers on one hand, really. So comparatively, I would say our larger peers that you've heard reported over the last couple of weeks are in multiple basins across the U.S. and probably have a more diverse customer profile than us. But we I think we said a couple of different times in our in our in our prepared remarks, that's we do not think this is indicative at all of our strategy. We think it should something that hit us from a external circumstances standpoint, that was unexpected and obviously unfavorable. But where we are here in January, February this year and what our outlook is for 2024, we're pretty we're pretty pleased with how we're positioned.
Arun Jayaram
Got it. Got it. Fair enough. And then just thinking about it, as we look through the Q4 numbers, your revenue is pretty consistent with the Street I think you mentioned that the that you held on to some costs just to get ready for 2024. But as we think about fine-tuning our numbers for 2024. Are there any knock-on knock-on impacts from 4Q that we think about for the full year in 2024? Is this just an anomaly as we think about go-forward earnings impacts come to 2024. I see that the Street is today modeling, I think, just under $400 million of EBITDA. So just some general thoughts on 2024 would be helpful.
David Schorlemer
Yes, Arun, this is David. And I think that as we mentioned, we had crude up a certain level and we wanted to maintain crude continuity because we did believe our customers are going to be starting back up early in January, which they did. So I think that those costs will essentially come forward.
Now in addition to that, we've got an additional operating leases as we deploy the electric fleets. Those will start being blended into our financial results. We had a little over $4 million in the fourth quarter there. That number is going to go up. And so I think that's something that will need to be modeled in. But we got some additional work that we're doing to address our cost structure and optimize some things that we're doing, strategic supply chain work, ongoing operational optimization, but we'll look at that as we go throughout the year.
Sam Sledge
Phase three and Sam I'll just add to that. I think the one lever might be one of the biggest levers, our oilfield service business that we haven't really talked a ton about yet. I'm kind of surprised what were four questions in and we haven't got the pricing question.
Yes, but we feel we feel really good about pricing this year. We do we know it's definitely not peak pricing, what maybe we saw in the first half of 23?
It's down a little bit. We've talked about that in the last couple of calls, but the part of the bifurcated market of which we're operating in, which we believe is the top end with natural gas burn solutions and for dual fuel and electric and also just a high-quality service offering. That's the pricing mode today. So we're not we're not going to get picked out on the fringes by a spot diesel market like we have given for a good portion of our sector. And so I think I think that's really that might be one of the most important things about kind of our go-forward strategies. It's how confident we are in the pricing and also how much more discipline we're seeing around us from our peers and our competitors.
I've been I've been in the I've been working in this sector for 13 years and kind of through these mini cycles that we're seeing today. This is the most disciplined underwriting in mind, and that gives us a lot of confidence to go forward with our strategy and a lot of the things in development, think pricing is pretty important and how the whole market is behaving is.
Arun Jayaram
Yes. Great. Thanks a lot.
Operator
Scott Gruber, Citigroup.
Scott Gruber
Yes, good morning, Scott. Look, I know it's it's always difficult to forecast beyond the quarter, but I'm just curious, based upon your conversations that you're having with customers today. So have these do you see a path to activity improvement in 2Q and 3Q? Can you can you get above that kind of 14 to 15 level? Or is that what kind of level is what we should expect? That's kind of the base case for 2Q and 3Q your question.
Sam Sledge
I think that I think the earliest opportunity we could see activity improving is probably second half of the year. And it's an opportunity that's not anything we're sitting here saying is going to happen more. We're looking at pretty flattish activity through the year as far as we know right now, but the way and the majority of the operators, I think, will begin to operate over the last year or two years from a rigs to frac crew standpoint feels like much more of a just-in-time inventory management. It's not, but there's this big load of uncompleted wells lying out there where frac activity could snap back quickly. So to say that more more plainly, I guess rig counts are flat and have done for the last several months. You'll have to see a rig count inflection before you see it before you see the frac activity selection, better know, what's the what's the kind of delay on that maybe 90 days or something like that. If you're starting to see a big rig count inflection today, it might be three, four months before you see that show up, correct.
Scott Gruber
Got it. And then just thinking about the budget, it sounds like it doesn't contemplate additional e-frac, but are you able to provide some kind of broad strokes split of the budget kind of between base maintenance on active frac fleet and what's allocated to the ancillary services? And is there some some growth CapEx in there for ancillary services?
Yes.
Sam Sledge
Mean, I mean, just kind of a general comment on the on the on your force electric comment, and I'll let David talk about puts and takes CapEx pie. We guided 200 to 2 50 and we could we could deploy it this forcefully inside of that range such that that's part of the reason why we're coming forward with a range that wide at this point because one, there's some unknowns about back half activity activity, all always has a heavy impact on our CapEx spend through maintenance CapEx. But given our confidence that which I've expressed, we've expressed multiple times on the call today in our electric offering, we do think that there's a decent likelihood of fifth. We just don't have any commitments or orders right now, but the fit fits within that, that range that we've quoted and what David wants to add to the CapEx commentary, Scott, just give you a little more granularity around the CapEx guidance.
David Schorlemer
I think we've talked about $6 million to $7 million per fleet on that, along with other refurbishments in our other service lines, Keisha, call it one 50 to one 60, and then we've got about $60 million of growth CapEx, the majority of which is allocated toward our electric fleet deployments, but also other very long-term investments that will enhance the business so that that that we believe along with our balance sheet position, is really how we are able to increase free cash flow this year in an otherwise, call it somewhat stagnant top line environment.
Scott Gruber
Got it. I appreciate the color. I'll turn it back.
Operator
Thank you. (Operator Instructions) Luke Lemoine, Piper Sandler.
Luke Lemoine
Yes. Sam, you talked about being past the learning curve on the Force fleets and on being more an optimization or maybe for you or David, you talked about some operational cost savings could be 30% or 40% for the fourth fleets. Just wanted to see kind of what you're seeing there and if you still think that's a good range.
Sam Sledge
And also I'll make just a general comment in detail about specific numbers here. These units don't really come into the shop. We can do all the maintenance on the field like you did a traditional frac business of our size of all the diesel engines and the amount of technical engine work that has happened, the type of CHARLES maintenance infrastructure you have to have is pretty significant for a company our size or bigger. As we continue to evolve into this electric offering, it begins to change our mindset and our approach to a lot of the fixed cost support functions within within our business. So on you walk up in our maintenance shops more than there's 94,000 units out there. It's how conventional or do. So that's just a really, really positive time.
David Schorlemer
If you want to say Cynthia and I presume he gave the product exactly one of the things that we've been looking at, you know, just there and a shot a message to our Director of maintenance yesterday and asked them how many force units are in the maintenance shop and he said he said none. And so that's just an anecdote. But I think what we're looking toward is a 30% to 40% improvement in OpEx with a similar impact related to our maintenance CapEx. So again, think about watch on the front of our conventional trailers, and it's a our 2,500 horsepower diesel or dual fuel engine.
What's on the front of our electric equipment is a variable frequency drive box and a transformer.
There's really no meaningful moving parts in those two units and they really should be low to no touch. So I think we're looking forward to realizing those benefits over time. I don't think we're going to be able to give you specifics on that just yet, but give us a few more quarters to see how that pans out over time, but we like what we're seeing so far.
Luke Lemoine
Okay. And then, David, just to follow up, I mean, once you optimize kind of cost structure on the forced fleets on the cost savings should offset the operating lease payments?
Sam Sledge
Correct. I think that's certainly something that we would expect and we're seeing some pretty positive results so far. But again, we're this is a new product launch phase that we're still and we've had in force fleet operating system September, and we've got enough experience under our belt to realize that the customers very pleased that our operations management is able to operate well with very strong performance in the field. But look, we're still new into this.
David Schorlemer
So we like what we're seeing, but still still fresh food safety.
Luke Lemoine
Okay. All right. Thanks, Dave, and thanks, Sam.
Operator
This concludes our question-and-answer session. I would now like to turn the conference back over to Sam Sledge, Chief Executive Officer, for any closing remarks.
Sam Sledge
Thanks, everybody, for joining us today to talk to you again soon. And I'd like to thank all of our profit metrics again for all their hard work throughout our business and making this all possible.
Operator
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
