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NexTier Oilfield Solutions Inc. (NEX) Q4 2022 Earnings Call Transcript

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NexTier Oilfield Solutions Inc. (NYSE:NEX) Q4 2022 Earnings Conference Call February 16, 2023 11:00 AM ET

Company Participants

Mike Sabella - Vice President of Investor Relations

Robert Drummond - President and Chief Executive Officer

Kenny Pucheu - Chief Financial Officer

Kevin McDonald - Chief Administrative Officer and General Counsel

Conference Call Participants

Scott Gruber - Citigroup

Stephen Gengaro - Stifel

Luke Lemoine - Piper Sandler

Derek Podhaizer - Barclays

Kurt Hallead - Benchmark

Saurabh Pant - Bank of America

John Daniel - Daniel Energy Partners

Operator

Good morning, and invited to nan NexTier Oilfield Solutions Fourth Quarter 2022 Conference Call. As a reminder, today's telephone is being recorded. At this time, each participants are successful a listen-only mode. A little question-and-answer convention will travel nan general presentation.

For opening remarks and introduction, I would for illustration to move nan telephone complete to Mike Sabella, Vice President of Investor Relations for NexTier. Please spell ahead.

Mike Sabella

Thank you, operator. Good morning, and invited to nan NexTier Oilfield Solutions' net convention telephone to talk our 4th fourth 2022 results.

With maine coming are Robert Drummond, President and Chief Executive Officer; Kenny Pucheu, Chief Financial Officer; and Kevin McDonald, Chief Administrative Officer and General Counsel.

Before we get started, I would for illustration to nonstop your attraction to nan forward-looking statements disclaimer contained successful nan news merchandise that we issued yesterday afternoon, which is presently posted successful nan Investor Relations conception of nan company's website.

Our telephone this greeting includes statements that speak to nan company's expectations, outlook aliases predictions of nan future, which are considered forward-looking statements. These forward-looking statements are taxable to risks and uncertainties, galore of which are beyond nan company's control, which could origin our existent results to disagree materially from those expressed successful aliases implied by these statements.

We undertake nary responsibility to revise aliases update publically immoderate forward-looking statements, isolated from arsenic they whitethorn beryllium required nether applicable securities laws. We mention you to NexTier's disclosures regarding consequence factors and forward-looking statements successful our yearly study connected Form 10-K, subsequently revenge quarterly reports connected Form 10-Q and different Securities and Exchange Commission filings.

Additionally, our comments coming besides see non-GAAP financial measures. Additional specifications and a reconciliation to nan astir straight comparable GAAP financial measures are included successful our net merchandise for nan 4th fourth of 2022, which is posted connected our website.

With that, I will move nan telephone complete to Robert Drummond, Chief Executive Officer of NexTier.

Robert Drummond

Thank you, Mike, and acknowledgment to everyone for joining nan telephone today.

2022 was a beardown twelvemonth for NexTier. While we will not remainder connected our past successes, I do want to return a infinitesimal to reflect. We started 2022 by asserting our position that nan frac marketplace was tight and that frac instrumentality will go harder to fund, a position that was acold from nan statement astatine nan time. Indeed, frac quickly emerged arsenic 1 of nan main bottlenecks successful nan U.S. shale lipid and state market.

Against this macro backdrop, pinch beardown request and constricted proviso for our services, our pricing outlook improved considerably arsenic nan twelvemonth progressed. Importantly, we were capable to present beardown results for our investors, while besides delivering best-in-class work for our customers. To each our hard-working labor and their families that made past twelvemonth possible, convey you for contributing to nan occurrence of our company. I could not beryllium prouder of what we accomplished together.

At NexTier, we are committed to sharing successful nan occurrence successful investing successful our group arsenic we strive to make this a destination for nan hardworking men and women of our industry, who are looking to build a agelong and prosperous career. During 2022, our occurrence extended beyond conscionable nan halfway frac cognition to each of our work lines pinch profitable maturation successful wireline, cement, powerfulness solutions and last-mile logistics.

But contempt nan advancement we made past year, our business still has not returned to pre-COVID nett pricing, and we are still looking to recoup anterior investments we made to amended efficiency. Our anterior investments must beryllium mixed pinch supported fundamentals if our manufacture tin beryllium expected to thrust nan adjacent limb of process betterment and afloat bespeak nan worth we tin create for our customers.

On nan macro front, we judge nan rhythm has only conscionable begun pinch a setup successful 2023 that is arsenic bully arsenic what we saw successful 2022. We judge request for frac fleets coming exceeds proviso by 20 to 25 fleets pinch arsenic overmuch arsenic 10% of horsepower request going unmet, which has allowed america to raise value this twelvemonth already. We besides person customers that are inquiring astir 2024 activity now.

But afloat satisfying request of our customers had its challenges. Our proviso concatenation remains stretched pinch a backlog for parts that is substantially higher than normal. We've seen small advancement truthful acold successful correcting nan situation. While immoderate reason that existent economics will stall attrition, nan reality is that proviso concatenation challenges, superior subject and ostentation are much apt to origin attrition to accelerate and caller builds to hold further. In fact, transportation of our ain electrical fleet has been delayed successful nan Q2.

At NexTier alone, we scheme to decommission astir 150,000 horsepower complete nan adjacent 18 months. Meaning, wrong our superior fund model of 8% to 9% of revenue, our capacity will stay comparatively level this year. We will proceed to allocate superior to nan highest return investment. And, arsenic we show connected Slide 11 of our updated investor presentation, investing successful these older assets nary longer meets our hurdle rate. It makes much consciousness for america to put successful caller instrumentality than to proceed to deploy superior into these older obsolete assets.

We do not judge we are unsocial successful this attrition narrative. Even pinch nan caller builds, we spot a challenged way to expanding manufacture frac capacity, which should lengthen nan rhythm and solidify different information of value increases. At nan aforesaid time, and arsenic we show connected Slide 12, a bifurcated manufacture fleet pinch a steep instrumentality costs curve is allowing our earthy state fueled assets to gain a premium return. These differentiated returns, supported by nan substance costs arbitrage, should past respective years arsenic nan manufacture afloat transitions to next-generation equipment, a process that will apt return complete 7 years astatine nan existent newbuild cadence, pinch much than half of manufacture capacity still bequest diesel fleets.

The request broadside is supported by what we spot arsenic an underinvested lipid and state marketplace that needs to summation accumulation to avert a world power proviso crisis. U.S. shales' domiciled will nary uncertainty beryllium captious successful balancing world commodity markets, but our customers are restricted by their ain superior discipline, arsenic good arsenic nan readiness of instrumentality for illustration frac. We do not judge shale is prepared to quickly reply nan world call, which should lengthen nan request rhythm for our services arsenic nan world searches for much lipid and gas.

For NexTier, we judge we're connected a way to further profitability successful 2023 and beyond. We entered this twelvemonth still astir 10% beneath pre-COVID nett pricing for our frac services and we will look to recapture that passim nan coming year, immoderate of which we've already realized. We besides spot opportunities to turn our wellsite integration offerings and put successful high-return projects that support ratio successful our halfway frac operations.

Even arsenic nan beardown macro situation plays out, we will proceed to lead our manufacture successful disciplined behaviour and usage our returns to reward our shareholders. We've established a way grounds of delivering beardown free rate flow, precocious return connected finance and superior businesslike growth. We will proceed to attraction connected maximizing returns connected superior and returning superior to shareholders. We judge this will beryllium nan winning strategy for our institution and our investors.

While our manufacture fundamentals stay strong, we would beryllium remiss to disregard nan increasing speech astir weakness successful nan near-term earthy state fundamentals. For NexTier, our largest earthy state vulnerability remains successful nan Marcellus. Takeaway capacity has constrained activity successful that basin for immoderate clip now and activity location has been comparatively dependable complete nan past mates of years compared to different state basins. Coupled pinch nan little breakeven good economics, we expect Marcellus activity to stay comparatively dependable contempt nan driblet successful earthy state prices.

Because of this, we deliberation nan Haynesville will return nan brunt of immoderate activity decline. History suggests worst lawsuit is possibly a 50% diminution successful Haynesville activity, which would connote arsenic galore arsenic 14 frac fleets could beryllium released from that basin, a script that would consequence successful a important diminution successful basin production. But we want to beryllium crystal clear, we afloat judge nan basal supplied quality of nan frac marketplace successful nan lipid basins could easy sorb these fleets.

Even successful this scenario, erstwhile taken into information existent unmet demand, humble request maturation successful lipid basins and nan planned frac fleet additions, we judge full utilization is apt to stay balanced. Even a mini magnitude of attrition would support nan power afloat sold retired done 2023 and we judge attrition is inevitable arsenic evidenced by our ain actions.

Our macro position has ever taken a much blimpish position connected near-term rig count additions owed to our knowing that frac fleets are nan bottleneck to accumulation growth. So, while we are watching nan earthy state fundamentals conscionable for illustration everyone else, we position nan imaginable disruption arsenic a comparatively insignificant threat, fixed our position that nan wide U.S. onshore frac marketplace is still undersupplied and apt will beryllium passim 2023.

It is important to statement that we only person a mini vulnerability to nan Haynesville pinch conscionable 2 fleets operating successful that basin today. Additionally, we're not proceeding immoderate commentary from our earthy state customers astir slowing nan gait of completions. Further, debased state prices accrued nan costs advantage of our earthy state substance fleets, which could solidify request for those premium assets and raise nan worth of our Power Solutions business. Nevertheless, moreover arsenic we spot this rhythm continuing, we are nimble and tin respond quickly to unforeseen changes. We person a sticky customer relationships, and we will ever prioritize a beardown equilibrium expanse pinch important liquidity.

Now to our results. We saw improved profitability and return sequentially moreover successful a antagonistic seasonal period. Net income of $133 cardinal improved 27% from nan anterior 4th and was 15% of revenue. Our nett income per diluted stock was $0.52. Total gross of $871 cardinal was down 3% sequentially, but was 71% higher than nan aforesaid 4th past year. Our adjusted EBITDA was $213 million, was up 9% from Q3. We efficaciously managed our decremental margins connected a sequential ground and we managed to displacement to higher separator activity pinch amended returns.

We besides continued to make very beardown free rate flow, generating $93 cardinal successful Q4 moreover arsenic we funded an Alamo earnout payment. During Q4, we repurchased 11.5 cardinal shares for $113 cardinal nether our $250 cardinal shareholder return program, funded wholly pinch free rate travel and rate connected hand.

For nan afloat twelvemonth 2022, we much than doubled our gross pinch adjusted EBITDA astir six times greater. Most importantly, we achieved this beardown maturation while staying very disciplined pinch our superior allocation and generating $295 cardinal successful free rate flow.

Since nan very commencement of nan recovery, we saw that winning this rhythm was going to require a different attack compared to anterior cycles. We've been patient and our connection that our extremity is to equilibrium early maturation needs demanded by our customers pinch returns and free rate travel needs demanded by our investors. We're happy to spot this strategy being repeated by galore of our peers crossed nan industry. Capital subject has go a communal taxable successful nan industry, which should lengthen nan long of nan cycle.

We're proud of our occurrence successful balancing these 2 strategies and we person precocious condemnation that this is nan champion way guardant for our institution and our investors. As you spot connected Slide 15, we've achieved our maturation successful a very capital-efficient manner. On Slide 16, we show that we achieved our maturation complete nan past twelvemonth while deploying importantly little superior comparative to our peers. For 2022, our 30% return connected invested superior has improved importantly complete nan past year.

In nan 4th quarter, we delivered an annualized ROIC of 46%. ROIC is 1 of our highest priorities we see whenever we make an finance decision. Maximizing returns require smart and opportunistic superior allocation. We invested antagonistic cyclically, which allowed america to create further worth during nan early parts of nan cycle, and we proceed to rationalize our plus base. We sold $50 cardinal of non-core assets past twelvemonth and redirected nan costs to areas wherever we tin create amended worth for our shareholders.

We judge our return should amended importantly again successful 2023 and person nan imaginable to enactment precocious for aggregate years. We expect beardown request will continue. And connected nan proviso side, nan marketplace remains undersupplied and consolidated. Additionally, increasing superior subject successful our manufacture and instrumentality and parts readiness are restricting our expertise to adhd and support equipment. Finally, bifurcation and instrumentality value is elevating returns arsenic nan manufacture undergoes a lengthy conversion to earthy gas.

During 2022, we reported net per diluted stock of $1.26. Our stock value coming is conscionable 7 times our 2022 net per share, and considering we expect EPS maturation again successful 2023, we judge our forward-looking value to net ratio is moreover lower. We generated $295 cardinal of free rate travel successful 2022 and our anticipation is that will summation -- that we will summation our rate travel to astatine slightest $500 cardinal successful 2023. We spot free rate travel conversion complete 50% this twelvemonth and we still spot a way to increasing our adjusted EBITDA 40% to 50% comparative to 2022.

Ultimately, nan extremity of this strategy is to maximize worth creation for our shareholders. Last quarter, we presented a elaborate superior allocation strategy that remainder connected 2 foundational pillars: we will prioritize a nett indebtedness zero superior building to guarantee our business remains nimble done nan cycle; and we will look to put 8% to 9% of our gross successful CapEx annually, which we judge is capable for america to support work value and marketplace stock successful our halfway frac business, while slow transitioning nan remainder of nan fleet to earthy state powered and backing maturation successful our wellsite integration strategy.

On apical of this foundation, since what we judge is simply a durable free rate travel profile, we will return astatine slightest half of this free rate travel to shareholders done a process that we started successful 2022. Through February 14, and including nan magnitude we utilized successful Q4, we've repurchased 14.4 cardinal shares for $139 million, bringing nan full to astir 6% of nan shares that were outstanding anterior to nan buyback. After backing our shareholder return committedness and reaching our superior building goal, we judge that we person optionality connected astir $200 cardinal successful rate done nan extremity of this year.

We stay willing successful M&A, including some for further consolidation of nan frac marketplace arsenic good arsenic different avenues to turn our successful wellsite integration platform. We person a very beardown M&A way grounds arsenic been demonstrated by our caller acquisitions of Alamo and CIG Logistics, some of which easy outperformed first expectations and person go halfway to our company. But we will proceed to beryllium prudent and will enactment connected transactions that make consciousness for our shareholders. If nary attracted deals are found, we tin pivot to usage nan rate to further fortify our equilibrium expanse aliases grow nan shareholder return program.

We stay committed to maximizing nan worth each dollar of superior successful each phases of marketplace cycles guided by our sustainable superior allocation program. We judge nan important usage of rate to repurchase shares should show our dedication to our strategy arsenic good arsenic our condemnation successful nan semipermanent outlook for our business and nan belief that our equity is importantly undervalued.

The anterior rhythm OFS playbook, which was guided almost solely by EBITDA maturation and relied successful -- connected indefinitely capitalizing one-year returns successful caller build economics while ignoring manufacture proviso and request fundamentals, did not work. We judge our balanced strategy amended served nan institution and our shareholders, and we will proceed to floor plan this caller course.

We person beardown condemnation that superior subject and a attraction connected sustained returns and superior businesslike maturation will beryllium nan winning look successful this cycle. We are bullish that nan rhythm is successful its early shape and we are prepared to present beardown worth creation and return superior to our shareholders nan full time.

I'll now walk nan telephone complete to Kenny to talk nan 4th fourth results successful much detail.

Kenny Pucheu

Thanks, Robert.

Fourth 4th gross totaled $871 cardinal compared to $896 cardinal successful nan 3rd quarter. Revenue decreased 3% sequentially, which was successful statement pinch our guide. We had beardown execution and pricing continued to fortify during nan quarter, which was offset by seasonal downtime arsenic good arsenic little merchandise sales. We proceed to run very efficiently pinch adjacent institution grounds pumping hours per fleet connected mean moreover pinch seasonal disruptions. Revenue declined successful our Completion segment, while nan Well Construction and Intervention Services conception gross improved connected beardown request and coagulated operational performance.

Total 4th fourth adjusted EBITDA was $213 million, an betterment from $195 cardinal past quarter. We accrued profitability contempt little gross based upon respective factors.

First, we saw a displacement successful activity to higher efficiency, higher separator jobs during nan quarter. This little gross much profitable activity is simply a usability of aligning ourselves pinch like-minded customers that attraction connected efficiency, integration and worth creation. This realignment is besides serving america good successful 2023.

Second, while vacation downtime was a facet successful our results, we managed costs to thief minimize nan effect connected our profitability.

And third, nan investments we are making to amended our ratio and costs building are working. These investments, specified arsenic expanding nan functions of our NexHub Digital center, upgrading ancillary instrumentality astir our frac fleet and improving last-mile efficiency, goes consecutive to nan bottom-line and we're captious successful nan quarter-on-quarter improvement.

In our Completion Services segment, 4th fourth gross totaled $830 cardinal compared to $858 cardinal successful nan 3rd quarter, a sequential alteration of astir 3%. Completion Services conception gross profit improved to $227 cardinal moreover connected little gross arsenic we upgraded nan value of activity and efficaciously negociate costs.

In our Well Construction and Intervention Services conception 4th fourth gross totaled $41 million, an summation of 7% compared to $38 cardinal successful nan 3rd quarter. Gross profit totaled $10 million, an accrued from $8 cardinal successful nan 3rd 4th arsenic our cement operations showed beardown improvement.

Fourth 4th selling, wide and administrative disbursal totaled $37 million, level compared to nan 3rd quarter. And excluding guidance nett adjustments of 7 million, adjusted SG&A disbursal totaled $30 million.

EBITDA for nan 4th fourth was $200 million. When excluding guidance nett adjustments of $13 million, adjusted EBITDA for nan 4th fourth was $213 million. Management adjustments see $7 cardinal successful banal comp, pinch different items totaling to nett of $6 million, which are non-recurring successful nature. Approximately $6 cardinal of full nett guidance adjustments were rate related.

Now connected nan equilibrium sheet. We exited nan 4th fourth pinch $218 cardinal successful cash, down from $250 cardinal astatine nan extremity of nan 3rd quarter. We exited nan 4th fourth pinch full disposable liquidity of astir $634 million. Our liquidity was comprised of rate of $218 cardinal and $415 cardinal disposable connected our asset-based in installments facility, which remains undrawn.

Total indebtedness astatine nan extremity of nan 4th fourth was $361 million, nett of indebtedness discounts and deferred financing costs and excluding finance lease obligations. We person nary word indebtedness maturities until 2025. Net indebtedness astatine nan extremity of nan 4th fourth was astir $143 million, an summation from $115 cardinal astatine nan extremity of nan 3rd quarter. This sequential summation successful nett indebtedness is simply a usability of nan usage of rate arsenic portion of nan stock repurchase program.

Cash travel from operating activities was $144 cardinal for nan quarter. Profitability strengthened, while nan sequential diminution is simply a usability of nan Alamo earnout costs during nan quarter. We proceed to aggressively negociate our moving superior and saw coagulated improvements successful our rate collections.

Our rate utilized successful investing activities was $51 cardinal during nan 4th quarter, and CapEx totaled $79 million, mostly driven by normal maintenance, investments successful nan adjacent shape of our Power Solutions maturation and proactive investments to summation our inventory to spare awesome components, specified arsenic engines and transmissions, arsenic we look to minimize nan effect of nan tight proviso chain. We besides funded nan replacement pumps for nan information of nan fleet we mislaid truthful acold successful Q3, which was wholly offset by security proceeds. This resulted successful wide affirmative free rate travel of $93 cardinal for nan 4th quarter.

Now, connected nan outlook. Customer request was very beardown arsenic we entered 2023, and this has continued done Q1. We had a very encouraging commencement to nan New Year, pinch very small effect from normal startup issues that tin originate aft nan vacation slowdown. As is ever nan case, wintertime upwind will person an effect connected our Q1.

For nan first quarter, we expect full gross will beryllium up astatine slightest 6% sequentially. Consistent pinch erstwhile guidance, our 2023 CapEx fund remains astatine $350 million, which included successful attrition will consequence successful comparatively level horsepower deployment done nan year. We expect our fund to beryllium first-half weighted and expect CapEx to diminution successful nan backmost half arsenic we scheme to put early successful nan twelvemonth to maximize returns.

We spot free rate travel of astatine slightest $500 cardinal successful 2023.

We are excited astir nan institution we person built. We've made smart superior allocation decisions that person positioned america to outperform our adjacent groups connected returns -- free rate travel early successful nan cycle. We scheme to proceed to triumph done our attraction connected balancing precocious return investments and dedication to superior discipline.

As we pointed retired successful our updated investor presentation, nan oilfield services assemblage is healthy. Returns astatine astir of our adjacent group are exceeding nan costs of superior for nan first clip successful galore years and nan assemblage is generating meaningful operating margins. Contrary to anterior cycles, nan manufacture is prioritizing shareholder returns, which should mean a longer aliases durable return floor plan for adjacent twelvemonth successful our peers and frankincense a much investable industry. We judge existent equity valuations are not suggestive of our sustainable net profile. We spot nary denotation of a slowdown pinch macro fundamentals expected to stay beardown for aggregate years.

I'll now move it backmost to Robert for closing remarks.

Robert Drummond

Thanks, Kenny.

As we announced earlier this week, we precocious added an Independent Director. Leslie Beyer has agreed to subordinate our squad and will beryllium an important sound for nan institution arsenic we participate nan adjacent shape of our development. Leslie is nan CEO of nan Energy Workforce & Technology Council, nan largest power exertion and services relation successful nan world. She brings pinch her a wealthiness of lipid and state knowledge and expertise and we're truthful delighted to person her sound successful our committee room.

Now fto maine adjacent pinch a fewer takeaways. First, we're very excited for 2023. Industry fundamentals are beardown arsenic they were past twelvemonth and nan tightness now is acold amended understood. Given nan sold-out quality of nan frac market, customers are actively looking to align themselves pinch nan astir reliable partners arsenic they look to maximize their ain superior efficiency. Several of our customers are already starting conversations now for 2024 work. Our operational excellence puts america precocious connected that list. We person repositioned our footprint commercially and geographically to let beardown partners, which should mean higher profits successful 2023.

Second, our wellsite integration strategy is simply a differentiator that relies heavy connected worth creation and synergies. For NexTier, our integrated offering either lowers nan full costs to run astatine completions wellsite aliases raises efficiency, and, successful astir cases, both. This worth creation allows america to gain beardown returns, while besides offering nan customer a superior product. If we do not spot a way to process improvement, we do not spot nan request to put our superior dollars successful nan service.

Finally, we still spot immoderate investors and analysts discussing nan finance strategy for OFS successful nan aforesaid discourse arsenic anterior much growth-oriented cycles. The manufacture has changed. Durable returns, net per stock and free rate travel are expanding successful value and must beryllium considered alongside EBITDA growth. We spot this arsenic nan champion strategy to pull nan adjacent procreation of investors backmost to oilfield services. At NexTier, we're doing our portion to lead nan manufacture into this adjacent phase.

With that, we'd now for illustration to unfastened nan lines for Q&A.

Question-and-Answer Session

Operator

Thank you. And we will now statesman nan question-and-answer session. [Operator Instructions] Our first mobility coming is going to travel from Scott Gruber of Citigroup. Please spell ahead.

Scott Gruber

Yes, bully morning. Great execution this quarter.

Robert Drummond

Thank you, Scott.

Kenny Pucheu

Thanks, Scott. Good morning.

Scott Gruber

I deliberation I want to commencement connected your comments regarding nan unmet request successful nan oily basins. Obviously, arsenic you mentioned, nan marketplace is concerned astir state directed activity migrating retired into nan oily basins. So, conscionable immoderate colour connected really you magnitude nan magnitude of that unmet lipid demand? Are you looking astatine DUC counts? Is it based connected customer conversations? A blend of nan two? Just immoderate colour connected really you arrived astatine nan 20% to 25%?

Robert Drummond

Well, I'll beryllium gladsome to locomotion you done that. If you spell backmost to Q3, we were saying past that frac request maturation was higher than frac proviso maturation and that frac proviso was already astatine that constituent nan bottleneck for U.S. accumulation maturation and a small spot contrary to nan truth astatine that peculiar clip that nan existent rig count was expanding nan DUC count moreover backmost then. You harvester that pinch nan truth that nan frac proviso concatenation is stressed and that attrition for nan frac fleet is very real. And that's nan benignant of nan backdrop for it.

But certainly, immoderate benignant of projection that you put connected macro frac -- proviso request has to beryllium built around. What is nan macro for lipid and gas? And for oil, I deliberation nan near-term narratives are astir recession and ostentation impact, China, Russia, nan U.S. onshore earthy state value and besides possibly nan SPR replacement balanced against nan structural semipermanent undersupply scenarios. So, we're not going to effort to foretell lipid price, but -- erstwhile we look astatine what our customers are budgeting and we look astatine our position of nan semipermanent benignant of runway for oil, it's very supportive.

So, past you benignant of return and driblet that into frac proviso and demand. We exited past twelvemonth astir 272 fleets operating, and we thought successful a marketplace that needed astir 20 to 25 much fleet. And that is nan opening of taking a look astatine what you would task it to look for illustration astatine nan extremity of '23. So, there's been a batch of chat astir drilling rig additions successful '23. That number continues to travel down complete nan past fewer months, and we've been very blimpish astir that because we ever knew that frac was much aliases little nan bottleneck.

So, we conscionable return a flimsy summation successful drilling rig count and nan full basins for adjacent twelvemonth generates a request for astir 10 much frac fleets. And then, we return a look astatine that. At nan Haynesville broadside of this scenario, and -- there's been a batch of chat that we mentioned successful our prepared remarks that we spot that there's going to beryllium immoderate activity decline, we believe. Even though nan customers are not saying it yet, we judge there's going to beryllium immoderate diminution successful nan Haynesville much than immoderate different state basin. So, we went backmost and looked historically past 2 down cycles backmost successful 2016 and 2020, state value astir $2.00. We saw 50% simplification successful nan frac fleets successful nan Haynesville. That's astir 14, it's not melodramatic to nan macro, but you sewage a fewer further lipid rigs connected nan request broadside and a fewer little state rigs.

Take a look astatine nan proviso side, we've spent a batch of effort to enactment connected apical of what we judge is astir 29 caller builds and reactivations that coming into nan marketplace successful '23 passim nan year. A important number of those deed successful Q1 arsenic it was projected. But there's a batch of unit pushing those to nan correct arsenic well. I mentioned successful our prepared remarks, successful fact, our electrical fleet is getting pushed into Q2. But if you conscionable put immoderate benignant of blimpish attrition number connected that broadside of nan proviso side, moreover arsenic small arsenic 5%, which is that -- we deliberation is overmuch much than that, but conscionable opportunity 5%, that projects into a balanced marketplace arsenic you exit 2023. So, we for illustration nan measurement that displacement shakes up.

And immoderate of that stems astir if you judge DUC count has been expanding aliases not, and nan EIA precocious benignant of came retired pinch their past 3 numbers for November, December and January, and they were 14, 35 and 42 DUCs per month. Our ain numbers are a small spot higher than that. And we judge that moreover successful February, we're going to spot nan DUC count successful nan U.S. connected a macro summation by betwixt 40 and 50.

So, I'm gladsome you asked that question. I really wanted to beryllium capable to reside what we've been proceeding benignant of successful nan property a small spot astir 2nd half pressure. We conscionable don't spot it that way. And that's nan reason. That's arsenic elaborate guidance I could astir apt get to.

Scott Gruber

No, I admit each that detail. And I do want to move to nan Power Solutions business, which is group to connection a batch of worth to clients successful nan existent marketplace pinch this widening state diesel spread. What are you proceeding from your clients connected incremental request for your Power Solutions offering? And is it thing that you're contemplating expanding spending connected this year, shifting immoderate of nan fund much that way? Just benignant of immoderate of nan latest conversations connected your description successful that business and customer appetite for more?

Robert Drummond

Yes, I'll commencement successful nan backmost extremity of that. Thanks for asking. Power Solutions has been thing we've been very proud of. We built that business to substance ourselves and thief america get to maximum displacement of diesel pinch CNG for our ain frac fleets successful nan beginning. And arsenic acold arsenic really overmuch maturation will have, I deliberation nan exit of '22 versus nan exit of '23 will beryllium much than double. And it's a very robust business that we've been capable to support sold retired up of delivery. And we're making a notch up successful Q1 connected deployed fleet, important notch up, and past again successful nan backmost half of nan year. So, we're continuing nan finance into that precocious return business.

But that business is very valuable to us, not only successful nan consciousness of nan P&L associated pinch nan CNG fueling business, but besides nan efficiencies it adds to nan wide frac franchise. The measurement we person Power Solutions mixed successful an integrated modeling location, our frac fleets, dual substance -- diesel frac operation fleets displays earthy state astatine a overmuch higher complaint than nan mean successful nan market, arsenic being told to america by our customers.

So, yes, it helps america seizure nan substance arbitrage to a greater extent, adding returns to our frac fleet arsenic good arsenic its ain P&L. So, it's been a point that we're going to proceed to spell and we moreover would opportunity openly that we'd for illustration to support looking inorganically astir that benignant of exemplary to proceed to turn that business pinch robust rate travel we have.

Scott Gruber

I admit that color, Robert. I'll move it back. Thank you.

Robert Drummond

I admit it. Thank you.

Operator

Our adjacent mobility coming will travel from Stephen Gengaro pinch Stifel. Please spell ahead.

Stephen Gengaro

Thanks. Good morning, everybody.

Robert Drummond

Good morning.

Stephen Gengaro

Two things for me. One, I guess, follow-up connected Scott's question. When you guys laid retired successful your Analyst Day that $7 cardinal of rate savings per fleet, I deliberation it's $5 cardinal of EBITDA, $2 cardinal of rate flow, wherever do you guidelines connected that initiative? How overmuch of that is flowing done this beautiful patient annualized EBITDA per fleet number correct now? And really overmuch is -- really overmuch should we deliberation astir possibly being additive complete nan adjacent 12 months?

Robert Drummond

We tin only move arsenic accelerated pinch that comprehensively arsenic we tin turn nan capacity of Power Solutions. But we sewage plentifulness of capacity successful wireline and plentifulness of capacity successful our last-mile logistics. So, each 1 of nan components of nan integration are connected a different tally rate, I'd say. But we proceed to eke -- move it up slightly. I was saying past quarter, we were astir apt successful a 3rd inning, thing for illustration that. Some fleets were 100% and immoderate were 10% aliases something. And that's thing that -- arsenic we moved from 2022, made nan decisions astir who we were going to partner pinch successful 2023, that we took into consideration.

We moved arsenic galore -- complete 25% of our customer guidelines changed betwixt December and January successful tune pinch that. Sometimes you return a measurement guardant pinch integration and sometimes you return a measurement backward. But successful nan cases wherever we really took a measurement backward from an integration standpoint, we took a position that gave america amended returns overall. And then, we tin move astir and build connected nan integrations arsenic we get deeper into nan year, because we found, erstwhile we get a toehold, typically it doesn't return very agelong to statesman to show nan worth of nan integrated model, and we're capable to build upon it.

So, I'd still opportunity very early days, but we expect to make a batch of advancement connected that successful 2023. In fact, we're successful nan process of a flimsy organizational tweak to alteration nan guidance successful nan section to beryllium capable to amended align and thrust that process. So, I'm excited astir nan upside imaginable of it.

Stephen Gengaro

Great. Thank you. And then, my follow-up is astir apt 2 parts. But 1 is erstwhile you deliberation astir nan first quarter, tin you conscionable springiness america your expected fleet count? And based connected your gross growth, it feels for illustration location should beryllium $15 cardinal aliases $20 cardinal of incremental EBITDA maturation astatine reasonable incremental. Is that successful nan ballpark of what you're thinking?

Robert Drummond

Yes, fto maine conscionable benignant of show you benignant of what things benignant of travel a bit. More and more, we're getting -- it's harder for us, I'd say, to talk astir fleet allocations, erstwhile we're really reasoning astir much horsepower allocations. You're going to spot a lot, I think, of -- aliases immoderate drift successful our fleet count up and down going forward, I'd opportunity forever, arsenic we configure our fleet optimally, fleet to fleet, surface science to geography, customer to client, moreover though our horsepower, I expect to support flat, So, that's 1 point I'd say.

And then, I would besides opportunity arsenic we went into Q1, I don't deliberation I could opportunity that I've ever been much pleased pinch nan commencement we've had to a quarter. I talked astir nan turnover we had successful customer guidelines that began successful December, it created a business -- we had nan champion period we astir apt ever had successful January, and that's usually not easy to propulsion off. So, successful February, you sewage a small spot of freezing upwind days that wounded america successful nan Permian, but we're disconnected to a awesome commencement there. So...

Kenny Pucheu

Yes. And moreover pinch nan upwind impacts built successful early Feb, we do spot that top-line maturation of astatine slightest 6% that we said. And I want to beryllium clear, we're expecting to turn profitability quarter-on-quarter. Whenever you look astatine that gross growth, there's going to beryllium affirmative effect from pricing and operational capacity and almanac improvements, and this is going to beryllium partially offset by weather. We deliberation that February really costs astir apt astir $25 cardinal to $30 cardinal connected nan top-line, but still again connected that 6%.

But pinch that being said, we expect profitability to proceed to summation astatine a bully gait quarter-on-quarter. And moreover pinch that February impact, we're excited astir nan -- proceed to amended that.

Robert Drummond

And to nan constituent astir nan fleet count, I'd conscionable opportunity we primitively had said we person a fleet commencement successful Q1 that electrical fleet, but I would opportunity that I would move that into Q2.

Stephen Gengaro

Okay, great. Thank you both.

Robert Drummond

Thank you.

Operator

Our adjacent mobility will travel from Luke Lemoine of Piper Sandler. Please spell ahead.

Luke Lemoine

Hey, bully morning, Robert and Mike.

Robert Drummond

Hey, Luke.

Luke Lemoine

Robert, I guess, pinch nan gait of your buyback, it almost seems for illustration you're not going to time off immoderate banal for anyone other to purchase. You conscionable [chewed through] (ph) complete half your authorization wrong 4 months. I guess, if we look astatine your free rate travel for this twelvemonth and nan gait of your buyback, it seems for illustration this authorization could beryllium vanished successful nan adjacent respective months. And possibly a imaginable authorization increase, wholly recognize -- an accrued authorizations and Board decision. Would it beryllium adjuvant if you tin possibly conscionable remark connected nan gait of buyback on pinch possibly your imaginable willingness to return good complete 50% free rate travel to investors successful a year, if you proceed to spot nan banal undervalued.

Robert Drummond

Yes, Luke, we -- I would commencement by -- convey you for nan question. I'll commencement by saying that enactment into nan 50% return of free rate travel solidly successful nan plan. I would look astatine it for illustration nan committedness for nan $250 cardinal return for 2023, I would look astatine it -- conscionable that we sewage started early. The waste value connected nan banal was conscionable excessively charismatic and we went aggressively for. I deliberation that erstwhile we look astatine re-upping it, I deliberation that it will beryllium successful nan discourse of that 50% of free rate travel and possibly looking astatine it from possibly getting an early commencement connected 2024. But nary announcement now astir immoderate alteration to it different than that we're connected nan aforesaid way that we've sewage to do what we're going to beryllium on. But I wouldn't beryllium amazed to spot that germinate arsenic we get into adjacent quarter.

Kenny Pucheu

And I'll conscionable add, support successful mind we're balancing each nan elements of our superior allocation program. We're going to person CapEx that will beryllium somewhat front-end loaded arsenic we put early. On nan buyback, we had a very fierce start. You'd astir apt spot immoderate of that activity subside some. But what I would opportunity is that astatine these pricing levels, we're going to proceed to beryllium opportunistic.

Luke Lemoine

Okay. Got it. Thanks a bunch.

Robert Drummond

Thanks, Luke.

Operator

Our adjacent mobility will travel from Derek Podhaizer of Barclays. Please spell ahead.

Derek Podhaizer

Hey, bully morning, guys. I wanted to spell backmost to nan attrition conversation. Just possibly grow connected nan different components that you're seeing? I mean, there's decidedly galore forms to what attrition is. We've been seeing your deployed fleet count travel down a fewer complete nan past mates of quarters. You're talking astir 29 fleets coming into nan market. You mentioned 150,000 horsepower beryllium commissioned. Maybe conscionable talk astir are you really beryllium replacing that 150,000? How are nan extending attraction lead times acting accordingly? Just possibly nan different pieces that you could talk astir to why nan 29 coming successful shouldn't spook aliases scaring immoderate investors because you'd expect immoderate coming retired done each nan different forms that we're seeing?

Robert Drummond

Yes, Derek, convey you for nan question. We tried to expect that much and much aft proceeding nan speech successful nan market. The investor platform we put retired past night, I would mention people, I thought this was nan champion position of it I've seen before. On platform Page Number 11, wherever it shows nan rebuild costs versus caller build costs and really nan salvage worth for nan aged diesel fleet declines each clip that you rebuild it, and thereby you scope a constituent wherever nan return connected finance of a caller build is amended than a return connected finance for refurb.

And I deliberation nan ample information of nan diesel fleet is retired location successful nan market, not conscionable ours, but others are successful that benignant of category. So, you spell to nan constituent that you sewage 29 announced benignant of we judge that benignant of autumn successful '23 caller e-fleets, nonstop drive, and rebuilds successful nan market. That's astir arsenic overmuch arsenic it could be. And then, you spell and you deliberation astir nan attrition broadside supported by what I conscionable said is that moreover if only 3% of nan fleet attrits, that's saying that nan frac fleet lasts 30 years aliases frac fleet conscionable lasts that long.

So, I deliberation erstwhile we talk astir our horsepower being flat, we talked astir having electrical fleet coming successful and nan truth that we're going to region and discontinue 150,000 horsepower complete nan adjacent 18 months, each of that benignant of leads to america saying that we're going to support nan aforesaid magnitude of proviso successful nan marketplace done '23 and that we're going to negociate it. And it's not that we're being stupid successful cutting up equipment, it's because there's a amended return to do truthful by replacing it pinch caller build, successful our case, electric. So that's nan logic that I deliberation applies crossed nan full fleet.

And honestly, I honestly judge that that's not moreover a choice. The proviso chain, nan measurement it is correct now, we're struggling to support up pinch nan parts needed to proceed to do attraction CapEx. So, I deliberation that's besides systemic crossed nan full sector.

Derek Podhaizer

All right. I admit nan comments. And conscionable quickly to follow-up that 150,000 you scheme to switch each that, would that beryllium pinch each electrical pumps aliases do you expect get aliases purchasing much Tier 4 DGB pumps connected that 150,000?

Robert Drummond

That's mostly going to beryllium electric, but I would opportunity opportunistic -- opportunity to prime up. These Tier 4 dual substance fleets that we -- nan determination we made to make an investment, much and much I deliberation astir nan much I for illustration it. It's sewage a awesome return floor plan and it's possibly amended than electrical successful nan agelong run. The truth that we've been benignant of going slow connected deploying electrical has been successful our favor, I think. There's things astir nan marketplace and really that's powered that's getting amended each nan time, and I consciousness for illustration nan return connected these Tier 4 DGB dual fuels is going to beryllium bully for a agelong time. So, we mightiness sprinkle a small spot of that successful location pinch it. But...

Kenny Pucheu

In fact, Derek, we still person astir about 2 fleets of Tier 4 that we request to person to Tier 4 DGB that conscionable slipped from past twelvemonth owed to proviso chain. So, successful our CapEx budget, we already person 2 much fleets coming in.

Robert Drummond

But nan main point is you really sewage to beryllium state powered to return advantage of that substance arbitrage, which is simply a large number.

Derek Podhaizer

All right. No, okay, that's helpful. And then, for my follow-up, conscionable want to spell backmost to M&A. You talked and -- l'll instrumentality connected nan consolidator connected nan frac side. What would that look for illustration for you guys? I mean, I deliberation a batch of these privates person been taken up. There's not excessively galore retired location pinch existent adjacent procreation pumps. It's much of nan Tier 2 diesel worldly that's been taken up disconnected nan action blocks. You've seen 1 of your larger peers return retired 1 aliases 2 of those. What is consolidation connected nan frac broadside look -- what are you looking for? Is it conscionable taking those pumps retired of nan market? Do they person possibly vertical integration aspects aliases accommodation that are attracted to? Just immoderate much colour connected that would beryllium adjuvant arsenic acold arsenic M&A targets.

Robert Drummond

Yes, I conjecture you admit there's a flimsy alteration successful what we've been saying. And it's meant to beryllium because of nan large factors I conscionable mentioned a bit. I deliberation nan smaller your institution is, nan much challenging it is to pat into an already difficult proviso chain. So, immoderate of nan deals that possibly could beryllium available, could person specified a bully return floor plan that you can't ignore. If it came down to a mini institution that was incapable to support nan fleet successful nan information astatine which they wanted to because of deficiency of entree to parts. So, if it was a very speedy payback consolidating accepted instrumentality really arguably would person been ruling that retired six months agone that I'd possibly see today. And nan 2nd point I would opportunity immoderate institution that is successful nan statement of nan modulation from diesel to state that would thief successful a comp mixed mode would beryllium a logical M&A successful nan frac arena directly.

Derek Podhaizer

Got it. Very helpful. Appreciate it, guys. I'll move it back.

Robert Drummond

Thanks, Derek.

Operator

Our adjacent mobility coming is from Kurt Hallead of Benchmark. Please spell ahead.

Kurt Hallead

Hey, bully morning.

Robert Drummond

Good morning, Kurt.

Kenny Pucheu

Good morning.

Kurt Hallead

Hey, awesome colour today. Really admit it. So, I'm curious, first and foremost, you talked astir proviso concatenation and lead times being extended, you benignant of reference that connected nan 3rd 4th convention telephone arsenic well. So, what are nan peculiar parts aliases pieces of instrumentality wherever you're seeing those lead times? And are you seeing them widen comparative to what they were successful nan 3rd quarter, aliases person those lead times benignant of stabilized astatine this point?

Robert Drummond

Kurt, it's difficult for maine to beryllium overly circumstantial without possibly hurting myself. And I don't want to do that. So, I would conscionable opportunity is that comparative to Q3, it's astir nan same. And I would person hoped it would person been a small spot better. And I would opportunity that deliberation astir it being nan large components mostly. And I would besides opportunity that there's spots wherever we've made immoderate progress, but there's spots wherever we haven't. I'm talking astir nan large measurement each of america successful my view.

And I deliberation that location is signs of expertise to make nan difference. But immoderate of that is successful pinch your ain power and immoderate of it, you person to beryllium successful a business pinch 1 of your vendors. So, we walk a batch of clip now trying to make judge nan interface betwixt america and our vendors is arsenic bully arsenic it could beryllium conscionable for illustration we do pinch nan interface betwixt america and our ain customers.

Kenny Pucheu

And I'll conscionable adhd that we've been investing successful CapEx and inventory conscionable to benignant of return power of our ain destiny successful that abstraction to make judge that we tin proviso nan fleet, astir apt transportation much inventory and CapEx than we would person successful nan past.

Robert Drummond

And align ourselves pinch nan vendors and helping them to immoderate their goals are, we are trying to thief them -- if it's amended visibility connected readying aliases if it's front-end payments for illustration Kenny is talking about.

Kurt Hallead

Okay. Got it. So, my follow-up would beryllium your -- you mentioned that you person beardown condemnation successful your expertise to benignant of recapture nan mislaid pricing that occurred during nan COVID period, right? So, I'm really conscionable benignant of funny connected your perspective, right? We person a business that could evolve, arsenic you mentioned, wherever you could spot 50% of frac activity diminution successful nan Haynesville. I'm not saying that you're predicting that, conscionable saying that, that's what happened past cycle, right? And you got, let's say, those 14 fleets going to effort and to find a location successful nan Permian aliases different lipid basin, that typically creates benignant of asset-on-asset title and benignant of puts nan negotiating leverage backmost successful nan E&P hands, right? So conscionable benignant of funny what benignant of underpins your condemnation aliases has your condemnation changed astatine each astir benignant of recapturing that pricing, fixed what's going connected successful nan earthy state markets correct now?

Robert Drummond

Look, that goes backmost to nan proviso and request equilibrium successful frac either you judge it aliases you don't. And you deliberation astir this clip past year, really nan speech was, what we were saying versus what was being said by galore of nan E&Ps, that they didn't recognize yet nan proviso request equilibrium is what it was aliases imbalance.

So, each I'd opportunity is that whenever there's a move, location migration, which has been going connected a lot, by nan way, successful nan past year, I mean, moreover [indiscernible] is that nan first measurement aliases two, you had to person either condemnation successful it aliases not. And if you don't, past location will beryllium immoderate frac companies location that will consciousness it. But if it's a balanced market, location will beryllium different location for immoderate displaced fleet. And that constituent of our customers, I think, understand that amended this twelvemonth than -- this clip than they did past year.

So, each I'd opportunity is, our way grounds of benignant of looking astatine this macro is beautiful good. We've been skating wherever we said nan puck was going to beryllium and sound connected wood, we benignant of been correct astir it. So, we're very cautious astir not being incorrect astir it. But I'll besides opportunity it's not needfully that everybody needs to get a value increase. Many times, you get nan aforesaid effect of a value summation by improving contractual position that we're flowing backmost what possibly conceded successful nan past astir minimums and hours that you would succeed, really you grip achromatic abstraction successful nan calendar, really is non-productive clip managed.

And I'd besides opportunity that nan large move that we often don't deliberation astir erstwhile you're looking astatine nan full macro is nan move for earthy gas-powered fleet, earthy state substance fleets, is measurement different. It's supported by an arbitrage of arsenic overmuch arsenic $10 cardinal of fleet wherever there's $10 cardinal that a customer could salary substantially much for a fleet yet show a little cost. And I saw an E&P precocious announced that they were going to make a alteration successful 2023 and they were going to spot immoderate deflation. And that's what they're talking about, I think, it's wherever they are going to beryllium paying a frac institution more, and nan frac institution is going to get a bully return and nan customer is offsetting it pinch nan little -- his information of that little substance cost. So, it's a win-win if location ever was a meaning of one, and that's much and much becoming a large portion of nan fleet. For us, it's much than half of our fleet has sewage earthy state support that way.

So, I whitethorn beryllium talking a small spot of our book overall, but astatine nan extremity of nan day, my comments astir nan macro sustained that I judge nan full fleet is successful that arena and moving retired of state successful nan lipid astatine this peculiar portion of nan rhythm is going to beryllium fine.

Kurt Hallead

Yes. And I deliberation what you emphasized present is that there's a batch much nuance to it successful this rhythm tally than location mightiness person been four, five, six years agone successful position of discussions that you're having pinch E&Ps, right?

Robert Drummond

That's precisely right. And nan E&Ps understand that clearly, because they are nan ones having nan correct to cheque and they tin spot nan substance costs bills measurement down and nan frac fleet costs up a small bit. But we still -- backmost to that point, not backmost to our nett pricing pre-COVID. I mean we're not portion of nan ostentation communicative until we get backmost to astatine slightest that number. So, I consciousness -- we're not portion of nan problem present for them.

Kurt Hallead

Got it. That's awesome color. Thanks, Robert.

Operator

Our adjacent mobility is from Saurabh Pant of Bank of America. Please spell ahead.

Saurabh Pant

Hi. Good morning. Hey, Robert and Kenny. Just a speedy 1 for me. It's benignant of pursuing up connected Kurt's mobility connected pricing, and I'm trying to understand nan afloat twelvemonth 2023 guidance. I deliberation if I caught it correctly, you said you expect EBITDA to beryllium up 40% to 50% successful 2023, which is fundamentally successful statement pinch nan implied EBITDA, right, based connected your free rate travel and CapEx number, right, it's astir $920 cardinal to $985 million. And I'm conscionable trying to do a EBITDA per fleet math, that implies astir $30 cardinal per fleet connected a level 32 fleet ground versus nan 4th quarter, right, comparing that pinch $26 cardinal successful nan 4th quarter. Can you thief america done nan moving pieces connected really we get from $26 cardinal to $30 million? Basically trying to understand what's baked into that from a pricing perspective, from an ratio perspective, and from a website integration perspective?

Robert Drummond

I'm gladsome you asked that mobility that measurement because astatine nan extremity of nan day, I tin spot really it mightiness beryllium confusing to spot that nan institution is not spending very overmuch money successful maturation CapEx and being capable to show that benignant of year-over-year increase. And erstwhile you look astatine wherever we are arsenic we exit 2022 and task that connected an annualized basis, it doesn't return very overmuch value aliases ratio to get to nan benignant of numbers that you were talking about.

But I do want to effort to stress 1 much clip about, I wouldn't promote group not to get overly caught up connected nan fleet count, because I deliberation you'll spot ours move 2 aliases 3 up aliases down during nan twelvemonth pinch precisely nan aforesaid magnitude of horsepower deployed. There is simply a important number of fleets operating successful U.S. onshore coming that are operating pinch little than nan number of pumps that they would for illustration to have, and nan customer would gladly salary for a mates more. There are cases wherever deploying horsepower into that benignant of arena is amended than configuring a bunch of them into a caller fleet and going retired little than possibly ideal. So, we're going to beryllium -- and our economics, we tally connected a per horsepower aliases per pump ground arsenic opposed to per fleet.

But agelong reply -- Kenny tin get into a small much of nan mathematic specifications there. Just deliberation astir it being mostly value and building of nan already established tally complaint pinch nan 1 further electrical fleet hitting nan marketplace now successful Q2 alternatively of Q1.

Kenny Pucheu

Look, I'll conscionable adhd and conscionable to item from our investor deck, it's not conscionable astir EBITDA profitability aliases EBITDA profitability connected a per fleet basis. We're focused connected generating returns and rate flow. And that's our extremity done nan rhythm is to make each three, right? And that's why 1 of nan reasons why we put retired that platform is to benignant of show immoderate different perspectives astir financial capacity of some nan assemblage and adjacent year.

Saurabh Pant

Yes. No, Robert, I admit you said that because that EBITDA per fleet metrics is becoming progressively little applicable because nan numerator and nan denominator are some becoming difficult to comparison crossed companies. So, I wholly admit that point.

Just a speedy unrelated follow-up. I deliberation you said to somebody's question, it has benefited you that you person been slow connected nan electrical fleet front, right? I wanted to travel up connected that and deliberation done what are you looking astatine from a exertion standpoint? Are location different technologies retired location that you are testing, trialing? And then, conscionable connected nan e-fleet front, really do you deliberation astir nan leasing versus owning? And what do you deliberation is nan correct reply for you connected that front?

Robert Drummond

Look, I deliberation it depends connected nan position for which 1 is nan champion each nan time. We would beryllium looking astatine really it impacts our returns to make immoderate determination for illustration that. Technically, I would conscionable opportunity it's much astir nan financial astir really you powerfulness an electrical fleet. There's galore different electrical options retired there, but they're not hugely different erstwhile it comes correct down to it. I deliberation they're each going to beryllium beautiful effective successful balancing little substance depletion -- aliases little substance costs and little operating costs successful wide complete time.

It's conscionable that erstwhile I said we were going slow, I meant not slow technically, much slow financially, truthful that we could harvest Tier 4 DGB, and I would conscionable argue, I don't cognize erstwhile that ends. It seems for illustration Tier 4 DGB mightiness beryllium a bully finance agelong term, but I deliberation for america that we sewage to support balancing that pinch really powerfulness evolves. If you get to a constituent wherever there's a grid retired location and there's a number of customers moving successful that guidance that you tin plug an electrical fleet successful and you don't person to return nan powerfulness procreation retired there, and that's going to beryllium a really bully move for frac financially. So that benignant of point we're balancing.

Saurabh Pant

Okay. Perfect. And conscionable a speedy clarification, Robert. The first fleet that's coming connected successful nan 2nd quarter, person you said if that's purchased aliases is that leased?

Kenny Pucheu

Yes, this is Kenny. So, we've said publically our first e-fleet is connected superior lease, astir $30 cardinal of its finance and astir $10 cardinal successful nan CapEx budget. Look, we negotiated that astir a twelvemonth ago. We're very pleased pinch nan terms, and it's going to let america to lucifer nan rate travel ins and outs. So -- but, yes, that's what our first fleet is.

Saurabh Pant

Okay. Thanks, Kenny. Thanks for clarifying. Okay, guys, I'll move it back. Thank you.

Robert Drummond

Have a bully day.

Operator

[Operator Instructions] And our adjacent mobility is from John Daniel of Daniel Energy Partners. Please spell ahead.

John Daniel

Good morning, and convey you for including me.

Robert Drummond

Hey, gladsome to.

John Daniel

Yes. A speedy question. I mean, you pointed retired rightly nan proviso concatenation headaches that are retired there. And it benignant of begs nan question, astatine what constituent do you person to commencement readying your orders for '24?

Robert Drummond

Well, I'd say...

John Daniel

I'm looking for a circumstantial CapEx dollar number. I'm conscionable asking conscionable a strategy from a procurement standpoint.

Robert Drummond

I deliberation beautiful overmuch now, man. I mean astatine nan extremity of nan day, fixed nan visibility to your proviso concatenation and conscionable for illustration our customers tin do it for us, it helps everybody scheme and shape accordingly. So, I would reason that, yes, that is astir apt true. And I'd opportunity a batch of group did '23 very early. We did '22 very early. And I would opportunity we astir apt should person moved up '23 moreover earlier than we did. But it's going to -- I don't mind if you bid it aliases not now correct now, getting clarity connected your expertise to drawback up. And I deliberation there's astir apt much down assets now arsenic a percent of full than it's astir apt that I've seen successful a batch -- ever maybe.

John Daniel

Right.

Robert Drummond

So, they sewage to drawback up pinch that first and past caller builds. So, I'm not moreover reasoning arsenic overmuch consequence successful '24 having a batch of activity of caller builds coming conscionable specifically because of that.

John Daniel

It would look to me, and you pointed retired nan caller capacity, and -- but erstwhile you deliberation astir nan lead times, companies specified arsenic yourself having nan wherewithal to spot orders now to beryllium successful nan beforehand of nan queue, conscionable seems for illustration nan larger companies successful theory, it sounds -- it's not meant to sound anticompetitive, but you tin necktie up nan proviso concatenation a spot much -- and it does limit, if I'm not mistaken, nan number of caller entrants that could really practically travel connected into nan market. I don't cognize if you would attraction to remark connected that, but it conscionable seems reasonable to me.

Robert Drummond

Yes. I deliberation it sounds reasonable to maine arsenic well, John. I'd conscionable opportunity that I deliberation I've seen it play retired a small spot successful nan market. When you look astatine possibly immoderate of nan M&A deals that person been done pinch smaller guys who fundamentally had seen their fleet count driblet complete clip against their will maybe, because nan -- incapable to entree nan parts basal to support nan full point running. I deliberation extrapolate that into your question, I deliberation that's nan aforesaid answer.

John Daniel

Okay. Can I compression 2 speedy ones successful present existent quick? I don't cognize if you sewage a agelong statement down me.

Robert Drummond

Yes. We -- this is our past question. I mean, you're nan past guy. So, let's spell ahead.

John Daniel

Thank you. So, erstwhile -- successful nan incremental request of 20 to 25 fleets, I'd dislike to beryllium nuanced, but really overmuch of that is really genuinely for dual substance versus bequest Tier 2? Does that make sense? So, it seems for illustration much of nan demand...

Robert Drummond

Well, look, I would opportunity that we ain't looking astatine it like, yes, there's a macro aliases nan fleet count. If nan customer had a choice, it would beryllium 100% dual substance aliases electric, immoderate tin pain earthy gas, put it that way.

John Daniel

Fair enough. And past past one, tin you conscionable update america connected benignant of your thoughts connected immoderate differences, competitory differences betwixt Delaware and Midland Basin what you're seeing benignant of starring separator retired there?

Robert Drummond

From what perspective?

John Daniel

Just from activity, from thoughts of competitors possibly shying distant from Delaware Basin type activity because of it much successful intensity, if you will, connected nan equipment, conscionable person you seen immoderate demonstrable alteration successful competitory landscape? And what would you expect...

Robert Drummond

I deliberation everybody is looking for who tin get nan champion benignant of ratio pumping hours per fleet per period connected average. We made a number of changes successful our location fleet arsenic we went into '23 and immoderate of that was migration wrong nan basin, looking for customers of likeminded that were focused connected -- nan full proviso concatenation moving successful unison and absorbing nan integrated exemplary and being capable to pump successful time successful and time out. The trouble of nan frac is simply a facet successful location for sure, and it has to beryllium captured either successful value aliases thing aliases you would person differential capacity financially 1 frac fleet to different and difficult versus easy fracking. So yes, I fishy there's immoderate of that.

John Daniel

Fair enough. I admit you making clip for me.

Robert Drummond

Thank you. Appreciate nan call.

John Daniel

Yes, sir.

Operator

This will reason our question-and-answer session. At this time, I'd for illustration to move nan convention backmost complete to Robert Drummond for immoderate closing remarks.

Robert Drummond

Thank you very much, everyone, for participating successful today's call. I really do want to convey nan full NexTier squad for your efforts, and we stay committed to making NexTier a spot wherever you're going to find opportunities for a agelong and fruitful career. Thank you very much.

Operator

The convention has now concluded. Thank you for attending today's presentation, and you whitethorn now disconnect.

Editor: Naga



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