ProPetro Holding Corp. (NYSE:PUMP) Q4 2023 Earnings Call Transcript

ProPetro Holding Corp. (NYSE:PUMP) Q4 2023 Earnings Call Transcript February 21, 2024

ProPetro Holding Corp. misses on earnings expectations. Reported EPS is $-0.08 EPS, expectations were $0.08. ProPetro Holding Corp. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the ProPetro Holding Corp. Fourth Quarter 2023 Conference Call. All participants will be listen-only mode. [Operator Instructions] Please note, this event is being recorded. 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 Munoz. This morning, we released our earnings results for the fourth quarter and full year of 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 of 2023, I’d like to highlight some of our key accomplishments. Over the last two years, we have worked to create a 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 with state-of-the-art technologies and services. Our results in 2023 and our start in 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 that 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 offerings remains strong and our outlook is positive. Our FORCE 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 two FORCE electric fleets and seven Tier IV 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 both fleets are 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 another core element 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 adds 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 Par Five’s capacity in tandem with the strong commercial architecture and established customer relationships of ProPetro.

We are pleased that the accretive earnings and expected revenue synergies are already coming to fruition. Value-enhancing acquisitions like Silvertip and Par Five 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 and the overall return of capital to shareholders as an important part of our strategy showing our conviction in the future of the company, while creating value for shareholders, and a key pillar of our value proposition for investors.

Our financial results over the past year are a direct result of the continued execution of our strategic initiatives with the ultimate goal of generating strong returns and value for our shareholders. The results also demonstrate that our strategy and our business are resilient as we navigated a turbulent fourth quarter. In the fourth quarter, like other industry participants, ProPetro’s utilization was hindered by increased seasonality and holiday breaks as well as budget exhaustion amongst certain of our customers. We previewed these challenges last quarter, but the impact on our activity in the fourth quarter was more than we had expected. 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 entered the new year.

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’ve moved into the first quarter, we are picking up right where we left off and remain focused on the long-term. We continue to believe that ProPetro’s stock presents a unique investment opportunity given the discrepancy between our equity value and our financial results and strong outlook. With our share repurchase plan, we are showcasing our conviction in this opportunity. Lastly, and moving more to our macro outlook, we believe ProPetro is uniquely positioned to capitalize off the recent transactions in the E&P space. These transactions reinforce our disciplined approach to capital deployment as 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 North America 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. We are confident 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 give us confidence in our strategy and earnings potential. As we continue to industrialize, we’re creating durable and repeatable results. The industrialized model that 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 Sam and good morning everyone. ProPetro’s 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 planned inception in May of 2023. 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 Par 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 2023 included $8 million of true-up depreciation related to changing 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 crew continuity and ongoing fleet performance led us to retain our crews and associated labor costs despite the temporary decline in utilization as our customers were starting back in earnest in early January.

This recovery has transpired as expected. Additionally, an important to note when comparing to previous quarters, we incurred a 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 Par 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 contrast to only $22 million in CapEx AP at the end of 2023, 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 incurred CapEx will be between $200 million and $250 million.

The range is largely a function of activity potentially ramping higher as we head through the year. We expect a 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’s balance sheet remains strong and we are committed to disciplined capital allocation for the long-term.

Finally, we believe we are 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 FORCE fleets that are compatible with their desires to pursue further electrification, lower completion costs, and lower emissions. We believe our business is built for more durable earnings and cash flows in the current flat market environment, and we are confident 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’s 2023 performance. Our go-forward strategy and why we are confident in the future of our company and 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. We offer bifurcation with our service quality and equipment and 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’ve been successfully optimizing our operations and industrializing our business as we execute the transformation of our fleet, buyback shares, and 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 are excited to capitalize on ProPetro’s 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, while remaining opportunistic on active 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, enables 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 and play an integral role in the overall energy industry. With that, I’d like to now open it up for questions. Operator?

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Q&A Session

Operator: We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Luke Lemoine with Piper Sandler. Please go ahead.

Luke Lemoine: Hey good morning.

Sam Sledge: Hi Luke,.

Luke Lemoine: 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 fleet has been performing relative to your expectations? And then possibly future FORCE fleets beyond three and four, how are you 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 knew that we needed to get up pretty quickly to maintain our quality service reputation and where these first two fleets have landed, the customers — not only the customers that they’ve landed with, but how they performed with those customers has been great. I think we’re learning some things around maintenance cycles and how to just optimize, but to be just this many months in and kind of already working towards optimization point and not the — off the learning curve and on the optimization point is a pretty big deal. I think our team has been really, really pleased with. So, as it pertains to future, FORCE 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. We’ve got a lot of good things going pertains to those. And beyond number four, look, demand is really strong. This is really continuing to convict us about our strategy to continue to transition our fleet in this manner because the customers kind of continue to inquire and line up and come to the table for contractual negotiations and talks. So, it would be a very positive sign if you see more FORCE fleets from us in the future, and that’s definitely our intent, as we sit here today, there’s no additional orders beyond number four.

Luke Lemoine: Okay. And then, David, you gave us a fleet count guidance for 1Q. Rebalanced pretty nicely versus 4Q and almost a at 3Q levels. But in 4Q, you had some white space. You retained the crews, so you have that kind of fixed cost 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 we want to be careful about given 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 we feel very good about the first quarter. But I think just speaking to some of that comparison to the third quarter may give you some perspective of what we’re seeing so far.

Luke Lemoine: Okay, perfect. Thanks so much.

Operator: The next question is from Derek Podhaizer with Barclays. Please go ahead.

Derek Podhaizer: Hey good morning guys. I just wanted to ask about the level of free cash flow generation in 2024 and how we should think about shareholder returns. So, in your deck, you talked about you had $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 hit to reach that. So, should we expect you to up the authorization, maybe layer in 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 question, Derek, and I think kind of a key a key theme to our value proposition going forward. Before I talk about necessarily shareholder returns, just talk about — zoom out a little bit more and talk about capital allocation in general. We’ve said this a number of times here recently 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. 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 and the business that we’re in, is in can multitask through all three of those categories, and we’ll likely continue to do so going forward.

We’ve operated our buyback program relatively opportunistically to try and 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 for kind of our equity values and valuations stay where they are, we will continue to hammer our way at those 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. 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.

David Schorlemer: And Derek, 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 being more durable, but also a balance sheet improvement. We’re in a significantly better position from a working capital perspective 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.

Derek Podhaizer: Got it. That’s very helpful. Also, I wanted to ask about the display sort of diesel on the dual-fuel fleet. You had a chart in there that showed a 20% increase through 2023. I guess maybe just talk about what are the drivers behind that, bringing you to 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 new delivery, field gas, anything around another potential bolt-on for you?

Sam Sledge: Yes. Good question. I think is — diesel displacement inside of the dual fuel offering is likely times hard for a public investor, someone like yourself to see what type of benefits those bring, not only what type of benefits does bring, but what I think the question you’re asking is how do you do that? I mean to put it plainly, it’s just operational excellence. I think what we began to learn when we were deploying dual-fuel equipment is that you don’t just flip these things on a lot 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 gas value chain, which I think is your — kind of your second question there, that can supply the appropriate type and condition of fuel on an ongoing basis that also enables high displacement rate.

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 good operational decisions and work with suppliers, vendors, customers to get the right gas to the — to get the right kind of gas to location and the right amounts at the right time. 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. I think we’re — we’ve — you’ve 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 field gas and the different acreage positions that our customers have and they’re going to move around and get the right kind of gas to the well site.

So, a little bit of a learning curve there, but it’s something that we’re — that’s on our radar that we continue to launch evolve as it pertains to the gas value chain.

Derek Podhaizer: Got it, great. Very helpful. I’ll turn it back. Thank you.

Operator: The next question is from John Daniel with Daniel Energy Partners. Please go ahead.

John Daniel: Hey Sam. Thanks for having me on the call. Just one question. Can you — and you actually said this in the prepared remarks, I apologize, but what’s the quoting activity right now for more [Indiscernible] frac work? And how do you see the evolution of that and just the impact to your business?

Sam Sledge: Yes. [Indiscernible] 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. We kind of talk a lot about the industrialization of our business, and that’s a pretty evident example of where things could go and 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 that if something like that comes in the future, it will be a player, and we’ll prove out our operational excellence in operational [Indiscernible].

John Daniel: Cool. That’s all I got. Thanks for including me guys.

Sam Sledge: Thanks John.

Operator: The next question is from Arun Jayaram with JPMorgan Chase. Please go ahead.

Arun Jayaram: Yes, good morning gentlemen. Sam, 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 could just help us sort through why do you think your business had that level of seasonality? Is it just the customers you’re working with, but anything more nuanced than that?

Sam Sledge: Good question, Arun. I think what makes us unique is our geographic focus in the Permian basin and our fairly consolidated customer portfolio. It’s really — 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 report over the last couple of weeks are in multiple basins across the U.S. and probably have a more verse customer profile than us. I think we said a couple of different times in our prepared remarks. That’s — we do not think this is indicative at all of our strategy. We think it’s just something that hit us from an external circumstances standpoint that was unexpected and obviously unfavorable. But where we are here in January and February this year and what our outlook is for 2024, we’re pretty pleased with how we’re positioned.

Arun Jayaram: Got it. Got it. Fair enough. And then just thinking about as we look through the fourth quarter numbers, your revenue is pretty consistent with the Street. I think you mentioned that, 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 impacts from 4Q that we think about for the full year in 2024? Or is this just an anomaly as we think about go-forward earnings impacts 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. I think that, as we mentioned, we had crewed up a certain level, and we wanted to maintain crew 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 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’ve 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: Arun, this is Sam. I’ll just add to that. I think the one lever might be one of the biggest levers in the oilfield service business that we haven’t really talked to about yes, I’m kind of surprised what were four questions in, and we haven’t got a pricing question. But we feel really good about pricing this year. We do it’s definitely not peak pricing, what maybe we saw in the first half of 2023. 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 burning solutions in the form of dual fuel and electric and also just a high-quality service offering, that’s the pricing today. So, we’re not going to get picked out on the fringes by a spot diesel market, like a good portion of our sector.

So, I think that’s really — that might be one of the most important things, kind of, our go-forward strategy is 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 working in this sector for 13 years and kind of through these mini-cycles that we’re seeing today, this is the most discipline I’ve ever seen in my career. And that gives us a lot of confidence to go forward with our strategy and a lot of the things that we value today. So, think pricing is pretty important and how the whole market is behaving is really healthy.

Arun Jayaram: Great. Thanks a lot.

Operator: The next question is from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber: Yes, good morning.

Sam Sledge: Good morning Scott.

Scott Gruber: Look, I know 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, Sam, do you see a path to activity improvement in 2Q and 3Q? Can you get above that kind of 14% to 15% level? Or is that, that kind of level is what we should expect, that’s kind of a base case for 2Q or 3Q?

Sam Sledge: Good question. I think the earliest opportunity we could see activity improving is probably second half of the year. Now, that’s as an opportunity as anything we’re sitting here saying is going to happen. We’re looking at pretty flattish activity through the year as far as we know it right now. But the way the majority of the operators, I think, begin to operate over the last year, two years from a rig to frac crew standpoint feels like much more of a just-in-time inventory management. It’s not that there’s this big load of uncompleted wells lying out there where frac activity could snap back quickly. So, to say that more plainly, I guess, rig counts are flat and happen for the last several months. So, you’ll have to see a rig count inflection before you see a frac activity inflection.

I don’t know what’s the kind of delay on that, maybe 90 days or something like that. So, if you started to see a big rig count inflection today, it might be three, four months before you see that show up in frac activity.

Scott Gruber: Got it. And then just thinking about the budget, it sounds like it doesn’t contemplate additional e-frac. Are you able to provide some kind of broad strokes split of the budget, the kind of between base maintenance on the active frac fleet and what’s allocated to the ancillary services? And is there some growth CapEx in there for ancillary services?

Sam Sledge: Yes, I’ll make just kind of a general comment on the — on your FORCE electric comment, and I’ll let David talk about puts and takes CapEx pie. We guided to $200 million to $250 million and we could deploy fifth FORCE fleet inside of that range. So, that’s part of the reason why we’re coming forward with the range that wide at this point because, one, there’s some unknowns about back half activity. Activity always has a heavy impact on our CapEx spend and remainder is 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 a fifth. We just don’t have any commitments or orders right now. But it fits within that range that we’ve quoted. I don’t know David wants to add to the CapEx commentary.

David Schorlemer: Yes, Scott, just to give you a little more granularity around the CapEx guidance. I think we’ve talked about $67 million per fleet. That, along with other refurbishments and our other service lines gets you, call it, $150 million to $160 million. 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, 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. Thank you.

Operator: [Operator Instructions] Next is a follow-up question from Luke Lemoine with Piper Sandler. Please go ahead.

Luke Lemoine: Yes, hey Sam. You talked about being past the learning curve on the FORCE fleets and being more an optimization maybe for you or David, you talked about operational cost savings could be 30% or 40% for the FORCE fleets. Just wanted to see kind of what you’re seeing there, and you could still think that’s a good range?

Sam Sledge: I’ll say — I’ll make just a general comment and Dave will talk about specific numbers. These units don’t even really come into the shop — we can do all the maintenance on — in the field. Like if you look at the traditional frac business of our size, all the diesel engines and the amount of technical engine work that has to happen and the type of shop, 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 our business. So, if you walked out into our maintenance shop, it’s more than there’s 90 [ph] FORCE units out there. It’s all conventional or dual fuel units. So, that’s just a really positive sign. David, do you want to say something?

David Schorlemer: Yes, Sam, you’ve brought up exactly one of the things that we’ve been looking at just a shot of message to our Director of Maintenance yesterday and asked them how many FORCE units are in the maintenance shop, and he said none. So, that’s just an anecdote, but I think what we’re looking towards is have 30% to 40% improvement in OpEx with a similar impact related to our maintenance CapEx. So, again, you think about what’s on the front of our conventional trailers, and it’s a 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.