ProPetro Holding Corp (PUMP) 2020 Q4 法說會逐字稿

Good day, and welcome to the ProPetro Holding Corp. Fourth Quarter 2020 Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Sam Sledge, Chief Strategy and Administrative Officer. Please go ahead.

Thank you, and good morning, everyone. Welcome to ProPetro Holding Fourth Quarter and Full Year 2020 Earnings Conference Call. (Operator Instructions) As a reminder, conference is being recorded.

Thank you, and good morning. We appreciate your participation in today's call. With me today is Chief Executive Officer, Phillip Gobe, Chief Financial Officer; David Schorlemer; and Chief Operating Officer, Adam Munoz. Yesterday afternoon, we released our earnings announcement for the fourth quarter and full year 2020. 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. Finally, after our prepared remarks, we'll hold a question-and-answer session.

With that, I'd like to turn the call over to Phillip.

All right. Thanks, Sam, and good morning, everyone. Well, after successfully navigating the onset of the pandemic in the oil price collapse in 2020 and seeing hopeful signs of economic recovery, 2021 started to look a lot brighter. As the year began, activity picked up, oil prices were approaching pre pandemic levels and the vaccine rollouts that started. What could possibly go wrong. Then last week an epic cold spell put a deep freeze across a large swath of the country, severely impacting people's health and safety as well as the ability to conduct operations, particularly in the Permian Basin. It was not exactly the start to the year we had hoped for.

However, some things never change, like first responders, answering the call for help and the resiliency of our employees to stand ready to work with our partners and customers to respond to the needs of our community and the continued need to supply energy to our larger community. We are thankful for that dedication.

I would also like to once again thank all of our employees for their continued efforts in following health guidelines to promote a safe work environment, not only for themselves, but also for our customers, supply chain partners and other stakeholders. We appreciate our medical workers and first responders here in the Permian Basin for their selfless sacrifices they make day in and day out to ensure our well being.

Turning our attention to the fourth quarter. We benefited from a continued steady increase in customer activity levels during the period. We are also pleased to set new operating efficiency records for pumping hours per day and downtime. Our ability to quickly redeploy high-performing crews, combined with further efficiency enhancement made a significant difference in our sequential financial results for the fourth quarter. And we expect activity levels to continue to increase as we move through 2021. Additionally, the team continues to focus on disciplined deployment of our assets to ensure we only pursue profitable work that is cash flow positive. While we continue to have excess equipment availability for deployment, we will not reactivate equipment without adequate pricing, efficiency targets and expected operating margins. This discipline is critical to the success of the oilfield service industry.

Our best-in-class operational and safety performance was on full display yet again in the fourth quarter, and I want to thank all of our team members for their relentless focus on executing at the wellhead. Operational efficiency is the most important differentiator in oilfield services, and customers remain focused on utilizing the highest quality crews with the most reliable equipment available in the industry. Our proven track record of quickly and effectively responding to the needs of our customers continues to differentiate ProPetro in the marketplace.

Our customer-focused culture has allowed us to maintain market share at consistent levels throughout 2020, which we expect to continue into 2021, while also remaining cash flow positive. As the macro environment improves through the remainder of this year, we remain fully committed to improving margins and creating shareholder value. During the fourth quarter, we were pleased to generate free cash flow once again which help grow our cash position to almost $70 million at year-end, a more than 25% increase from the end of the third quarter.

Looking back at the past year, I'm extremely proud of how our team came together to work even closer with our customers and as we manage through one of the most difficult times in the history of the energy business. We quickly adapted to a new environment by lowering our costs to ensure that our customers continue to operate at the financial level that was appropriate for them. E&P customers benefit from service partners that share in their interest in pulling through the downturns together as well as making investments for a more efficient and sustainable supply chain. With the downturn now transitioning to more of a recovery, the impending reinvestment cycle will further separate winners and losers in the U.S. pressure pumping industry with only the highest quality service providers able to invest in next generation, lower emission equipment as a result of their customer focus and mutually beneficial relationships.

Additionally, our debt-free balance sheet allowed the company to remain strong during the COVID-19 and oil price crisis of 2020. Our conservative balance sheet and capital discipline served the company well in 2020 and has positioned ProPetro to continue to succeed in this ever-changing energy industry landscape.

With that, I will turn the call over to David to discuss our performance -- financial performance. David?

Thanks, Phillip, and good morning, everyone. Now moving to our financial results. We were pleased to post higher revenue and adjusted EBITDA sequentially and generate free cash flow for the fourth quarter. More specifically, total revenue in Q4 2020 was $154 million versus $134 million for the third quarter, an increase of 15%, which was primarily attributable to increased activity levels. Effective utilization for the fourth quarter was 9.6 fleets compared to 8.5 fleets in the third quarter of this year. Due to unprecedented extreme winter weather in our region recently, we are now expecting first quarter effective utilization of between 9.5 to 11 fleets down from our January guidance of 10.5 to 11.5 fleets. This single event caused more weather-related downtime than we've seen in the company's history.

Our team, our customers and our supply chain partners are working hard and have reestablished our work cadence prior to the snowstorms. And as of this morning, we are at pre-storm levels with 11 fleets working. Cost of services, excluding depreciation and amortization for the fourth quarter was $116 million versus $100 million in the third quarter. With the increase driven by higher activity levels in the fourth quarter. We've been able to continue to reduce our costs through innovation and technology, working in concert with our supply chain partners. For example, we are utilizing real-time data analytics with advanced condition monitoring with our global engine manufacturer. This leverages their global expertise to help us reduce failures. Many of these initiatives utilize cloud-based real-time data acquisition and analytics of our mission-critical supply chain partners that have deep expertise and resources well beyond ours to invest in the latest and most innovative solutions for our benefit. Our team swept the details and our results benefit from this focus.

Fourth quarter general and administrative expense was $20 million compared to $22 million for the third quarter. Excluding nonrecurring and noncash stock-based compensation in both periods, G&A decreased 12% from $17 million in the third quarter to $15 million in the fourth quarter.

Our net loss for the fourth quarter was $44 million or a $0.44 loss per diluted share versus a third quarter net loss of $29 million or a $0.29 loss per diluted share. In Q4, we incurred an impairment expense of $21 million related to the retirement of approximately 150,000 of hydraulic horsepower of Tier 2 conventional diesel pumping equipment that we announced in January 2021.

Finally, adjusted EBITDA was $24 million for the fourth quarter compared to $17 million for the third quarter, a sequential increase of 37% with incremental adjusted EBITDA margins at 31%, highlighting our operating leverage coming off the third quarter. Adjusted EBITDA margins improved almost 250 basis points, and these improvements resulted from continuous improvements in maintenance practices, reductions in nonproductive time on site, high pumping times per day by our fleet and supply chain and logistical efficiencies. Additionally, discipline in the deployment of our assets and a lean G&A profile also contributed to our improved earnings and cash flow.

As Phillip noted earlier, our team understands that we cannot deploy assets without generating adequate returns. This discipline is what enables us to remain cash flow positive during what remains a highly competitive environment. Other oilfield service companies have chosen the path of deploying assets without adequate returns, which is unsustainable in our view. While our top line may not increase as dramatically as the industry, we are willing to sacrifice short-term revenues for more durable profitability. Our customers understand that in order for us to deliver industry-leading performance which yields top-tier completions efficiencies for their operations, we must also deliver returns to our shareholders and be able to reinvest in equipment that delivers lower emissions completion solutions.

Regarding capital expenditures, we incurred $21 million in CapEx during the fourth quarter, mostly related to maintenance of equipment. Capital expenditures incurred during 2020 totaled $81 million, including $11 million spent on growth projects, primarily in the first half of the year. We achieved our previously stated guidance for full year 2020 capital spending of below $85 million. Actual cash used in investing activities for capital expenditures was $101 million and differs from our incurred CapEx due to timing differences of some of CapEx incurred in 2019 that was paid in 2020.

Cash proceeds from the sale of assets was $6 million and net cash used in investing activities during the year was $94 million. Our capital investment plan for 2021 will be heavily weighted toward conversion of our fleet to lower emissions equipment. Total CapEx for 2021 is expected to be between $115 million and $130 million with approximately $37 million allocated to Tier 4 DGB dual fuel equipment and the remainder largely related to maintenance CapEx and subject to fleet utilization levels.

As we stated in our January press release, we have purchased 20 new build Tier 4 DGB dual fuel pumping units for approximately $20 million, which we expect to receive during the first half of 2021 and have allocated an additional $17 million for conversions of existing Tier 2 pumping units to Tier 4 DGB units. These investments will add lower emissions equipment to our fleet and enhance our offerings to customers.

Moving to the strength of our balance sheet. At year-end, we had total cash of $69 million as compared to $54 million at the end of the prior quarter. At the end of the fourth quarter, we remained debt-free and had liquidity of $121 million, including cash on hand, plus $52 million of available capacity on our revolving credit facility.

Finally, I would note that our total liquidity as of January 31 remained strong at approximately $109 million, comprising of $62 million in cash and $47 million of available capacity on the revolving credit facility. Working capital increased slightly from $61 million to $64 million at year-end.

As Phillip mentioned in his opening comments, the strength of our balance sheet and capital discipline is critical to our success, and we are firmly committed to ensuring we maintain a solid financial position that provides maximum flexibility. Being debt-free and generating free cash flow is a key differentiator for ProPetro, especially in this environment. We look forward to further leveraging our operating scale and concentration in the marketplace as we continue to provide our customers unsurpassed quality and service in the Permian Basin, the most prolific producing region in onshore U.S. oil production. As we evaluate the strategic actions of our customers and other leading E&P operators, we are mindful of their most recent transactions in the Permian Basin, totaling over $60 billion since 2018, essentially in ProPetro's backyard. The market is coming our way and we are excited about the opportunities that those investments could present for us and are focused on continuing to be the leader in completions efficiencies and performance at the wellhead.

With that, I'll turn it back to Phillip.

All right. Thanks, David. We are pleased to see a steady recovery in activity throughout the second half of 2020, and barring work disruptions like we saw last week due to the weather or other external issues, we look forward to a continued improvement in oilfield activity as we move through 2021. Supporting our view is a much improved crude price environment and the consensus that crude demand should increase significantly once an increasing number of Americans have been vaccinated and began to commute more for work, travel and entertainment. This return to more of a normal backdrop will further support the price of crude oil which will provide E&P's visibility to increase their development activities. As we navigate our course until that time, we will remain focused on what we can control. Over the years, we have taken pride in running a lean organization, and will continue to do exactly that.

Based with the onset of the pandemic in the first half of the year, we escalated our efforts to ensure that we not only survived but also positioned ourselves to thrive as activity levels improved over time. As recovery continues in 2021, ProPetro is uniquely positioned to out form competitors with multi operating models and complex logistics needs spread across the country. Our business model works especially well during periods of increasing activity levels, which we expect for the balance of this year and into 2022. Consistent with the past, we will maintain close communication with our customers as they plan for their development programs. This allows us to better anticipate their needs and improve our technical offerings in advance, which helps minimize later potential problems at the well side. Of course, once on site, we will continue to provide unsurpassed industry-leading execution including driving increased efficiencies that improve both ours and our customers' bottom lines.

As we have discussed in the past, pressure pumping services and the equipment used to execute those services must continue to evolve if we want the industry to remain globally competitive. Because of the recent uptick in crude prices, we expect increased demand for further improvements in process efficiencies and we will continue to work closely with our customers to develop cost-effective solutions in support of our mutual long-term success. For example, this year, we have been running simul frac operations for 2 different customers, which are very pleased with their operational success. As we showed last year and are showing again this year, we are a valuable resource for our customers to lower their completion cost. And additionally, we intend to work with our customers to bring next-generation technology to the market.

Regardless of the price environment, our customers expect further minimization of the environmental impact of wellsite operations through reduced emissions and other considerations. As evidence of our commitment, we have made a significant investment in DuraStim electric fleet technology and dual gas burning equipment, aiding us in an effort to employ cleaner burning fuel sources.

During the fourth quarter and in January, we continued to test and develop the DuraStim technology alongside our partner, AFGlobal, and plan to be back in the field with a larger deployment in the coming months. I would note that our blue-chip customers base remains extremely interested and excited about the prospects of DuraStim, and we are currently targeting to be in the market with a full electric DuraStim fleet offering in 2021. We also believe our strategy of being very disciplined about deploying additional assets at pricing levels that support positive free cash flow is the single most important operational discipline needed for a return of healthy earnings for industry participants. The combination of pricing discipline, and E&P consolidation will be a net positive for ProPetro, given our Permian centric focus and clear reputation for providing unsurpassed execution at the well site.

With that, I'd like to turn it over to the operator for questions.

(Operator Instructions) The first question comes from Scott Gruber with Citigroup.

Yes. So unfortunately, you had to experience the storm last week, glad to hear you guys are back up and running. But just thoughts around the cadence of recovery here given where crude prices spend, you kind of early thoughts on where your fleet count could go in the second quarter and then early thoughts on where it could go in the second half?

Yes. Scott, this is Sam. I can't say that our outlook is terribly different maybe than it was at the end of last year, beginning of this year. Given the customer portfolio that we've been working with consistently over the last few years, there's quite a bit of planning in advance. That our close relationships there allow us to participate in a lot of that forward planning. You're right, the crude backdrop has improved, and we're hoping that, that trickles down through other parts of our business and our industry. But I can't say that it has significantly changed the decision-making process yet amongst our customer group. Like David mentioned, we are working 11 fleets today, and we gave guidance for the first quarter that we think takes into account the effects of the storm last week. That said, we think activity does have a chance to go marginally higher from here. But we're still hesitant on there being any significant activity adds beyond where we are today, unless this commodity backdrop persists for some time more.

Got you. And then maybe just a little bit of color on how to think about revenues and EBITDA in 1Q, your fleet guidance incorporates the storm impact, but how should we think about the revenue generation per fleet and then also the EBITDA generation or incrementals with extra cost associated with the storm, they're going to weigh on incrementals? How do we think about both the the revenue line and the EBITDA per fleet here in 1Q?

Scott, this is David. I think that while we came out from year-end with a pretty positive month in January, actually exceeding our plan. February is definitely going to be impacted by some costs that are not absorbed by revenue activity dropping off for some period of days. So I think that, that's definitely something that will impact us in February, March. We're hopeful that we don't see the same types of weather events and can potentially pick back up some of that lost work. But certainly, we're going to have a period of days in February that are going to have some unabsorbed costs. We're working with supply chain partners and vendors to mitigate that as best we can, but definitely something that could impact the quarter.

Is it just too early to tell if EBITDA per fleet expands or potentially compresses at this point in 1Q?

I think it's a little early to tell because we've got a full month to go. And when customers get working and supply chains work together, things can happen pretty quickly. But we definitely got some ground to make up given last week.

And then just 1 last one. We've been hearing about some supply chain constraints even before the storm. Just some color on sand availability and other supply chain issues and how severe are they have upper bases? Some color there would be great too.

Yes. Scott, this is Adam. As of right now, of course, the winter impact did impact some of the supply chain and their abilities to get products to location. But as of today, I mean, we worked -- as mentioned earlier in the call, we're up and running again. There are customers that are self-sourcing a lot of those products are up and running again. So we don't see any major impact going forward from a supply chain perspective.

If you'd asked that question last year, we were sourcing a lot of the sand, our answer would have been quite a bit different. But that mix has changed dramatically and that seems to be the bottleneck right now and people getting back up and running is staying.

Yes. Scott, this is Sam again. The only thing I'll add to that is, from my perspective, sand is very much a just-in-time product. So the health of the mines and their ability to mine, clean and produce sand regionally is very important. Most of the mines that we're working with or our customers are working with today have recovered nicely. With all the other products that we source, I think our team has done a great job planning ahead. And keeping enough stock on hand of other consumables like chemicals and parts and supplies that are going to allow us to continue to plan. The long-term effects of the storm from a supply chain disruption or yet to be seen. But here near term, I think our team has done a great job planning ahead to get us back to work.

The next question comes from Sean Meakim with JPMorgan.

I was thinking about margin progression, a lot of moving parts. Presumably, you'll have some operating leverage on better volumes through the year. Pricing on a per lateral foot basis may not be changing. But then could you elaborate on how you see your fleet mix shifting towards DGB as year through '21, there's the impact of Simul-Frac fleets and then there's, of course, the DuraStim fleet in the back half of the year. So you're putting all that together, how should we think about fleet mix and your ability to make progress on revenue and EBITDA per fleet if we assume the underlying base rate is flat?

Well, I think that, as we've mentioned, we are beginning to see the conditions that are conducive to price increases. The crude environment is definitely materially better than it was even at year-end, and we're beginning to see impacts of the vaccine on global markets. So as that continues to sustain itself, we do believe that we'll be in a situation where fleet counts will need to rise and pricing opportunities will play out. And we've had some of those comments even from customers at this point that there's some willingness there.

In terms of the mix of equipment, we've still got some work to do in terms of confirming delivery dates for those and how those will ultimately impact our margins. We believe that there's opportunities to improve efficiencies and reduce costs at the well site in some cases, but we've got a lot more work to do to really validate that going forward. So I think right now, we're focusing on just the overall activity levels continuing to improve, seeing the operating leverage play out as we did see from quarter-to-quarter from Q4 to -- or Q3 to Q4 and that playing out into the year as we see fleet counts improve.

Okay. Fair enough. And then maybe a little more just how the market could be tightening in the near term. So you noticed -- you noted your willingness to stay disciplined on the type of work you're going to bid for, focusing on higher calorie opportunities. So could we just maybe get a little more context of what you're seeing in terms of tendering in the market? So recognizing the way in which you operate, there's an emphasis on the long-term relationships, of course, but thinking about visibility on how many fleets are bidding for jobs today versus maybe beginning of the year, a quarter ago, just some context to help us understand to what extent you're seeing tightening in the market in the first part of '21?

Yes, Sean, this is Adam. As far as the bidding question that you have, I think we're still seeing a lot of the same players bidding on work coming up in the Permian. I think what we have seen is some of those numbers coming up and getting closer to kind of where we feel it needs to kind of be as far as a competitive range. You still have your outliers there at offering lower pricing. But I think we have seen some improvement there where companies are starting to move price up a little bit, just to improve their bottom line that they haven't been seeing in the past. But as far as pricing in the future, I'd say timing is still the question. But I would say we're a lot closer than we have been in the past. We're at least having conversations with a couple of our customers as far as pricing improvement going on throughout the year as commodity prices stabilize, and if they continue to increase at the levels we've seen.

Yes. I think if -- as I've looked over the reports, if you look at all the top line growth from pressure pumpers and how that's trickling down, not much of that is making it to the bottom line. So I think the way we're pricing is we're seeing -- you'll probably hear people say pricing is going up, but they're probably just trying to get probably to about the point where we're at. So I wouldn't expect us to move at the same pace that you may hear others. But then again, I would tend to focus on the free cash flow generation and the EBITDA margins on the revenue that they're projecting. So we've lost some jobs and it wasn't by just a little bit. So there's still people out there willing to take it low if they need to get the work. We're not chasing activity. We're really chasing margin and free cash flow.

Yes. I think that's 1 of the positive things that we have seen is that if we are missing work, we're missing it at a lower differential to the competition. So they're finally beginning to walk up to levels where we've been holding and hopefully, that will continue, and we'll start picking up profitable work.

Yes. I think that's really great context. So progress made, but so do you see more fleets put to work in the Permian.

The next question is from Ian MacPherson with Simmons.

I'm glad to hear everyone's doing okay after last week, which was no fun for anyone. So it sounds like I'm guessing, if not for last week, you probably would have been inclined to nudge your Q1 activity guidance flat to up as opposed to down a tick from what you said last quarter. And you're back at 11 fleets today, do you have visibility to exit March above 11?

This is Sam. I hesitant to say that. We have -- we do have visibility to add another fleet. The short answer is yes. The more detailed timing on that is -- makes me hesitant to confirm that exactly. But yes, we do have visibility to additional work in the near term.

Okay. So just kind of circling back on this topic of your efficiency gains that are showing up in your -- especially in your Q4 comps on revenue and EBITDA per fleet. It sounds like that was mostly, if not entirely, efficiency and not pricing. And I think that we understand that your idle payments were down slightly Q-on-Q as well. So my question is how much more room is there to run apart from Simul-Frac mix and that sort of thing, but just in terms of your ability to optimize your operations on a comparable basis. Are you -- do you feel like there is an undetermined peak here that you're still racing towards? Or do you think that you've sort of close to a plateau at this point in terms of the efficiency of a top-tier pumper like ProPetro?

Ian, this is Sam. Again. I mean, I smile when you asked that question because I think there's only 24 hours in a day. We're not going to get the 25th and 26th hour. So the short answer is there's probably a threshold, but the longer answer is, every time we don't think we can grind efficiencies higher, we do. And you're exactly right, fourth quarter is an example of many of those operational metrics on a per crew basis grinding higher, therefore, enabling us to add incremental margin, like David mentioned in his prepared remarks.

So yes, the rate of change will be slower. But when you do think about the prospects of something like Simul-Frac, of which we are now a healthy participant in as of the last couple of months, there could be another leg. Now early days to see what the what the profitability impact is for us individually, but we like what we see operationally with Simul-Frac, and if there is more of that type of work to come, then that could be the next efficiency enabler for not only us, but our sector as well. So more to come there, hopefully, in coming quarters.

And just to add to that, Ian, this is David. We also benefit greatly through our efficiencies. If we have higher efficiencies on the job side, the customer benefits greatly, as do we. And we should note that not all customers have the same level of efficiency. So 1 of the things that we're working on is working with our customers to bring them up to speed and improve their efficiencies, if they're not in the higher levels that we think are able to be achieved. So we think that there's a potential to improve that as we go forward. We think that's a value-add that we provide for customers that work with ProPetro, and we're going to make that a big focus for 2021. So not only Simul-Frac that Sam mentioned, but also just improving efficiencies within our mix of customers.

The next question comes from Chris Voie with Wells Fargo.

Just curious, as I think about CapEx guidance and CapEx versus investments in Tier 4 DGB. How do we handicap the odds of additional investment later in the year? Are you committed to not investing more? Or is there a chance that customer pull drives incremental investment in that?

Well, this is David, Chris. Regarding CapEx and cash flows, we have performance metrics that we have set in place related to capital discipline. This is a theme that we want to make sure that investors understand that it's very important. We communicate this internally with the team. And so as it sets today, under the current expectations for this year, we're going to stick to our investment plan. As the year unfolds, could there be a potential to increase that, increase the level of conversions? Potentially, but we're going to be very, very careful about what we do on the capital spending side, and we're going to be very disciplined in terms of how we deploy capital.

And Chris, this is Sam. I'll just add on to that. Maybe to zoom out a little bit and talk about investment at a sector level for the pressure pumping space. We at ProPetro, are avid believers that equipment needs to evolve. We need more efficient equipment. We need equipment that has a lower cost profile, and we need that equipment to have a smaller environmental footprint. So if as a sector, we need our equipment offering to evolve, then our sector needs to find a way to make more investments. We've announced recently that we're making some dual gas investments. We've obviously made some electric investments via DuraStim. And it's just so vital for companies like us and our peers to make a return so we can push the evolution of this equipment. So we are happy to be on the forefront right now of taking those steps and are hopeful that our entire sector can get in a place where we can push this evolution forward as a group. So we can all better serve our customers and our communities.

Yes. And just getting back to capital discipline. If we see pricing move up, if we see margins improve and cash flow improve, then certainly, those are conditions that we would consider that.

Okay. And then for my second question, just thinking about efficiency a little bit. Could you characterize as you mentioned record efficiency in the fourth quarter. How did the calendar look compared to stages per day? I think we've seen a huge increase in the amount of work most fleets in the industry can do in a day. But for at least a lot of companies, the calendars haven't been that tight if you compare them to 2019 levels. Was your fourth quarter and maybe the first quarter, excluding the rough weather in February, are they tracking pretty well on a calendar basis compared to 2019? Or is there still some gaping is there?

Yes. I mean the short answer there is, yes, there's -- we work with our customers to only deploy equipment and crews to the high calorie calendar dense opportunities. We're really not interested in gaps. Because as we've said time and time again, in prior quarters and today, we have to earn a return when we deploy this equipment and a huge, huge part of that is keeping a full calendar.

The next question is from Stephen Gengaro with Stifel.

2 things, if you don't mind. One, on the Simul-Frac site, can you just talk about a little more as far as what constitutes a fleet? Because it's my understanding, it need, kind of 1.5-ish times the horsepower. And how do you think about the allocation of horsepower in when you're doing these Simul-Fracs?

Yes, Stephen, this is Adam. Yes, your 1.5x is probably an accurate number. Although different customers have different approaches to the Simul-Frac, not all are considered equal, depending on whether it's a 2-well pad or a 4 or 6-well pad. So the amount of equipment can change there as well as the target rate that each customer wants to achieve down each well. If they -- whether they back that rate down or want to continue with the same type of rate that they are accustomed to on a traditional zipper design or horizontal design.

Okay. And then the second question, as you talk more about the move to some of the Tier 4 equipment and the lower emission assets, what are you seeing in the market? Are you seeing a utilization change, kind of pull for those assets only? Or do you -- are you seeing any price benefit yet? And how do you think that evolves as 2021 sort of plays out. And as far as the pricing dynamic behind kind of low-emission assets versus traditional assets?

The demand is definitely there. But paying you on it doesn't make it happen really. And all of our customers want it. I can put them in 2 buckets. So there are people focused on emissions and their people also focus on emissions, but there are focus is burning their natural gas supply. So it's most a cost issue and a mission issue. So everybody wants the latest low emissions technology. I believe it is all currently deployed. So we don't see any pricing differential between the Tier 4 DGB and our Tier 2 differentiation. But that could change as customers ramp up their demands because there's only so much that equipment. And right now, I just don't see a lot of companies able to make that kind of investment unless they get some type of pricing support or contractual commitment to bring it to market.

I understand. So when you're putting dollars to work on upgrading these assets, you're expecting to get a better price to justify the investment from a return perspective? Is that fair?

Well, I wouldn't say that's necessarily accurate. It would be lovely if we could. And I think eventually, we will. But I think right now, our expectation is we will convert that equipment and deploy that equipment and end up in the same pricing regime we're in right now. If we find that customers are willing to pay more, obviously, we'll shift equipment around and go to the highest margin opportunity with it.

(Operator Instructions) The next question is from Waqar Syed with ATB Capital markets.

My first question is, how many cementing crews do you have currently deployed or active?

We currently have 19 that are active -- they're following 19 rigs.

Yes, Waqar, it's a little bit of a fluid number given the type of rigs we're chasing. But we're right around the 19 rig number today. I think at the peak, we were peak activity. 2019, we were following almost 40 rigs, yes.

Okay. And is the revenue quarter-on-quarter in cementing, tracking, the rig count changes in the Permian?

I'd say, generally, it is. And we've seen our share actually pick up a little bit as compared to the total Permian movement in rigs.

Okay. Great. And then what's the maintenance CapEx per fleet that you're thinking of for 2021?

Yes. Waqar, this is David. We have guided in the past $6 million to $8 million per fleet of maintenance CapEx. We think that, that number is probably going to be closer to the upper end of that range as we're converting a good amount of equipment this year. I think once that plays out for those fleets, that number probably ends up being on the lower end of that guidance. But we're currently in a cycle with our fleet overall, where it will be toward the higher end.

And also to add on to that, you have -- we'll have some nominal dollars via fleet reactivations as we get into some of the equipment that has been parked that might need a little bit of an intention via some more investment. So that's what we keep us toward the high end that range as well. I also have to make the comment that, although we're laser-focused on minimizing our maintenance CapEx impacts and definitely would like to minimize our maintenance CapEx spend, we continue to work more and more hours per day and have more throughput through our operation. And much of these large components that fall into our maintenance CapEx categories are very time driven. So the more -- the longer they work and the more hours per day they work, the more oftenly, they need to be replaced. So maintenance CapEx in some form of fashion is a product of your own efficiencies as well.

Fair enough. And so what is the -- what are you planning for fluid and costs embedded in that maintenance CapEx number for the year?

50%.

Yes, it's about 50% of the maintenance CapEx.

Okay. And then just finally, what was the idle revenue from Pioneer contracts in the fourth quarter?

It was $6.2 million in the fourth quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Phillip Gobe, Chief Executive Officer, for any closing remarks.

All right. Thanks, everybody, for joining us today. I just want to leave you with the ProPetro story, which I think is a very simple one. We have the best people in the business, working for a very high-quality customer base in the best basin in the United States and arguably the world with a focus on capital discipline and reputation for safe operations delivery. In addition, we have an enviable balance sheet with no debt and ample liquidity to respond to the needs of our customers now and in the future. We look forward to sharing more of our story as the year progresses, and we'll speak with you on the next earning call. We hope everyone has a great day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.