ProPetro Holding Corp.

Good day and welcome to the ProPetro Holdings Corp fourth quarter and full year 2025 conference call. Please note that this event is being recorded. I would now like to turn the call over to Matt Augustine, ProPetro's Vice President of Finance and Investor Relations. Please go ahead.

Thank you and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer Sam Sledge, Chief Financial Officer Caleb Weatherall, President and Chief Operating Officer Adam Munoz, and President of Pro Power, Travis Emery. This morning, we released our earnings results for the fourth quarter of 2025. 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 format. 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 will hold a question and answer session. With that, I would like to turn the call over to Sam.

Thanks, Matt. Good morning, everyone, and thanks for joining us today. 2025 was a year that was defined by uncertainty across the broader energy markets. There was a significant slowdown in completions activity, as illustrated by our estimates that the Permian is operating with approximately 70 full-ton frac fleets, down meaningfully from 90 to 100 fleets just a year ago. This headwind was compounded by tariff impacts and OPEC Plus production increases that added pressure to commodity prices throughout the year, affecting budgets, and creating a more cautious operator mindset. Despite these dynamics, ProPetra continued to deliver both operationally and financially and generated strong free cash flow, particularly in the fourth quarter. Our legacy completions business continues to generate sustainable free cash flow, even in this tough market environment, which gives us confidence as this business helps fuel investments we are making in ProPower, our future growth engine. Our solid fourth quarter performance underscores the industrialized nature of our completions business and the benefits of the technology and next generation equipment investments we have made over the last several years. While we expect market challenges to persist into 2026, we continue to control what we can and move quickly by streamlining costs across the business, performing a granular analysis and taking decisive action. I'm proud of our team's ability to adapt quickly rationalize costs, and protect our asset base, thereby supporting our margins and competitiveness in the market. This will remain a key focus in 2026. Profetro is a fundamentally strong company. We have low-debt, first-class customers operating in the Permian Basin, a refreshed next-generation fleet, and a team that continues to execute at a very high level. Even if challenging market conditions persist, Our company's unique attributes position us to continue performing. As we've said before, market cycles create opportunities. And with that, we expect attrition among smaller and less disciplined competitors that cannot sustain prolonged market weakness. We believe this dynamic will provide structural benefits for well-capitalized next-generation operators like ProPetro. I also want to discuss the strategic actions we're taking to support resilient financials. As a reminder, we currently have the majority of our active frack paper under contract, providing us with ongoing stability in our operations. Over time, we plan to continue to allocate capital to our force electric equipment, given its strong demand and commercial leverage. However, prior to committing to additional force equipment orders, we require greater visibility into customer demand and growth, especially in the challenging market environment, to ensure these investments are both strategically justified and aligned with expected return. Additionally, in 2026, as a part of our Completions CapEx program, which Caleb will discuss in greater detail, we plan to allocate targeted capital to refurbish a portion of our existing 2.4 DGB fleet, make investments in fleet automation technology, as well as measured investments in direct drive gas FRAC units. These direct drive gas units are highly complementary to our current FRAC asset base, and their integration is anticipated to partially offset future capital requirements for investment and refurbishment in our conventional FRAC. These new investments, specifically in fleet automation technology and direct drive We'll reinforce our position as a premier completions provider in the Permubasin and support our broader goal of further industrializing our business. Importantly, given the current challenging market dynamics, we remain disciplined in our capital deployment, investing only when there's clear visibility to high returns and strong customer endorsement, principles that are embedded in our way of doing business. Additionally, 2025 was an exciting year for ProPower, where we made significant progress as we capitalized on robust customer demand to not only launch the business, but to bring our total committed capacity to now approximately 240 megawatts and to also deploy our first assets into the field. This total includes recent contract wins supporting production operations for Permian EMP customers, secured since our last update in December. Additionally, as announced in December, we placed orders for an additional 190 megawatts of equipment, increasing total delivered or on-order capacity to approximately 550 megawatts. With this order, Pro Power's equipment portfolio is split approximately 70% and 30% between high-efficiency natural gas reciprocating and generators and low-emission modular turbines, respectively. ProPower anticipates all units will be delivered by year-end 2027, with contracts expected to be secured ahead of delivery. ProPower's expected total cost per megawatt for the 550 megawatts ordered today averages approximately $1.1 million, including battle for plant. We are confident in the business's future growth capabilities and expect to secure additional contracts throughout 2026 due to our flexible asset base, ability to rapidly respond to evolving customer demand, and quality execution. Furthermore, we would like to reaffirm our five-year growth outlook for ProPower as communicated last quarter. We are positioned to deliver at least 750 megawatts by year-end 2028 and one gigawatt or more by year-end 2030. Our standing in the supply chain not only enables us to meet these milestones, but also provides us the ability to scale beyond these targets its right opportunities present themselves. Moreover, we are seeing a growing number of inquiries from potential data center and industrial clients. Over time, we anticipate these opportunities occupy a higher share of our overall capacity, driven by both their larger load needs and longer-term strategic commitment. These evolving market dynamics, coupled with our strategic partnerships and operational excellence, uniquely position us to capitalize on large-scale, long-term demand, and drives sustained value for our clients and stakeholders. These growth targets reflect the significant opportunity we see in the market for reliable, low-emission power generation solutions. ProPower's momentum is tangible, and we're excited to continue our effort to expand our reach and drive long-term growth. In terms of capital to fund our ProPower strategy, our approach remains deliberate and balanced. Resilient free cash flow generated from our completions business continues to serve as the company's preferred capital source. This strong foundation will be further enhanced by contributions from our power business, especially as we exit 2026 and have deployed on multiple projects. Moreover, our recent equity offering provided approximately $163 million in cash net of fees, strengthening the company's ballot sheet and reducing ProPetro's near-term reliance on debt. In addition to the equity offering, our strong balance sheet is bolstered by our refreshed capital structure, which includes our recently expanded $157 million financing facility at favorable cost of capital and on flexible terms with Caterpillar Financial Services Corporation, along with a $350 million leasing financing facility secured in December with Stonebriar Commercial Finance that we will utilize on an as needed basis. These sources of capital are key to ensuring we have the financial flexibility to take advantage of the exciting opportunities ahead of Pro Power and across our entire business. Caleb will discuss our financial results in more detail, but as we previewed in our December update, we expected a very strong finish to 2025, and that is exactly what we delivered in the fall. Revenue remained resilient, holiday impacts were less pronounced than in prior years, and the decisive cost structure actions we took during the third and fourth quarter helped support margin performance. Pricing remains stable through the quarter, and we continue to stay disciplined on that front. As we've said before, we will not run fleets at sub-economic level, as preserving fleet quality remains essential to ensuring readiness for rapid deployment when market conditions do in fact improve. Importantly, But Petro's hallmarks of operational excellence and efficiency continue to prevail as evidenced by our ongoing cost control acts. As we look ahead, the near-term outlook remains uncertain and headwinds appear likely to persist into 2026. That said, we like what we are seeing currently in our active fleet, and we expect approximately 11 active frack fleets in the first quarter. although winter weather in late January did have a significant impact on our activity, which we expect will meaningfully affect first quarter profitability. Furthermore, as I mentioned, we are reaffirming our five-year growth power and we expect the first half of 2026 to focus on e-risking deployment and establishing a strong operational foundation, positioning our company for sustainable long-term growth. By the second half of 2026, we expect ProPower to begin contributing meaningful earnings. Before I turn the call over to Caleb, I want to reiterate the fundamental strength of ProPetro. Our differentiators are clear. We have a strong balance sheet, first-class customers, a refreshed next-generation asset base, strong free cash flow generation in our completions business, and ProPower as a key growth agent that will drive our earnings profile. Most importantly, we have a first-class team that continues to execute at a very high level, ensuring that we continue operating safely, efficiently, and productively, while enhancing our ability to capitalize on the opportunities ahead. With that, I'll turn it over to Caleb.

Thanks, Sam, and good morning, everyone. As Sam mentioned, Perpetua's performance in the fourth quarter and throughout 2025 showcased the results of our strategy at work. Through disciplined cost control efforts and continued industrialization of our operations, We delivered resilient margins, strong free cash flow from our completion business, despite a challenging market environment. We also advanced ProPower meaningfully through new contracts, strategic equipment orders, and flexible financing arrangements, positioning it as a growing contributor to future earnings. During the fourth quarter, ProPetro generated total revenue of $290 million, a decrease of 1% as compared to the third quarter. Net income totaled $1 million, or one cent income per diluted share, compared to net loss of $2 million, or two cent loss per diluted share, for the third quarter of 2025. Adjusted EBITDA totaled $51 million, was 18% of revenue, and increased 45% compared to the third quarter. This includes the lease expense related to our electric fleet of $17 million. Net cash provided by operating activities and net cash used in investing activities as shown on the statement of cash flows were $81 million and $39 million, respectively. Free cash flow for a completions business was $98 million, supported by strong EBITDA performance and reduced completion capex. Additionally, free cash flow was further bolstered by working capital tailwinds, which contributed an additional $28 million in cash. Moreover, we also generated $14 million from select asset sales and received $11 million from the note receivable related to the sale of our Bernal, Utah cementing operation, completed in the fourth quarter of 2024. As Sam mentioned, our legacy completions business continues to generate sustainable free cash flow, demonstrating what we have consistently communicated over the past several years. Even in today's challenging market environment, our performance has remained steady and reliable. During the fourth quarter, capital expenditures paid were $64 million, and capital expenditures incurred were $71 million, including approximately $12 million primarily supporting maintenance and the company's completion of business, and approximately $59 million supporting its ProPower orders. During the quarter, some of the ProPower spending was accelerated. as our supply chain partners have consistently delivered equipment efficiently and on time or ahead of schedule. Notably, the difference between incurred and paid capital expenditure is primarily comprised of pro-power related capital expenditures that have been financed and paid directly by the financing partner and unpaid capital expenditures included in accounts payable and accrued liabilities. We will continue to evaluate the market and scale CapEx as activity demand. We currently anticipate full-year 2026 capital expenditures to be between $390 million and $435 million. Of this amount, the completions business is expected to account for $140 million to $160 million. including $40 million to $50 million related to lease buyouts for a portion of the company's force electric fleet portfolio. As a reminder, our five force electric fleet leases were secured with an initial three-year term and include options to either buyout or extend the leases at the end of that period. The intent behind these leases was to defer upfront capital expenditures while securing the equipment at an attractive cost of capital supported by the contracted earnings from the forced electric relief. This strategy proved successful, enabling us to rapidly transform our fleet and still generate accretive cash flow. The upcoming lease buyouts reflect the completion of a deliberate and strategic capital allocation decision. By exercising these options, we will take full ownership of the force fleets. Each buyout will immediately reduce our lease expense, currently reflected in operating expenses, and strengthen our commercial flexibility. We expect to buyout all five fleets, with buyouts anticipated to begin in late 2026 and through 2028. As Sam mentioned, the completions business guidance range also includes capital reserve for refurbishing a portion of the existing Tier 4 BGP fleet, investments in fleet automation technology, as well as measured investments in direct-drive gas fracking. Additionally, the company expects to incur approximately $250 million to $275 million in 2026 for its pro-power business. This range allows for additional equipment orders and associated down payments. The outlook is based on the current 550 megawatts of ProPower equipment on order, as well as plans to reach at least 750 megawatts delivered by year-end 2028. While these ProPower capital expenditure estimates reflect the total cost of the equipment, they do not account for the impact of financing arrangements, which are expected to reduce near-term actual cash outflows. or cash capex required from the company. Cash and liquidity continue to remain healthy. As of December 31st, 2025, total cash was $91 million and borrowings under the ABL credit facility were $45 million. Total liquidity at the end of the fourth quarter of 2025 was $205 million, including cash and $114 million of available capacity under the ABL credit facility. Notably, as of January 31, 2026, total cash was $236 million and borrowings under the AVL credit facility were $45 million. Total liquidity as of January 31, 2026 was $325 million, including cash, and $89 million of available capacity under the AVL facility. This increase from year-end is primarily due to the approximately $163 million in net proceeds the company received through the equity offering we completed in January. Lastly, and as I mentioned last quarter, we'll continue to take a disciplined approach to deploying capital. This commitment ensures ProPetro remains well-positioned to fund the strategic growth of our pro-power business while maintaining a strong financial foundation. Resilient free cash flow generated by our completion business, complemented by future contribution from our power segment, Thurs is the preferred source of capital for these initiatives. In addition to internally generated free cash flow, we maintain access to flexible financing facilities with favorable terms, which we would utilize diligently and only as needed to preserve financial flexibility and low near-term leverage. Most recently, our equity offering has further strengthened the balance sheet, increasing liquidity and ultimately reducing our reliance on debt to advance ProPower. With these resources and actions in place, we are equipped to seize the exciting opportunities ahead for ProPower and across our entire business, while continuing to drive long-term value for our stakeholders.

Sam, back over to you. Thanks, Caleb.

As we wrap up today's call, I want to address the significant interest we've received from various stakeholders regarding what differentiates ProPower in the power market, how the business has positively progressed since its launch in late 2024, and how we foresee its evolution in the future. Some of this will be restating what you've already heard from the earlier call. Since launching the business, ProPower has demonstrated a unique execution strategy A key differentiator in our strategy is our belief that there is meaningful value in acting now, deploying assets into the market, capturing market share, and then extending and expanding with both existing partners and those in our pipeline. Rather than waiting for the perfect contract, our speed to market advantage and confidence in operational execution enable us to build momentum and secure meaningful contracts over the past year. Market dynamics have also evolved and continue to evolve in our favor. Demand for power has accelerated in the Permian, across the U.S., and global. Since ProPower's launch, there's been a further awakening to the scarcity of reliable power, and the data center and AI boom only amplify the issue. This has led to increasing demand for ProPower within this arena. Our first data center contract announced last October was a pivotal moment. They signal our ability to participate in this arena and outside the Permian Basin. where we expect to grow in both deployed megawatt and contract duration over time. In the oilfield sector, we recognized early the emerging bottlenecks around power availability. Our foundation in the Permian positions us uniquely to solve these challenges for E&P customers, many of whom already know and trust ProPetro based on the proven performance of our legacy business line. We believe that no competitor matches our support infrastructure, logistics capabilities, supply chain expertise, and operational experience with heavy machinery and large-scale field assets. Accordingly, demand remains strong for ProPower in the oil and gas sector. This part of our commercial pipeline has also gained significant momentum as customers increasingly realize the cost savings of replacing inefficient power setup with efficient in-field distributed microgrid that ProPower can offer. Moreover, as production matures and well inventory complexity increases, more power is going to be needed to maintain and especially increase production from today's level, placing additional stress on the already overburdened and in some places nonexistent Permian power grid. Given these dynamics, we anticipate continued growth in oil and gas power delivery, which will remain a core opportunity alongside data center and other industrial infrastructure projects. This diversification strengthens our position and underpins our confidence in our growth expectation. Looking ahead, we will continue to strategically deploy assets where we generate the highest return, a direct function of maximizing free cash flow while balancing the length of contract term. As I already mentioned, our pipeline today suggests increasing opportunities in larger more substantial projects across the data center and industrial sectors, while maintaining a meaningful presence in oil and gas. We are excited for what lies ahead, and we continue to grow, innovate, and lead in the evolving power market. Lastly, it's clear that we've built ProPetro into a resilient company capable of generating cash through cycles while investing in higher return growth. We proved in 2025 that we can respond proactively and decisively to the market. And in 2026, we'll be a year focused on executing across ProPower and continuing to strengthen our core completion business. I'm grateful for our team and how they navigated 2025 with urgency, discipline, and ownership. Their work positions us exceptionally well for the opportunities ahead. We remain confident in our strategy and in the future of ProPetro.

With that, operator, We'll now open the line for questions.

Thank you. If you have a question, please press star 1 on your telephone keypad. If you wish to remove yourself from the queue, simply press star 1 again.

One moment, please, for your first question. Your first question comes from the line of Derek Podhazer of Piper Sandler.

Your line is open.

Hey, good morning, guys. Maybe we'll start with expanding on some of your last comments there, Sam, on Pro Power. Just trying to think about the contracting cadence for 2026. You mentioned you have six, sorry, 240 megawatts committed today. I believe your average term is around five years. I know you're primarily addressing oil and gas, but obviously we have the 60 megawatt data center contract. How should we really think about this mix in term evolving as we work through 2026? And then do you believe we'll be close to additional data center contracts this year?

Yeah, great question. Good morning. I think for us it's definitely, and we've shown this, it's definitely a portfolio approach. I think as we're starting and launching the business from both a commercial and operational standpoint, we value being able to get equipment on the ground, generate returns, and prove out our execution effectively. You also heard in our remarks that we think of a larger share of our work over time as non-oil and gas. Those projects are many times larger and a little bit different from a time horizon standpoint in a very positive way. So we do think our mix will evolve in that direction a little bit more over time. And look, I think we're pretty proud to have contracted well over 200 megawatts in our first year. standing up the company. And if we stick to our five-year plan, which we think is very doable and executable, I think you can look for that level of contracted equipment from us on almost an annual basis moving forward to get to the one gigawatt number five years out. So we're really confident in our ability to continue to march down that path. That said, You know, to the upside of that, some of these non-oil and gas data center industrial type projects can be much bigger and chunkier in nature. So one of those can potentially change that timeline and that mix very significantly if we're able to capitalize on one of those opportunities soon.

Got it. That's helpful. Appreciate the comment. Switching over to the completion side of things. And I found that interesting. You mentioned 70 fleets today down from 90 to 100. And I know one of the big themes we work towards the end of the year is around frack attrition. You obviously have your version of frack attrition. Well, you'll be refurbing some of your tier four DGBs. You talked about investing in direct drive to help offset some of your legacy tier two diesel assets. My guess is that you'll be replacing those tier two diesel assets. And I think this is a theme that we're seeing across the market. So maybe just simplistically, Does the industry have enough frack equipment to get back to that 90 to 100 level if there's a call on demand? Maybe just some of your thoughts around the potential tightness we could see in this frack market if we do see some activity start coming back as we work towards the end of the year.

I think the short answer on can we get back to that 90 to 100 in the Permian, I think that would be a major stretch for the existing pressure pumping market. We have been banging the attrition drum loudly the last few years, and a lot of that is because of the information that we get through our own company and our own business and how difficult it is to keep a sizable fleet operating in these market conditions. That said, all along, when we've been talking about attrition, especially at the bottom end of the market, the smaller, less sophisticated players, the market has been shrinking as well. circumstances um in a way where that attrition necessarily shows through that's why we continue to remind um people that if and when activity kicks up it's not going to take very much to structurally tighten the market that said it's hard for us to see past what everyone else can see is the potential um you know crude oil supply glut and what weakness might remain there for kind of the near term um but we all know this business cycles that the supply and demand balance usually fixes itself if and when that happens um i i think we're going to have a frac operation that is very very well positioned to capitalize on a much tighter market we've got a great portfolio of technology starting to dribble in a little bit of direct drive gas equipment We have one of the premier electric track operations in the Permian Basin, and we have some very flexible diesel and dual fuel assets that are quite valuable in today's market as well. So we think that we're very, very well positioned to capitalize on that structural tightness when it does come, and we think it will.

Great. Thanks, Sam. I'll turn it back to you.

Your next question comes from the line of a run, J.R.M. of J.P. Morgan. Your line is open.

Yeah, good morning, Sam and team. I wanted to just talk to you or ask you about, pardon me, just about kind of the mix between finance CapEx versus cash CapEx. In 2025, gentlemen, you financed just under 30%. of your 281 million of capex incurred. And so is that, how should we think about that mix relative to the 2026 capex program, which is kind of just above 400 million at the midpoint?

Yeah.

So in terms of funding our CapEx program, we have a lot of different options. We obviously did the equity issuance opportunistically from a position of strength, and we're always going to prioritize our use of sources of capital to fund our growth from a cost, flexibility, and size standpoint. So first of all, we like to use cash on the balance sheet, including organically generated cash from our business to fund growth. But like you mentioned, we have several flexible and competitive debt facilities available. in our ABL and cap finance facility. And we're also happy to have the Stonebriar lease financing facility in place, which is committed capital that we can draw on as needed. So I think that we have like several different attractive options and we'll plan to use a mix of those.

Great. And just as my follow-up, you guys have, you know, seven a tier four DGB fleet, uh, if, if, if my notes are correctly, Sam, could you talk about some of the planned upgrades between automation and the investments in, in, in the direct drive? Um, just, just trying to understand how your DGB fleet will evolve, um, you know, over time.

Yeah. You know, we, we, we met our first DGB investments, um, probably a little over five years ago. Um, And built on that pretty aggressively for a couple of years and have held it relatively flat since peaking out around that seven fleet range. We obviously have, you know, we're bringing in some of the direct drive units like we already talked about. We also have our electric offering and our diesel offering. And as I said, that portfolio we find to be very valuable in the Permian Basin, where There is both stranded gas where we can capitalize on that type of situation with a customer, but also in other places where customers are selling their gas at a very reasonable price and might want to burn diesel or a blend of the two. So it's probably hard to see from an external standpoint, but there's a lot of regional pockets in the Permian in size and size. these different types of offerings. And I think what we have now is a very good portfolio for us to be able to service the biggest, most sophisticated EMPs in the Permian, but also the growing independents that still exist in an entrepreneurial area like West Texas and New Mexico. So I think in the near term, Arun, from like a portfolio mix standpoint, it's probably just more of the same for us. We talked about rebuilding some tier fours, maintaining kind of that seven fleet type of capacity for that, but also making a nod to some of the newer technologies like direct drive that certain customers are very interested in. And you mentioned the fleet automation technology. Look, that's just really in some ways, we believe the cost of doing business and the cost of playing the game at the highest level in the pressure pumping sector where you've got to be able to bring those types of high-tech solutions to your customers and allow them to fine-tune their completions programs as much as possible while at the same time deploying technology internally into our business that allows us to extend equipment life and use more predictive maintenance tools, lots of things like that. So that's where some of these technology upgrades are coming from us. And I think to sum all that up, these are the types of things you have to do to remain competitive at the highest level in the pressure pumping sector. There's a lot of players that aren't making these moves and these investments back to kind of the structural tightness that we believe will exist in the future. because the bar just continues to go higher every day from a performance technology standpoint. We like our position being able to compete in that game in the future.

Great. Thanks, gents. Your next question comes from the line of Stephen Gingaro of Stiefel.

Your line is open.

Good morning, everybody. I had two questions, Sam. The first one was just around the demand for power in the oil patch versus the assets getting pulled into other applications for data centers, et cetera. And is there any concern about the cost of power for the EFRACs and how that evolves and how that affects the FRAC business?

Yeah, I'll answer the EFRAC question first and maybe let Travis chime in. on your first question. I don't think we have any concern around EFRAC power right now. We kind of look at that market and it having matured a bit over the last year or so. That was a very aggressively growing market for a few years there when we were deploying into it and getting power to pair with our force electric track equipment was a bit of a task at the time. But we think a lot of that equipment that's serving the EFRAC market is in a pretty stable place, given that that market's not really growing that fast right now. And a lot of that power is more custom-tuned and built for that very application. So it has a little bit of a more difficult time going other places in the

in the in the power market travis i don't know if you want to take his first question yeah i guess the the first question was just on the oil and gas demand relative to the data center markets um clearly we see both growing the data center demand is is much higher we're excited to be able to diversify into both sectors um really excited that we were able to kind of act quickly and execute in the oil field um here in our backyard and just get confidence and grow our fleet but also the ability to do that has allowed us to participate in these larger and longer, chunkier deals in the data center market. So we're happy to be able to participate in both and have the equipment that I think serves both because of the high efficiency, low emissions that we've done.

Thank you. And the follow-up I had was just around, when you think about contract duration versus terms on some of the data center contracts that you're looking at, Should we think about the returns on the investment being potentially a little bit lower if you're able to secure long-term contracts? We've heard that from others, which when you have visibility of cash flows, it's a big positive, but the returns enter pricing could tend to be a little lower. Is that the right way to think about the blend?

Yeah, I think it's a balancing act. I mean, we're looking at a diverse group of contracts and duration and even site size. So we look at a number of different variables that we weigh into our return metrics. But, you know, there's a possibility as they go really long that, you know, we're willing to take something a little bit lower.

You know, Stephen, I'll just add a little bit more to that. And watching Travis and his team work through this commercial pipeline, you know, there's only so much time and energy and assets that we can deploy today. So I think everything that Travis said is highly accurate. It's definitely a balanced portfolio effort. That said, we prioritize real conversations with customers that are serious about, you know, making moves and cutting deals that are mutually beneficial to both of them and what we have to offer in ProPower. And I think what you've seen from us today in the contracts that we've made and the assets that we're going to deploy are two things. real projects that are going to generate real earnings and have real timelines. There's a lot of blue sky out there in this market that I think mostly materializes over time. But from a timing aspect, you know, in running a business like we run ours that's highly interested in real work and real earnings, we usually move to the front of the line the people that are most serious about actually getting a deal done and getting equipment into the field.

Great. No, thank you both for all the details.

Your next question comes from the line of Eddie Kim of Barclays. Your line is open.

Hi, good morning. Just wanted to ask about the cost of your power equipment and if it changes based on the end market. You mentioned you expect a larger share of your work over time will be towards non-oil and gas applications. To the extent more of your equipment goes toward data centers, Going forward, just curious if the mousetrap or configuration is different such that the $1.1 million per megawatt cost estimate increases at all as a result. Any thoughts there would be great.

Yeah, that's a good question. So the $1.1 million that we've talked about is for the modular equipment we've bought today. Definitely works at certain power nodes in both the oil and gas and data center market. you know, as we evaluate technologies that might be a little bit larger, um, and maybe more infrastructure esque, I think there's a possibility that that CapEx goes up a little bit on that equipment, but obviously requires a longer, uh, tender on the contract and maybe larger contract size to justify that investment.

Got it. Got it. Thank you. And then, um, Just sticking on the cost estimate, you mentioned you expect the cost of the 550 megawatts order to date to be that $1.1 million per megawatt, including the balance of plant. For the incremental 450 megawatts to get to your one gigawatt target by 2030, do you expect that incremental capacity to cost a bit more than your estimate? I mean, just curious, are the OEMs starting to raise pricing industry-wide? How has the pricing environment for PowerGen equipment changed, if at all, over the past six months or so?

Yeah, we're evaluating the mix on the additional 450. We have a lot of optionality there right now. I think the important thing is that the return metrics will be the same regardless of the capex. input so we're evaluating you know projects and and different industries a little bit different from an equipment perspective but looking at the same return profile across the board got it got it that makes sense great i'll turn it back thank you your next question comes from the line of jeff leblanc of tph your line is open uh good morning salmon team thank you for taking my question

In the press release, you referenced the opportunities to deploy incremental fleet is limited, but have you had success transitioning your existing customers from tier four, excuse me, the tier two to the tier four DGB assets? Because I think at some point you had some assets idle.

Yeah, there's been a little bit of that, but I think going back to kind of some things that I mentioned earlier, it's more of a It's more of a specific tool for a specific customer and region right now. You know, gas prices can vary greatly across the Permian Basin depending on where you are and what your pipeline deal is. So it's a little bit less of we need to grow a customer from diesel to dual fuel into electric. That was a game that we played very heavily and very successfully into the last several years. But I think there's a little bit more stability there. in the market right now. And I think at the given activity levels, crude prices, gas prices, I think most of the EMPs that we're dealing with, they know exactly what they want and they know exactly what fuel sources that they want to utilize wherever their specific acreage might be. So there's still a little bit of that going on, but I'd say that's a little bit less of a game that's being played today than it was maybe a couple of years ago.

Thank you for the color. I'll hand the call back to the operator.

Thank you.

Your next question comes from the line of John Daniel of Daniel Energy Partners. Your line is open.

Good morning. Thanks for having me. Just a couple quick housekeeping. Sam, can you say how many of the Tier 2 fleets are working today?

Two or three. Two or three. Okay.

And then on the... The direct drive, I got in a little bit late on the call. Did you specify like how many units you're adding and just a little bit more on the strategy there?

Yeah, we've had a couple units running for the last six months or so. They're part of kind of like a pilot program for us. We're going to add more than that here with kind of the CapEx that we've outlined and But not a lot, John. These aren't like fleets at a time. This is kind of like gradually adding them in with some of the attrition that we're seeing in our own fleet and taking them to very specific customers that have showed an interest in that equipment and committing to it over some period of time. So it's not, you know, this is not like a major reinvestment cycle for us. This is kind of an evolution, kind of a slow evolution that is, you know, listening to certain customers of ours. I guess it's a little bit more of a rifle approach. So, yeah.

Fair enough. And then last one, just since I'm a traditional energy guy, can you just give us some thoughts on wireline and cementing what you're seeing in both of those service lines today?

Yeah, wireline, Silver Tip team has done a fantastic job over the last year managing the market volatility. I think we've probably been a net market share winner in that business, along with really good margins, really good pricing discipline. There's been maybe a little bit of a flight to quality in the wireline business, and we've benefited from that. Uh, very, very stable right now. We've got a, we've got a good amount of overlap with our frack fleets, which also creates a good integration and stability, good, uh, you know, efficiency, um, cementing, uh, you know, we've seen the rig count throughout last year, continue to dribble lower. Um, and it's still in a pretty depressed area. That's, that's hit that business, um, a little bit, but we think the bones are there, uh, to you know have a have a really great business over time i think we're probably top three or four market share they're very competitive uh you know one of the one of the grass one of the best labs and bulk plants in the permian basin and a great footprint on the western side of the side of the basin in the delaware with the with the par 5 acquisition that we made a couple years ago so now business is down a little bit relatively to something like power line and wire line and fracked, but still in a really good, strong position.

Okay. Thank you for that. That's all I had to say. Thanks.

And again, if you have a question, it's star 1 on your telephone keypad. Your next question comes from the line of Scott Gruber of Citigroup. Your line is open.

Yes, good morning. I want to come back to the power side. Demand for onsite generation for data centers appears to be taking another step higher here. and CapEx numbers from the hyperscalers continue to grow. And you mentioned that it's unlikely that the data center market pulls EFRAC megawatts, you know, due to the design configuration differences. But, you know, is the pulling from the data center market starting to improve the terms and conditions and potentially the return profile that you're able to achieve on incremental investment, you know, in megawatts, you know, into the oil field microgrips?

Yeah, I think it helps the competition certainly, you know, raises all boats, I would say. So the limited amount of megawatts is being certainly recognized by the oil field players as well. And they see the demand constraint or the supply constraints, both from the utility and from a behind the meter perspective. So we see that all as positive for what we're looking at.

Okay, that was it. Thank you.

Thanks, Scott. With no further questions, that concludes our Q&A session. I'll now turn the call back over to Sam Sledge, Chief Executive Officer, for closing remarks.

Thanks, everybody, for joining us today. Thanks for your interest in ProPetro. We look forward to talking to you again soon.

That concludes today's conference call. You may now disconnect.