ProPetro Holding Corp. (PUMP) Q1 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us, and welcome to the ProPetro Holdings First Quarter 2026 Conference Call. [Operator Instructions] I will now hand the conference 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 Weatherl; President and Chief Operating Officer, Adam Munoz; President of PROPWR, Travis Simmering. This morning, we released our earnings results for the first quarter of 2026. 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 will hold a question-and-answer session. With that, I would like to turn the call over to Sam.

Thanks, Matt, and good morning, everyone. The results we generated in the first quarter of 2026 demonstrate the resilience of our business model. Despite weather-related disruptions that significantly impacted revenue and profitability during the quarter, we delivered positive financial results in our completions business, particularly when measured by adjusted EBITDA less incurred capital expenditures. These results highlight the strength of our industrialized model, which is the result of strategic investments, disciplined asset deployment and rigorous cost management. The strategic actions we implemented throughout 2025 to protect our assets and rightsize our cost structure are now delivering measurable benefits, positioning us for success in the current market environment. We'll continue to leverage the industrialized nature of our completions business to drive expansion of PROPWR, which we expect to fuel future earnings growth and further strengthen our value proposition. With respect to the broader environment, we're still in the early stages of assessing the global and domestic implications of the Iran war. While uncertainty remains, we're starting to see signs of recovery across the broader North American oilfield services sector given a strengthening commodity backdrop that is driving early pricing and activity tailwinds across our completions business. Importantly, structural tightening in the completions market continues to intensify, driven by ongoing attrition, particularly among smaller and less disciplined competitors. This trend was already emerging prior to the onset of the Iran war and has since accelerated with the recent increase in demand for U.S. frac activity. Notably, there was already very little spare frac equipment capacity even before the conflict began, further amplifying current market constraints. These dynamics, combined with ongoing capital investment discipline and pricing discipline have tempered any plans to expand capacity both within ProPetro and among our close peers in the completion space. Collectively, these factors have created a more constructive supply and demand environment for our business over time. We do recognize the impact that the Iran war has created for our business. However, the market remains volatile, and we expect this uncertainty to persist until there is more clarity on the disruptions in the Middle East and the subsequent impacts on global supply and demand dynamics. While external conditions are beyond our influence, we remain focused on what we can control, our commitment to operational excellence, exercising rigorous cost discipline and deploying capital strategically. Our stable and industrialized business model ensures our positioning not only to navigate this volatility, but also to maximize opportunities and emerge stronger as conditions stabilize. Turning briefly to our fleet. Due to the significant diesel to natural gas price discount currently at play in the Permian Basin, we've seen an uptick in demand for next-generation natural gas burning fleet. Currently, approximately 75% of our fleet is next generation, spanning our Tier 4 DGB dual-fuel and FORCE electric fleet. Recently, we've also added a small number of 100% natural gas burning direct drive units that operate at the highest performance standard and complement our existing fleet. These additions are measured and are not intended to expand our overall capacity in the environment, but rather to further enhance our portfolio. We anticipate adding a few more units later this year to capture targeted demand as it required. As we look ahead, early indications suggest that the floor for crude prices has risen and is becoming more stable, which is constructive for our business. Due to the strong demand for next-generation natural gas burning fleet, we're currently sold out across our Tier 4 DGB dual-fuel and FORCE electric fleet, and accordingly expect to run approximately 12 fleets in the second quarter, up from the approximately 11 in the first quarter. Importantly, we do have a few additional Tier 2 diesel fleets available, which we will deploy only if opportunities meet our economic return threshold. Given disciplined deployments and limited capacity in the completions market, we're well positioned to quickly capitalize on new opportunities as they emerge. Now moving over to PROPWER. We've made significant progress across several key initiatives this past quarter, highlighted by our recent announcement of a new strategic framework agreement with Caterpillar. This agreement enables PROPWER to acquire up to approximately 2.1 gigawatts of additional power generation capacity over the next 5 years. When combined with the approximate 550 megawatts previously ordered and upon successful delivery of assets under this agreement, PROPWER is positioned to have approximately 2.6 gigawatts of power generation capacity delivered by year-end 2031 and fully deployed in 2032. Our nearly 20-year strategic partnership with Caterpillar has been instrumental in shaping our long-term growth plan for PROPWER. This collaboration enables us to pursue shared success while providing PROPWER with reliable access to high-quality assets even amidst the challenges of an exceptionally constrained supply chain. Together, we're well positioned to capture the future opportunities and drive mutual value. This agreement underscores PROPWER's leadership in deploying innovative energy solutions, and we're excited about the transformative potential it brings to our company. To support our upsized order backlog, we have built a robust commercial pipeline. Demand for reliable and low-emission power solutions remains very strong, fueling continued growth across the data center, industrial, and oil and gas sectors. Notably, we're pleased to report major advancements representing several hundred megawatts of high potential data center opportunities in a select portion of our data center commercial pipeline. While specific details are contingent on finalizing agreements, these developments highlight our expanding leadership and strategic positioning in the digital infrastructure market. Additionally, we are engaged in advanced contract negotiations for approximately 100 megawatts to support oil and gas microgrid projects with deployment expected later this year. These commercial developments will rapidly expand our total committed capacity beyond the approximately 240 megawatts currently committed under contract. We are confident in PROPWER's future growth and expect to secure additional contracts throughout 2026 as we extend and deepen relationships with both new and existing partners. The majority of future megawatts are anticipated to be contracted within the data center and industrial sectors, driven by their larger load requirements and long-term strategic commitment. Importantly, our near-term focus also remains on disciplined execution, deploying and scaling PROPWER across our contracted customers with a strong emphasis on derisking deployment and building a resilient operational foundation to support sustainable long-term growth and profitability. As we continue to deploy capital to grow PROPWER, we remain committed to maintaining financial flexibility and a strong balance sheet. Our preferred source of funding continues to be free cash flow generated from our completions. This is supplemented by our strong balance sheet, proceeds from our recent equity offering and access to flexible financing arrangements, including our Caterpillar financing facility and lease financing structures that we already have in place. Given the recent increased orders, we will continue to actively pursue low-cost capital and flexible financing solution to support PROPWER's growth. Looking ahead, while we're still in the early days for PROPWER, we've already made significant progress to secure customer commitments and have real momentum and real operation that allow us to negotiate additional contracts from a position of strength and proven service quality. As the demand for reliable low emissions power solutions continues to grow, we expect PROPWER to continue to scale and deliver increasing returns over time. Our approach remains consistent. We're staying nimble and disciplined, while continuing to lean into the opportunity we see at PWER. Stepping back, the strategy we've been executing over the past several years is now working. Our completions business continues to generate resilient financial results and provides the foundation to fund growth, while PROPWER represents a high growth and high return on investment vehicle that we are just beginning to scale. Importantly, ProPetro is a strong company pursuing value-enhancing growth opportunities from a position of strength. We maintain a healthy balance sheet that provides us with the flexibility to invest in PROPWER. At the same time, we're beginning to see tailwinds emerge in our completions business with early signs of tightening supply and improving pricing dynamics. We have a strong balance sheet, first-class customers and a first-class team that continue to execute at a high level while operating safely, efficiently and productively. Taken together, we believe we're well positioned to execute through the current environment and create meaningful long-term value.

Thanks, Sam, and good morning, everyone. As Sam mentioned, ProPetro's first quarter performance once again demonstrated the industrialized and resilient nature of our business. Despite lower revenue, we generated positive financial results in our completions study, which continues to highlight the durability of our company. At the same time, we have made meaningful recent progress in PROPWER, including advancing equipment orders and securing additional capital. These efforts position PROPWER to become an increasingly important contributor to the company's future earnings profile. During the first quarter, ProPetro generated total revenue of $271 million, a decrease of 7% as compared to the prior quarter. Net loss totaled $4 million or $0.03 loss per diluted share compared to net income of $1 million or $0.01 income per diluted share for the fourth quarter of 2025. Adjusted EBITDA totaled $36 million or 13% of revenue and decreased 29% compared to the prior quarter. This includes the lease expense related to our electric fleets of $16 million. As Sam mentioned, the decrease in adjusted EBITDA this quarter was primarily driven by reduced utilization in the completions business, which was significantly impacted by adverse weather conditions. Net cash provided by operating activities was $3 million as compared to $81 million in the prior quarter. The decrease is primarily attributable to lower adjusted EBITDA and working capital headwinds in the first quarter, which consumed approximately $32 million in cash and working capital tailwinds in the prior quarter, which were an approximately $35 million source of cash. During the first quarter, capital expenditures paid were $43 million and capital expenditures incurred were $85 million, including approximately $14 million primarily supporting maintenance in our completions business and approximately $71 million supporting PROPWER orders. Notably, the difference between incurred and paid capital expenditures is primarily comprised of PROPWER-related capital expenditures that have been financed and paid directly by our financing partners and unpaid capital expenditures included in accounts payable and accrued liabilities. Net cash used in investing activities, as shown on the statement of cash flow, during the first quarter of 2026 was $41 million, which included capital expenditures paid of $43 million, offset by $2 million in proceeds from certain asset sales. We currently anticipate full year 2026 capital expenditures incurred to be between $540 million and $610 million, up from the $390 million to $435 million range highlighted in our fourth quarter earnings report. Of this, the completions business is expected to account for approximately $140 million to $160 million, including approximately $40 million to $50 million related to planned lease buyouts for a portion of our FORCE electric fleet portfolio. As a reminder, the 5 FORCE electric fleet leases were secured with an initial 3-year term and include options to either buy out 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 earnings from the FORCE electric fleet. This strategy proved successful, enabling ProPetro to rapidly transform our fleet and still generate accretive cash flow. Our current intent to exercise the upcoming lease buyouts reflects the completion of a deliberate and strategic capital allocation decision. By exercising these options, we will take full ownership of the FORCE fleet. Each buyout will immediately reduce our lease expense, currently reflected in operating expenses and strengthen our commercial flexibility. We expect to buy out all 5 fleets with buyouts anticipated to begin in late 2026 and continue through 2028. Also, as a reminder, the completions business guidance range includes capital reserve for refurbishing a portion of the existing Tier 4 DGB fleet, investments in fleet automation technology as well as measured investments in direct drive gas frac units. Investments in our gas burning equipment portfolio are especially valuable in the current market context. Accelerating demand for these fleets is driven by higher diesel prices and a significant diesel to natural gas price discount in the Permian Basin, resulting from the effects of the Iran war. This price differential enhances the economic viability of natural gas-powered fleets, making these investments critical for capitalizing on market opportunities and strengthening our competitive position. Additionally, we anticipate incurring capital expenditures of approximately $400 million to $450 million for our PROPWER business in 2026. This projected increase is attributable to down payments for future deliveries associated with the recently executed framework agreement with Caterpillar. While these PROPWER 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 the near-term actual cash outflows or cash CapEx required from the company. Cash and liquidity continue to remain healthy. As of March 31, 2026, total cash was $157 million. Total liquidity at the end of the first quarter of 2026 was $289 million, including cash and $132 million of available capacity under the ABL credit facility. 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 PROPWER business while maintaining a strong financial foundation. To reiterate what Sam already mentioned, we are pleased with our current capital position and our ability to support PROPWER's growth. That said, we continue to actively work to source low-cost and flexible financing, especially in light of recent increased orders. Our priority remains maintaining a strong balance sheet while ensuring we have the resources to capitalize on future opportunities. Sam, back over to you.

Thanks, Caleb. As we wrap up today's call, I'd like to reiterate a few points. We recognize the improving completions market, which is benefiting from a stronger commodity environment and recent market dynamics, including the impact of the Iran war. Given current supply and demand fundamentals inside the completions market, we remain confident in our ability to respond to additional commercial opportunities as they arrive. At the same time, PROPWR continues to gain momentum, supported by a robust commercial pipeline and our recently announced strategic framework agreement with Caterpillar. Our focus remains on disciplined execution and building a durable platform for long-term growth. We have a well-positioned company with a strong balance sheet, first-class customers that is all paired with exceptional leaders and teammates that enable our success. I'm grateful for how our team navigated the first quarter with focus, discipline and ownership. Their work positions us exceptionally well for the opportunities ahead. We remain confident in our strategy and our ability to create value for our shareholders. With that, operator, we'd now like to open up the call for questions.

[Operator Instructions] Our first question comes from Saurabh Pant with Bank of America.

Sam, obviously, a big day with the announcement of the strategic partnership with CAT. The first one, Sam, I was hoping to -- hoping to ask is just up to 2.1 gigawatt of equipment that you may be getting, right? Maybe can you talk to the mix of this equipment? Is this all natural gas resets? Is there a mix of turbines? And how are you thinking about that mix? Maybe just help us think about life cycle cost, CapEx versus OpEx, fuel cost as you run this equipment over the next 10, 15, 20 years, right? Just maybe help us think about that a little bit.

Sure. Great question, very topical. I'll just make a couple of think high-level remarks, Travis can probably fill in some of the details on the numbers that you asked. Look, this is -- part of this capacity is going to be a little bit more of the same from an equipment standpoint, mainly in the gas reciprocating arena. And then there's a larger portion of this capacity that we can't really speak to in detail right now, but we'll be providing some more details in the future. And look, this is something that we've been working on for quite some time, trying to balance the commercial pipeline with the tightness in the supply chain and to be able to do this with a partner that we have almost 20 years of familiarity with is quite big, and I think sets us up really well from an execution standpoint when we start to take delivery and deploy this equipment. Travis, I don't know if you want to say anything else about economics and fuel efficiency and all that.

Yes. I think we've said from the beginning, Saurabh, that our strategy has been to choose the right technology for the right project. And I think signing up with Caterpillar gives us probably the widest range of options on the market. So we've continued to lean into the reciprocating engines. That's what we're going to do with this framework agreement. And that's really anchored by the fact that larger, more power dense engines that are highly efficient are really required to provide some differentiation in the data center market. So we think that sets us up in a unique way to be able to kind of expand what we're already getting started in that space.

I got it. Okay. Travis, that's helpful. And then one more I think on the financing side of things. I'm getting some questions this morning on that, right? So maybe if you can help us with how should we think about the capital cost of this equipment? I know balance of plants would come later, right, but just the power gen equipment at this point. And then in terms of financing, how are you thinking about financing? Because I'm getting some concerns on potential dilution as you go ahead and seek financing for this, right? I know you've got liquidity, but maybe just help us think through all of that.

Yes. I'll take the first part there, Saurabh. And as far as the cost of equipment, we've updated our guidance to between 1.4 million and 1.5 million per megawatt, and that's really driven by the type of equipment that we're expecting to put into these longer term or infrastructure-type projects to support the data center.

Yes. Saurabh, this is Caleb. Thanks for the question. So when it comes to funding PROPOWR's growth and the CapEx we see coming over the next few years, first of all, we're going to start with the tools that we already have in place, but we do recognize that we'll need to bring in some additional resources as well. So just to go through those, first off, we always look to our own cash as our preferred source of capital. So that means cash on the balance sheet and cash that we're generating organically from our completions business. And then as PROPOWR ramps up later this year, we expect it to start making more meaningful contributions as well. Secondly, we've got flexible and competitive debt facilities, specifically our ABL and cap finance lines. Third, we have our lease finance facility with Stonebriar, which is committed capital that we can draw down as needed, which we're happy to have. That gives us another layer of strength and flexibility. And so looking ahead, especially with the updated growth guidance for PROPOWR, we are going to stay proactive in sourcing new capital that's both low cost and flexible. We're focused on keeping our balance sheet strong while supporting the business. And it is worth noting that we have great relationships with the major banks and financial partners in our sector. We're already in discussions and evaluating several financing options with very strong interest expressed in helping us to fund these equipment purchases. So we are confident we'll have the right capital in place as PROPOWR continues to grow to help support these orders.

Yes. And just to add on to what Caleb said, I think it's a great position to be in that we're in today where almost every tools at our disposal. I think the size and scale of our existing business is helpful, but we also have tailwinds kind of in both of these businesses that we're operating in right now. And the flavor of the day is obviously data centers, AI, all that good stuff. So to be kind of in that trend as well, I think it's just kind of a compounding effect. As Caleb said, I think every bank in the world pitch just about every single tool. So as Caleb said, we're kind of proactively working through that. And I think we feel really good about being able to equip PROPOWR and ProPetro from a capital standpoint moving into the future.

Right. No, that's helpful, guys. And obviously, I think it's helpful that both cylinders are firing now with the completions market looking like it's recovering. So that's a good place to be.

Our next question comes from Ati Modak with Goldman Sachs.

Sam, I think you mentioned the majority of the new capacity is going to data centers. But I'm curious, how do you evaluate the oil and gas landscape versus the data centers, given my understanding is that the microgrid offering in the oilfield is very different from prevailing solutions? I'm wondering if the landscape is not as large? Is there more competition? Just help us understand how you evaluate that.

Yes. I think, first off, you could base kind of the proportion of our work that's going to data centers moving forward, not solely, but in a big way, on how just big some of those opportunities are. So as we sit here today, about 240 megawatts contracted, mostly in the oil and gas space. Just one data center deal could completely flip the distribution of that work to majority data centers. So I think that's probably the biggest variable at play just the size and scale of some of these data center opportunities. We referenced in our materials that we're in extended negotiations on opportunities that are in the several hundred of megawatts ZIP code. And the other part of it is, I think your question was kind of who -- like how to choose where to go with some of this. And look, it's a very economical decision for us. What does profitability look like compared with contract term. The data center space is extremely appealing from a size and scale standpoint, just like I mentioned. But pricing is very strong. Pricing and paybacks are also very strong in the oil and gas side of the business. And look, I don't think we can neglect in the last 1.5 years standing up PROPOWR, the opportunity that oil and gas has given us to get to work quickly to prove our services and to be able to have real working equipment and people so that when the next customer calls, whether it be oil and gas or data center customer, we have real operations that we can show them. Travis, I don't know if there's anything you want to add to that.

I think the only thing I would add is kind of the differentiation between oil and gas and data center, there are some operational nuance. But realistically, the majority of the equipment and the types of services we're performing on site are similar. So we like being able to leverage that across what we're already doing in the oil and gas space, and be able to grow it into the data center space.

That's very helpful. And on the pressure pumping side, I know you talked about the potential to deploy Tier 2 fleets. I'm just wondering how much does pricing need to increase from where leading edge is for the economics to make sense. And is that a little bit more of a Q2, Q3 comment? Would it be fair to assume it's more spot work than a full or multiple quarters? Just any color there.

It's probably more -- that dynamic putting any more equipment to work and especially bringing some equipment from warm stack to hot stack to field ready, and that's mainly just a diesel Tier 2 story for us, as we said, all of our nat gas burning equipment sold out today. That's probably more of a second half story. That said, there's early indications, and we've experienced some of this in our own portfolio of pricing increases. And if the momentum or developments continue in the direction of which we expect them to, and I think they already are starting to, then it's likely we can make sense of putting some more equipment into the system. That said, we've got a pretty high bar. We've got a pretty high bar from an economic standpoint and a very high bar from a quality service and people standpoint. We're going to require full calendars to do that as well. So I think another thing at play here, we get a lot of questions about how much would it cost to put another fleet back to work and all of that. It is a cost, maybe less of one, but it is definitely an operational variable that I don't think is being talked about enough right now is people. And the companies that are able to acquire and deploy people in a quality manner are going to win. There's just not that much equipment laying around right now, whether it's ours or somebody else's. There's a much lesser amount of people that are ready to go to work back on a frac crew or a drilling rig or something like that. So we've always prided ourselves in being really good at that part of the equation. But I think that that's going to be something to watch for from an execution standpoint, even if pricing does go up, you have to have a workforce to operate, maintain and perform in the field.

Our next question comes from Derek Podhaizer with Piper Sandler.

Back to the power theme. I just wanted to get your thoughts around the balance of plant services that you guys provide and maybe how you see that evolving over time as you get further down these data center contract executions. Just thinking about whether that is batteries or gas delivery or last mile of that gas delivery. This is becoming a bit of a bigger theme here as far as what's going to be provided inside of these contracts. So how should we think about PROPOWR's scope from a balance of plant perspective and how that could evolve over time?

Good question, Derek. So the balance of plant that we're talking about has already included batteries. So we've been thinking about that from the start in the data center space. We think it's super helpful and value add to manage those loads. And then it's clearly some of the electrical equipment required to make sure that we're getting the power to the data center customer in the most efficient way. So we kind of already have that expertise built into what we offer from a balance of plant perspective. As far as gas delivery goes, that's not something that's been really on the radar in a major way, but obviously being connected to many oil and gas customers as the business that we're in and relationships that we have on the other side of the fence, certainly, that's something we could look at in the future.

Got it. Okay. Exciting. On the frac side, I noticed you've been talking a lot about the direct drive turbine equipment. Obviously, that's 100% natural gas as well. It sounds like it's going to go supplement maybe some of your aging Tier 4 dual-fuel fleets. But maybe just talk to us about that type of kit, how it compares to the FORCE fleets? And would this be something that you would increase over time as far as just your ongoing maintenance cycle or replacement cycle or potential incremental fleets being more direct drive? Just some thoughts around that would be helpful.

It's definitely not incremental capacity. I think we look at it as more along the lines of replacing existing equipment as it retires. That said, and I think this was mentioned in our scripted remarks, there is a premium on just being able to displace diesel right now, whether you do it with electric, dual-fuel or direct gas. So as these units go to work for us right now, they're mainly going to work alongside dual-fuel operations where they're just increasing diesel displacement and therefore increasing our economics and our customers' economics.

[Operator Instructions] Our next question comes from Eddie Kim with Barclays.

You previously talked about 70 fleets -- active fleets in the Permian today compared to around 90 to 100 fleets at the beginning of last year. If we do see a ramp-up in activity in North America from the E&P, what's the number of fleets you expect that could be added in fairly short order with very little investment? Is that going back up to 80 fleets and then the remaining 10 to 20 fleets to get back up to 90 to 100 would require significantly more investment? Just curious on your thoughts there.

Yes. I think across the Permian specifically today, we think that number is probably full-time fleets working is between 70, 75. We've got 12 of those. That said, our simul-frac work has increased a little bit. I think 4 of our 12 today are operating in large simul-frac. Look, there's been a lot of -- or some really good industry research done around this recently that we agree with. And I think that there's a hot stacked frac fleets, stuff that can go to work pretty quickly and that maybe has access to people fairly quickly for the whole country is probably in the 10 to 15 range. So you got to assume maybe half of that comes -- around half of that could go to the Permian. So maybe the Permian could grow to 80 pretty quickly. And then you get in a situation where, where is the capital, where is the people, where is the equipment? And that could make for a really tight completions market once you get in that ZIP code. That said, and we've talked about this a little bit in the last couple of quarters, too, that doesn't mean that our pricing and our repositioning inside of our own portfolio can't front run an 80 fleet count in the Permian Basin because as companies start to grab on to the equipment and the people that they want to execute on the projects that they want to, fleets and equipment will start to move around. And when those -- when that happens is when pricing really starts to inflect more aggressively. We already said we're seeing some green shoots of pricing increases in our own portfolio as we sit here today. It's just the beginning. So we don't -- you don't need a wave of capacity to come back to increase pricing. You just need a few customers to make some small decisions to either pick up a rig or a frac fleet or change an existing provider. And then that kind of like leapfrog across the entire sector begins to that's when pricing starts to really change.

Got it. There seems to be a lot of earnings torque in the system right now. So that's great to hear.

Torque, yes.

Shifting over to POWR. Back in October, you announced a 60-megawatt contract with a data center operator. That deployment was expected to begin in the second quarter of '26. We're in 2Q now. So just curious if that equipment has been deployed or is in the process of being deployed at this point? And how is the learning and experience you'll get with that data center deployment? How do you think that will help you secure more contracts in the data center space going forward?

Yes. First of all, that is moving as we expected. It's in process. Equipment is on site being installed and commissioned. We think that's a huge advantage when you look at folks that are actually executing and operating behind-the-meter solutions in data centers. It's a pretty small sample set. So once we get that experience behind us and kind of learn what a few others have learned, we think it's going to provide a really big advantage to go secure additional contracts or expanded contracts with that existing customer.

Got it. And just one really quick follow-up. I mean through that experience, I mean have you had any kind of bottlenecks or anything related to permitting or any issues that maybe took longer than expected? It doesn't seem like that's the case, but I'm just curious if there's anything like that.

No, we haven't. I mean we have the equipment coming well stage, the rest of the supply chain around the balance of plant. I think our team has done a really good job of staying ahead of that, knowing kind of what we need to supply for that type of project. And so we've gotten everything there on site by ordering the right equipment upfront to derisk those deployments.

Our next question comes from Jeff LeBlanc from TPH.

I wanted to see if you could talk on the delivery to deployment timeline as I believe your historical presentation implied a 3- to 6-month delay, while this latest one referenced a 6- to 12-month delay delivery and deployment.

Yes, it's a good question. So these are bigger assets. These are bigger sites. And so we want to give ourselves enough time to deploy and get those set up correctly given that they'll likely be longer term contracts. That's part of why we've kind of driven to this 4- to 6-year payback on these types of projects because they're a lot more infrastructure type build-outs for longer-term tenors on the contract.

Our next question comes from John Daniel with Daniel Energy Partners.

Caleb, maybe this is for you or maybe Adam. But in terms of like inflationary cost pressures right now, can you give us a tour of the P&L, if you will, and walk us around where you're seeing the greatest pressures today and what you might expect if all of a sudden rig count is going up 5%, 10% from here in the next 6 to 9 months, what you'd expect to see?

Yes, John, it's certainly something we're keeping a close eye on. As Sam mentioned, people is always at the forefront of our business. And so that's an area that we want to make sure that we are competitive in so that we can provide the best service to meet our customers' needs. And then we're watching all of the other lines of the P&L closely, things like fuel costs that could drive inflationary pressures and taking actions to mitigate those where possible. Adam Muñoz: Yes. John, Sam. I also kind of remind you and others, we took some proactive fleet deployment decisions mid second half last year to park some fleets that were turning uneconomic because of pricing requests. And that becomes really helpful in a situation like we are in now. You might not avoid all cost inflation, but you might kind of blunt the blow a little bit initially by having some equipment that's stacked a little warmer because of some decisions that we made proactively last year.

Do you think -- and I'm just making this number up, Sam, but like let's assume there's a 5% to 10% gain in activity out there. Is that so much that it would have inflationary pressures on labor or no?

Possibly, yes. I mean I think that could be possible. I think another place, and this is labor maybe a little bit more indirectly, but it takes a lot of other auxiliary support services to run a completions operation. So do you need help rebuilding an engine? Do you need help with some rental or other on-site service? And that's really probably where the people aspect of this gets more acute. And so that could cause inflation in that direction. And I think that's where a company of our size and scale in the Permian Basin is really advantaged because we already have really developed and ongoing sustainable relationships in our own supply chain to be able to mitigate trying to hire or bring on a service or a person that we previously didn't have. It's likely that we already have a lot of that working within the system right now, whether it be internal or external, and that's a hedge against some of this inflation that maybe some of our smaller competitors aren't as well positioned.

Fair enough. My final question is when the market, as you guys have alluded to and others for fuel-efficient diesel nat gas-powered equipment is essentially sold out. And I'm curious, is the market tight enough where you think you could force customers into take-or-pay contracts? Or is it still the dedicated agreement type frameworks?

I mean we already have some of those agreements.

No. But on the Tier 4 DGB, I mean, I know you have them on electric, but my impression is that the dedicated or give a little bit more wiggle room than a take-or-pay. So just that's the basis of the question.

Yes. I mean I think it's always possible. We're really proud of how we've contracted a significant of our fleet. So I think we've got a lot of reps in making sure that we're not only like creating value day 1, but we're creating value that can be sustained. And that's things like take-or-pay are always a lever. We use it -- we use an ask like that in particular places for particular reasons.

Our next question comes from Don Crist from Johnson Rice.

Sam, I just wanted to ask one question on the framework agreement. The language seems very specific that you could purchase up to a certain number, and it's not in a specific order. Is this just the availability for delivery slots? Or do you actually -- are those delivery slots now yours and you're already dedicated to those slots? Just a ton of semantics there.

Don, this is Travis. So we have secured those assets. And I think the updated growth trajectory that we showed in our investor deck is our expected timeline to receive those units and deploy them.

Okay. So the decision has been made to actually make this order, right? It's not a future order that you have to make a decision point later in time.

Yes. We have reserved some optionality in the agreement, but for all intents and purposes, they are secured.

Okay. And Sam, if I could ask just one kind of broader macro question. I know you like to opine on this. We've been asking most companies that have reported so far about the disconnect between kind of the physical oil markets and the financial oil markets. And a lot of people are now feel that the strip a couple of years out is really not reflective of what it's going to be. Have you had any customer conversations that are leading you to believe that the strip a couple of years out may be $10 or $15 too low and a lot of activity could come as we move into '27?

Yes. I'm glad you wrote the customer conversations in there at the end because I hate for you to think that I'm a macro expert by any means. But we do read stuff from a lot of smart people. We have a lot of smart customers. It's really quite puzzling, I think, this kind of like physical paper markets. And if even a portion of what's going on in the Middle East and around Iran as it pertains to the Strait of Hormuz and things like that, if even a portion of that is true, we're undergoing some, I think, major structural changes to the supply and demand and flow functions of oil and gas across the globe. I don't think any of us like war and what -- and all the bad things that come along with war, but I think this is creating a lot of kind of like sobriety and good reality as it pertains to how fragile this whole value chain is. I mean, we're sitting here almost with the oil price almost totally dependent on one narrow waterway on the other side of the world right now. So that's pretty interesting. The other part of it is that I think traditional energy as it pertains to oil and gas is important today as it ever has been. And I think more of the world and more of the politicians across the world are realizing that. But we've been banging that drum. Shoot, my family has been banging that drum for 3 generations. And we've definitely been banging that drum as an industry out here in the Permian Basin for a long, long time. So if anything, we're just glad that the spotlight is back on what's important. And what's important is places like the Permian Basin and our country producing the cleanest, most reliable molecule of energy in the world. We get first option to that, living here kind of right on top of this resource. But as a younger guy in the industry right now, seeing some of the structural stuff happen right now, it's pretty -- feels pretty promising to where we're positioned really in the 2 main drivers of our business, this oilfield service completion focused business and our Power-as-a-Service with PROPOWR. We really like where we sit. We think we're going to have great access to capital. And I think there's some major structural tailwinds here.

This concludes the question-and-answer session. I would like to turn the call back over to Sam Sledge for closing remarks.

Yes. Thanks, everybody, for joining us today. As I just mentioned in my last answer to Don's question, we're really excited and confident about the 2 main drivers of our business. PROPOWR being aimed right at the center of the Power-as-a-Service industry today, strong commercial traction, great supply chain position as evidenced by our recent announcement with Caterpillar and already high-quality operational execution in the field. And on the more LFS completion side of the business, great structural tailwinds, a great operating position in the best basin to be in here in the Permian Basin. So we look forward to talking to all of you again soon. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.