Greetings, and welcome to the U.S. Well Services Full Year and Fourth Quarter 2020 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Josh Shapiro, Vice President of Finance and Investor Relations. Thank you, sir, you may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the U.S. Well Services conference call and webcast to review the full year and fourth quarter 2020 results. Joining us on the call this morning are Joel Broussard, Chief Executive Officer; and Kyle O'Neill, Chief Financial Officer. Following their prepared remarks, the call will be open for Q&A. Yesterday evening, U.S. Well Services released its full year and fourth quarter 2020 earnings. The earnings release can be found on the company's website at www.uswellservices.com. The Company also intends to file its Form 10-K with the SEC this afternoon. Please note that the information reported on this call speaks only as of today, March 11, 2021, and therefore, time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. In addition, the comments made by Management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of U.S. Well Services' Management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to review today's earnings release and the company's filings with the SEC to understand those risks, uncertainties and contingencies. 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. And now I would like to turn the call over to U.S. Well Services' CEO, Mr. Joel Broussard.

Thanks, Josh and good morning, everyone. Last year, in early March, we reported our 2019 earnings, just as concerns about the spread of COVID-19 were beginning to surface in the United States. We pointed out then that we did not know what impact it would have on our business and that we were monitoring the situation actively. Because of this uncertainty, the U.S. Well Services team prepared for the worst-case scenario and began to implement our strategic plan. Knowing that the spread of the coronavirus could be devastating to our industry, we aggressively eliminated fixed costs, reduced our variable cost structure and approached our lenders with a proposal that enabled us to eliminate principal and interest payments on our term loan, preserving liquidity to weather the storm. These actions combined with proactive communication and planning with our customers allowed U.S. Well Services to remain strong throughout the worst of the pandemic. I cannot thank my team enough for their hard work, dedication and sacrifice throughout the year. With their commitment and support, U.S. Well Services was able to generate positive adjusted EBITDA each quarter in 2020 and emerge well positioned to capitalize on the ongoing market recovery. Kyle will go into detail on the company's financial performance for 2020, but I would like to mention a few highlights. We generated $244 million of revenue for the year and $31 million of adjusted EBITDA. During 2020, we recorded $12 million of non-cash charges to reflect doubtful collections of accounts receivables. Excluding these charges, we generated $43 million of adjusted EBITDA, which represents an 18% adjusted EBITDA margin and $8 million of adjusted EBITDA per fully utilized fleet. After the sharp slowdown in early Q2, U.S. WS steadily ramped back up through the year, exiting the fourth quarter with 5.3 fully utilized fleet. For the year, we averaged 5.4 fully utilized fleets. Demand for our service has continued to strengthen in Q1 2021 and U.S. Well Services currently has 10 active fleets, including all four of our next generation electric fleets. The market remains oversupplied with horsepower, but the situation is changing rapidly. As commodity prices have improved, activity has picked up significantly and attrition of conventional horsepower in the U.S. fracturing fleet has accelerated. It is our view that the frac services pricing will begin to rise from current levels to more sustainable price levels over the next several months as supply/demand imbalance improves. I believe that the future for U.S. Well Services is bright, and that today we're positioned better than any company in our industry to succeed in this market. Now, more than ever, the oil and gas industry faces scrutiny from institutional and retail investors, federal, state and local governments and regulatory bodies. Rightfully so, they question whether we are doing enough to protect the environment. E&P customers can no longer focus only on improving efficiency and reducing costs. They also need to improve emissions performance and reduce their greenhouse gas footprint in order to attract capital. Since we deployed our first Clean Fleet in 2014, U.S. Well Services has preached the benefits of the patent electric fracking technology. Eliminating the use of diesel fuel significantly reduces costs for our customers and relieves semi-truck traffic on community roads. Using our natural gas turbine generators to power fracking equipment offers industry-leading greenhouse gas emissions performance. Our internal data from both diesel and electric fleets proves that the maintenance costs for an electric fleet are substantially cheaper, and electric fleets reduce noise, traffic and other potential safety hazards that make our work safer for those on the well site and in the surrounding communities. Not surprisingly, for the last several years, most of our competitors focus their efforts and resources on discounting the benefits of this technology instead of developing their own next generation hydraulic fracturing solutions. Some competitors, along with a chorus of sell-side research analysts, have claimed that electric fleets are too expensive, that the purported benefits are not entirely true, and that this technology is inferior to dual fuel fracturing fleets. We've studied these claims closely, and they are not true. We remain the only company that operates both conventional diesel and all-electric frac fleets, which provides us the insights our competition does not have. Here are the facts. The fuel cost savings are real. Our fleets can reduce fuel costs by as much as $1.5 million per month, and we do not rely on overly optimistic diesel substitution assumptions to arrive at these numbers. Whether it's fuel gas or CNG burning our turbines, it costs less than diesel. No technology comes close to reducing emissions to the degree that our Clean Fleet does. Last year, we hired a third party to take real emissions readings on a Tier-2 diesel, a Tier-4 diesel and a Clean Fleet operating in Texas. We published the results in a white paper titled 'Clearing the Air', which is available on our website. The test showed that the CO2 equivalent emissions from the Clean Fleet were 42% less than emissions from a Tier-4 fleet and 48% less than emissions from the Tier-2 fleet. If you factor in gas that no longer needs to be flared, CO2 equivalent emissions are reduced by 60%. Clean Fleet also reduces smog-related emissions by 76% and 94% versus Tier-4 and Tier-2 diesel fleet respectively. We have seen presentations that suggest emissions performance of a Tier-4 dual fuel fleet is superior to electric fleet, highlighting the emissions rate of a single dual fuel pump compared to a turbine generator at low load. The statistic is irrelevant. The only metric that matters is total emissions from the job; and on this metric, the turbine generator offers superior results every time. Electric fleets do not cost more than conventional fleets when you consider the cost of ownership. Our Clean Fleets use long life components like electric motors, rather than failure-prone mechanical components using a conventional fleet. We have analyzed our own maintenance costs, both the expense and required capital expenses for electric fleets versus diesel fleets. We see a consistent 35% cost advantage for electric fleets. This cost savings matters. We may spend more on electric fleet upfront, but we spend less every year and are able to operate the fleet long after the diesel fleet requires replacement. Finally, I think the market can learn a lot based on the behavior of our customers and competitors. Our customers continue to sign and extend contracts for our electric fleets. Our competitors continue to announce plans to introduce their own unproven electric fracturing solutions. U.S. Well Services is uniquely poised to lead the industry as we enter a new era in which cost, efficiency, and environmental stewardship matter equally. We're excited about the prospects for our business and are confident that we can continue to deliver results for our customers and shareholders. With that, I would turn the call over to Kyle.

Thanks, Joel. I'll start off by reviewing the fourth quarter of 2020, before adding some color on our full year results. We generated $48 million of revenue in the fourth quarter, up 9% from $44 million in the third quarter. The increase in revenue was driven primarily by a higher number of active fleets working. Our revenues were up on higher activity levels. Service and equipment pricing on a per hour basis was down approximately 10% as we deployed new fleets at market rates. As Joel mentioned earlier, we're beginning to see the market tighten and are confident that pricing will improve heading into the second half of the year. Our cost of sales for the quarter was $42 million, up from $31 million in the third quarter. This increase in cost is largely attributable to labor and repair costs incurred as we prepared fleets to return to service in the new year. On a per hour basis, labor and repair expense increased 5% and 16% quarter-over-quarter respectively. SG&A in the fourth quarter was $13 million. Excluding a $3 million noncash charge for doubtful accounts and a $4.7 million charge for stock-based compensation, SG&A was $5.6 million compared to $5 million in the third quarter. The increasing cash SG&A was primarily related to professional fees. Adjusted EBITDA for the fourth quarter was $1.8 million. Excluding the non-cash charge for doubtful accounts, adjusted EBITDA was $44.8 million, or $3.6 million for fully utilized fleet on an annualized basis. This compares to $8 million of adjusted EBITDA in the third quarter, or $7.7 million for fully utilized fleet on an annualized basis. On an accrual basis, U.S. Well Services spent approximately $4.1 million on maintenance capital expenditures during the quarter. Looking at our balance sheet, U.S. Well Services ended the year with $14 million of liquidity consisting of $5.3 million in cash and $8.7 million in availability under our ABL. During the fourth quarter, we closed on a $25 million credit facility guaranteed by the United States Department of Agriculture under the CARES Act. At year-end, approximately $22 million was drawn on this facility with proceeds used to fund working capital and other financial obligations. This facility is a 10-year loan with a fixed 5.75% interest rate. The first three years are interest-only with straight line amortization over the remaining seven years. Earlier, Joel touched on some of the key highlights for 2020. But I'd like to add some additional detail. Revenue for 2020 was $244 million, reflecting a decrease of approximately 53% relative to 2019 levels, primarily resulting from the COVID-19 pandemic-related crude oil demand disruption. Over the course of the year, U.S. Well Services made significant improvements to the company's cost structure. The cost of sales for 2020 was $188 million, or $29 million per average active fleet. In comparison, in 2019, our cost of sales was $384 million, or $39 million per average active fleet. That's a 25% reduction on a per fleet basis. We were able to make similar reductions to the company's overhead. SG&A, excluding non-cash charges for doubtful accounts and stock-based compensation, was $23.5 million compared to $26.2 million for 2019. Full year 2020 capital expenditures were $37 million, of which $23 million was related to maintenance capital expenditures. The remaining $14 million was for growth capital expenditures related to the delivery of our new build electric fleet in Q1 of 2020. With that, I'll turn the call back over to Joel for his closing remarks.

Thanks, Kyle. U.S. Well Services is in an enviable position. Our intellectual property, experience operating next generation electric fleets, and proven track record are delivering results on behalf of our customers as this company is well-suited to be a market leader going forward. The electric fracturing is the future of our industry, and we continue to enjoy a first mover advantage. I'd like to once again thank the entire U.S. WS team for a job well done in 2020 and will now turn the call over to the operator for Q&A.

Our first question comes from Stephen Gengaro with Stifel. Please go ahead with your question.

Two things, please. The first, if you could talk a little bit about this. So your adjusted profitability per fleet, I think it ran probably about $5.5 million of annualized EBITDA per fleet when you adjust for the startup costs in the quarter. Given the higher activity levels that you're predicting in the first quarter, and I know there's some pricing headwinds that are continuing; how should we just think about the direction and magnitude of change we could see there over the next couple of quarters?

Kyle, you want to take that one?

Sure. I think that the increased activity is obviously going to help spread out some of our fixed costs and overhead. Anytime we ramp up and nearly double our active fleet count, you've got a lot of one-time costs to roll those fleets out. So those expenditures - those expenses have been spent, and I think that absent any type of further downturn, we should be able to have those fleets fully utilized, and that will help increase profitability.

Yes, we've seen an uptick in activity and greater fleet utilization. And generally, there's a lag and pricing improvement usually follows this increase in utilization. Although we expect the pricing environment to improve, predicating the exact timing is difficult, right? So everybody knows we went from five and a half active fleets to ten this quarter. So we feel that pricing will continue to improve and some of these one-time costs that Kyle had mentioned will go away.

And just to follow-up, if you don't see pricing based on the contracts in the overhead absorption, can that number get close to double digits without pricing, or do you need pricing to get to double digits?

On a per fleet basis, we'll need pricing improvement to get to into the double digits per fleet on an annualized basis.

And then the second last question was just around some of the comments that you guys made on electric fleets, the cost of ownership of the Clean Fleet versus the upfront costs. And what I was curious about was the pricing dynamic that you've seen and you expect to see for the Clean Fleets versus the traditional fleets, especially in light of the cost savings you have on the diesel front. How do you think that starts to accrue to your benefit versus the E&Ps?

Well, we feel it's accrued in our benefit now. Even with the fuel savings, let's say half of it, we're still way ahead of a diesel fleet on a per fleet EBITDA basis. When we previously started this, we would - when the market was really hot and pricing was up and all our peers were actually making EBITDA and putting fleets out for positive cash flow, which most of them aren't doing now, we would give all the cost savings of fuel to the client. But at low prices, the way they are, we can still give 50% or more of cost savings on fuel to the client and still - and that makes those fleets way more profitable for us.

Okay. So is it fair to say then that the conventional fleets are operating - so a little bit of the headwind to EBITDA per fleet going forward as sort of a mix hurts you a little bit? Because it sounds like you're getting better prices for the Clean Fleets.

Exactly.

Yeah. That's exactly right.

Our next question comes from line of Ian MacPherson with Simmons. Please proceed with your question.

Joel, I wanted to circle back to a comment in the release regarding some commercial opportunities that exist for expanding your Clean Fleet this year. So that to me was noteworthy. Obviously, you don't have tremendous balance sheet flexibility to do any fleet expansion on any form of speculative basis, clearly. So I presume you're contemplating sponsored fleet expansion. Can you elaborate on those possibilities and maybe any magnitude and timing of those?

We start - in the next 90, probably 120 days, we'll have three trials with three different clients with our original version of our fleet that we built in 2014. And all three of those clients are saying that they want to go electric. And actually, the first client wants to keep it if it goes well, which it will go well. However, we're making those decisions now. And when it comes to building them, I would like - we have all the auxiliary equipment to deploy two more electric fleets. We just need to build some pumps, which we could do through vendor financing/equity. So we think that by the end of the year with the demand we're seeing, we could potentially have two more electric fleets up.

Okay. And so really, you're speaking to your advantage as an experienced operator, this equipment, as well as less than a full 100% of capital requirement in order to build out a couple more fleets, because you have some of the capital in-house presently?

Exactly.

Correct.

Okay. I've got some more model stuff. I'll follow up with you later, Kyle, on that.

Our next question comes from the line of Daniel Burke with Johnson Rice. Please proceed with your question.

Let's see what's left. Joel, you guys have produced some pretty good efficiencies out there in the field. What's your outlook for efficiencies this year across the fleet, both the electrics and the diesels?

We, on efficiency-wise, are really happy with most of our fleets, especially the electric ones. The diesel ones that are coming out, we're seeing a slight improvement, but our efficiencies are top of our peer group and on our hours pumped per month. And we're excited about it. Now, on the electric side, there's some opportunities to where we deploy fleets without any generators and actually frack off the grid, which is why it's pretty robust when it comes to that. And a lot of people have built out - there's some clients, E&P clients that have built out substations and have contracted power from the electrical companies that are not using what they said they would use and are fixing to get charged penalties for using it. So we feel this will be an advantage to us also.

Okay. That's an interesting element of the build-out on the electric side for you guys as well then. All right. Okay. So we're in March, you got 10 fleets deployed. I assume the trials that would involve the first-generation electric would be additive to the 10. I think you've still got a couple of fleets on the diesel side left in inventory. Do you have visibility towards any further reactivations into Q2?

I do not - you're right. The first question, you're right, it will be additive to the 10 fleets. However, I do not foresee us putting any more diesel fleets out than we currently have out now, unless pricing would - potentially, pricing would have to double.

Okay. And does that speak to the reactivation cost associated with what remains?

Yes.

Okay. And then maybe just one last one -

Well, I'm sorry, Daniel. It specifically speaks to the pricing on diesel.

Yes, no. Okay. That's fair.

I mean that's the driving factor. Of course, if the pricing is substantial enough to where we can justify the reactivation costs, I would do it. But today's diesel prices are not even close to wanting to activate another diesel fleet.

Understood. And then maybe last one for me, maybe for Kyle, is any thoughts on cash flow outlook here for Q1? And if that's hard to speak to, maybe more simply, what would working capital trends look like in Q1?

Kyle, do you want to take that one, please?

Yes, sure. Yes, we made kind of big strides in the second half of last year, getting our working capital back in line. And I think things are normalizing and heading in the right direction. I think thinking about the company kind of in a steady state working capital environment and looking at EBITDA less maintenance CapEx, we should be in a positive cash flow position.

Our next question is a follow-up from Stephen Gengaro with Stifel. Please proceed with your question.

Two other quick ones, please, gentlemen. The first, you might have mentioned this, I may have missed it. Any thoughts on 2021 CapEx outlook? And you mentioned in the release about potential opportunities to expand the fleet. If you looked at something like that, what kind of contract would it require? And how would you think about financing it?

Like I mentioned earlier, it would be through equity and vendor financing. And that would be - we would add another 36 or 37 pumps. And I think - and two blenders and that runs about right at $50 million, which would probably be done through equity/vendor financing.

Great. And then just maintenance CapEx for 2021, is it similar to 2020 on a per fleet basis?

It's going to be slightly higher, Stephen. And that's just because the proportion of diesel fleets is going to be increasing relative to 2020 levels. So it's going to be slightly higher. It will be probably more in line with what our 2019 figures look like.

We have reached the end of the question-and-answer session. Mr. Broussard, I would now like to turn the floor back over to you for closing comments.

Thank you for joining us today. Have a good weekend.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.