ProPetro Holding Corp. (PUMP) Q3 2026 Earnings Call Transcript

Good day, and welcome to the ProPetro Holding Corp third quarter of 2026 conference call. Please note that this event is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the call over to Matt Augustine, ProPetro's 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 Wetherall, President and Chief Operating Officer, Adam Munoz, and President of ProPower, Travis Simmery. This morning, we released our earnings results for the third 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. With 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 for 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. ProPetro delivered a solid third quarter, higher revenue, debt income, and adjusted EBITDA in both our completions and ProPower. ProPower posted a meaningful sequential step-up as we continue to advance its commercial and operational execution and activity. While the cost of rebuilding its completions' capacity continued to weigh on margins, our fleet is now essentially sold out, positioned to re-contract into a tighter, better-priced market in 2027.

Let's start with ProPower.

Since our last update, we've made a significant progress across the business. ProPower generated approximately $8 million adjusted even on the third quarter, a meaningful sequential input. Results and margin performance at the project level continue to meet our already high expectations, which reinforces our confidence in the earnings and return growth. We expect to keep scaling deployments through year-end, reaching between approximately 250 to 275 megawatts deployed by the end of 2026, and stair-stepping to more than 500 megawatts by early 2028. We expect this growth to come from scaling our currently contracted capacity, deploying or preparing to deploy on the TARGA award, which is scheduled to be fully deployed by early 28th, and beginning to scale one or more additional data center projects over time. Looking further ahead to 2027, much of our work will be preparing for larger infrastructure-scale projects, including the TARGA award and potential additional data center awards, Which could begin deploying as early as late 2027. As a result, we expect 27 earnings to be weighted towards the latter part of the year, with growth following a stair-step pattern as projects come online, rather than a straight line. Projects of larger scale require significant lead time. We expect certain costs, including personnel, site preparation, and mobilization, build ahead of these appointments, or the corresponding revenue. By emphasizing discipline execution and actively de-risking these larger deployments, we are building on the strong operational foundation we established in 2026, and we remain confident in our pro-power guidance and the long-term earnings. The more recently announced agreement with TARGA for approximately 230 megawatts is our total capacity committed under contract. This award represents meaningful progress. It also shows how broad power demand is across end markets, including oil and gas, extreme and industrial, in addition to data centers. Contract terms and defectors are generally shorter than those in the data center arena. Pricing and expected annual return are very attractive. In the larger load requirements and longer contract duration in the data center arena, along with the depth of our pipeline there, we continue to expect to deploy the majority of our assets. Approximately 2.6 gigawatt power generation capacity that's secured. More than one gigawatt consists of Caterpillar's highly efficient 10-megawatt units. They're a part of our strategic plan. With supply chains for power generation equipment remaining very tight, we believe this agreement and our early mover position provide a meaningful advantage. Beyond just securing supply, the 10-megawatt units themselves are highly efficient, stationary natural gas engines purpose-built for permanent high-density neutrality. They maximize efficiency for our customers while lowering our total costum. The vast majority of our fleet will be natural gas reciprocating engines ranging from 2 to 10 megawatts, which we believe are the ideal fit for every vertical we are currently pursuing. Of note, our smaller units are also proving to be very successful. Our first data center deployment, which is live and operating today in the Midwest United States, is largely built on 2.6 megawatt units. Reciprocating engines offer a number of advantages that we believe make them the right to thrive. There are proven technologies with mechanical drive and our continuous duty-graded machines trusted in high availability environments, Including data centers, oil and gas, mining and industrial operations, and marine and heavy transport. We're uptight in performance. They provide flexibility, scaling, and modular blocks alongside customer demand with built-in redundancy. They deliver high fuel efficiency, are cost-effective for both ProPower and our customers, and our emissions framework, which supports an efficient permitting. These advantages apply across our entire fleet. Our 10-megawatt units are adding even greater scale for our customers' largest power unit. In the data center arena, despite broader volatility and the noise in the AI market, we remain in advanced negotiations on several hundred megawatts and continue to progress a number of additional opportunities. The pipeline also continues to grow, strengthening our conviction and our strategy in investments. As we have noted previously, timelines have extended as we work through diligence and counterpoint. These agreements involve long-term capital commitments on both sides, so getting the risk-sharing provisions right is critical. Strong demand for our assets can also lengthen rather than shorten the contracting process because we're being deliberate about choosing the right long-term partner. In addition, change in scope for timing on the project can make a previously unworkable opportunity viable or free up capacity for customers who otherize because we're allocating capacity across multiple customers. Individual deal timelines may shift to determine how each opportunity fits. Accordingly, we remain very confident. And importantly, they're currently deployed and operating on a hyperscaler project, and execution is done exceptionally well. We are one of the very few behind-the-meter power providers live on a data center site today, and we believe this operating track record validates our strategy and will help accelerate it. ProPower guidance also remains clear and unchanged. We continue to expect capital costs of approximately $1.4 million to $1.5 million per megawatt. That figure includes the balance of plants and expected inflation over the life of the cattle, and it reflects the advantage of our... We continue to target payback periods for four to six years, with oil and gas and midstream projects, and they're generally shorter. From a financing perspective, we have raised approximately $1.5 billion to support ProPower, including our highly successful $690 million convertible notes offering earlier in May, which largely addresses our near-term capital needs. Going forward, we will approach future capital decisions opportunistically as we continue expanding our commercial footprint. Now turning to completion, I want to address the costs that weighed on margins this quarter. As activity declined during 2024 and 2025, there was tariff-related uncertainty, and if OPEC-plus production increases, adding to the pressure, we took decisive action to reduce operating costs and capital spending during those years. That protected the free cash flow through a challenging market, but we've had to rebuild some of that capacity as demand has recovered. Improved pricing and better visibility into the duration of work supported the reactivation, bringing us to 13 active leads today. The latest addition deployed in the third quarter, earlier than we originally anticipated, we are now essentially sold out. Supporting the increase in activity has required rehiring field personnel, restocking inventory and spare parts, and preparing additional funds. Hire utilization has also put pressure on our field operations and maintenance. While the cost of ramping back up has been higher than we originally anticipated, we are proud of how responsive our operations team have been in meeting increased customer demand. We expect to maintain approximately 13 active fleets in the fourth quarter. That said, we expect meaningful seasonality in the fourth quarter from typical holiday slowdown, which will temporarily affect utilization and results, along with continued margin pressure from the rebuilding costs we experience. As activity stabilizes as we move into 2027, we expect to begin optimizing those costs, although the full benefit may take time. We're optimistic that our investments will pay off and create meaningful value for our shareholders as we recontract with a ton. The way we have managed through this period, flexing capacity up and down with the market while keeping our balance sheet strong, reflects our discipline, as well as the resiliency of our industrialization. Now, stepping back to the broader market. Conflict in the Middle East continues to influence commodity prices and customer activity. But it's also highlighted something that we've been talking about, the amount of crack capacity that has already exited the market through consolidation and nutrition. Smaller, less-discipline competitors could not sustain the downturn, and much of the excess capacity is disappearing. As activity stabilizes, customers are increasingly recognizing that tighter supply environment, which is constructive for our business. To put some numbers around that, we estimate the active Permian tract leak current is in the mid-70s today, and years of attrition have drastically reduced the supply of high quality. On the demand side, even a modest increase in drilling activity, particularly from large, public, and independent operators, would be enough to fully type the market. On the supply side, we believe the industry could only bring back perhaps a handful more groups in the permanent before it would need to make significant new investments to add capacity. Given the capital discipline and focus on free cash flow across the completion space, we do not expect that investment to materialize any time soon. In short, demand is poised to grow and suppose well for our lighter market is already showing up today in pricing. We're seeing early pricing momentum, led by next-generation natural gas burners, which command a clear premium for today's spread. Those fleets are effectively sold out industry-wide. We expect that premium to hold regardless of how the conflict is in the middle of the year. As limited supply and global refining constraints keep mutual prices elevated, that pricing momentum is also relevant to the timing of repricing our contracted fleets. Thank you. In completions, the setup is straightforward. Sold-out fleet, pricing market, and early pricing mobile. We still have work to do on the cost side as we absorb elevated expenses, ramping the system back up. But as activity stabilizes, our focus shifts from rebuilding to optimizing. And we expect to bring those costs back. Our primary focus remains commercial, converting our pipelines into signed, long-term contracts, and deploying and operating those assets reliably. We've secured the equipment to support that growth, and our performance in the field is strengthening our commercial position as we advance additional data centers. As I noted earlier, we expect 2027 to be a year of building towards larger infrastructure-scale deployments with growth-weighted across both businesses. We're doing what we said we did. We are excited about the opportunity. The completions market is moving in our favor. ProPower is executing and scaling, and we have the balance sheet, the equipment, and the team to capture what is in it.

With that, I'll turn it over to Phil. And good morning, everyone.

As Sam mentioned, both ProPower and our completions business delivered higher revenue, debt income, and adjusted EBITDA of this quarter, while completions market reflected the costs of rebuilding the operational infrastructure. During the third quarter, $55 million. Increase of 16% compared to the prior quarter. Net income totaled $13 million, or $0.09 income per diluted share, compared to a net loss of $8 million, or $0.07 loss per diluted share in the prior quarter. Adjusted EBITDA totaled $60 million, representing 17% of revenue and increased 33% sequentially. The increase was primarily driven by high incremental deployments in ProPower. Adjusted EBITDA as compared to 60. The decrease is primarily attributable to working capital headwinds and $10 million. These ProPower capital are looking ahead to certain ProPower contracts.

The second quarter, seeing early pricing on our contract at horsepower, set up for our completions. The market is waiting on it. We recognize this is the end. Our message is not changed. Operationally, it means real assets running in the field today, including a data center site and several Permian microgrids for oil and gas customers. Each with the supply chain, we're in a premium position relative to most secure megawatts through the Caterpillar Framework Agreement. The result is 2.6 gigawatts of secured equipment, including over 1 gigawatt, a 10-megawatt CAT, reciprocating engines, purpose-built for data centers. Locked in at a market where access to equipment has become the gating item, but is a real durable advantage. And behind all of this sits a strong execution support system. The people, the maintenance infrastructure, and the operating discipline we have built over years in the completion space. We have not over-promised or been deliberately disciplined. We would much rather under-promise and deliver. So simply put, we're doing exactly what we said we would do, and we're building a track record of execution. We look forward to demonstrating that execution across every one of our service lines. Let me leave you with this. This is a very strong company. We have a strong balance sheet for the first class company, from leading operators in the Permian Basin to investment-grade midstream partners like Targo, the data center customers group.

To our employees, thank you.

Your execution in the field, in the maintenance shop, and on the power sites is what gives this management team the confidence to move forward with this strategy. Every fleet we stood back up this year and every megawatt we commissioned happened because of it. We're excited about where the business is headed, and we're confident in the setup for 2027. We look forward to sharing more with you again soon.

With that, operator, let's open the line for questions.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, to join the queue, it is star one. Your first question comes from the line of Saurab Pant of Bank of America. Your line is open.

Hi, thank you. Good morning, Sam and Caleb.

Morning, Saurab.

Sam, so really good update on ProPower, especially the $8 million positive EBITDA. You're turning the corner there. So that's a really good update. And then you also expect to deploy more than 500 megawatt by early 2028. And I noted that includes one or more additional data center contracts. So just on that point, can you talk a little bit about where you are in your conversations with these data center customers on contract? And then just from a timing standpoint, how should we think about timing of signing a contract relative to ordering the balance of plan equipment and then putting it all together for deployment starting in there? I think you're targeting late 27 or early 28. So maybe if you can help us with that a little bit.

Yeah, thanks, Sarab. I'll point out a couple things here real quickly and then let Travis talk about the power contracts. Look, just to reiterate what was at the end of my scripture remarks there, we're doing exactly what we said we would do, and we're really hitting our guidance and executing well in the field. So, we're just really trying to over-communicate the fact that, and I know you've been paying close attention, Sara, but this has all been in the plan for almost a year now from a guidance standpoint. So, we're excited to see it come to fruition.

Yeah, just to be clear on the capacity also, sir, a data center contract would be incremental to that 500. That 500 reflects the 510 that we have contracted and have guided will be deployed in early 28. But as far as the conversations in the data center space, you know, despite kind of the broader turmoil in the data center market, our specific conversation is we're dealing with We're headed in the right direction towards execution. And as you mentioned, you know, that includes balance of plant equipment that needs to be ordered for these large infrastructure projects. We're in the middle of ordering some of that already, have line of sight to anything that might be on a project-specific timeline, and just continue to make really good progress on those projects to deploy, you know, potentially late 27, but for sure in 28 at scale.

Got it, got it. No, thanks, Sam and Travis. That's a good point, good clarification on the 500-plus data center number. And then for a quick follow-up, maybe, Caleb, this one is more for you. On the balance sheet, financing side of things, look, the good thing is that you have ample liquidity, like you noted, north of $900 million over there, which I think should be enough for all of 2027. But as you sign these bigger data center contracts that Travis was talking about, what do you think makes the most sense for future potential sources of financing as you get these contracts and get deeper into the execution phase? And then related to that, I think you mentioned this a little bit, Sam, but you were talking about some customers willing to give prepayments, some upfront cash reservation fees right now. Just maybe a little more color on that, especially I'm thinking about the bigger 10 megawatt CAT units, which would be much more desirable, I'm thinking, for these customers.

Yeah, thanks, Zahra. So like you said, we feel really good from a liquidity standpoint, over $900 million of liquidity, over $700 million of cash. That doesn't count the $350 million undrawn Stonebriar facility. We want to just continue to be opportunistic and look at all available options and make the best choice when we need the capital. And so we're going to evaluate all of our options when we need the capital and make the best choice. And of course, prepayments are part of the conversation on these larger.

Got it. Got it. Okay. Thank you, Kelly, but I'll turn it back.

Your next question comes from Alexa Breno of Goldman Sachs. Your line is open.

Good morning, team, and thanks for taking our questions. On the power side, it sounds like you're seeing attractive returns across all different end markets. Can you just talk about the varying economics of some of the shorter duration contracts you mentioned versus maybe some of the potential data center contracts? And then how do you evaluate the opportunities from a return and capital requirement perspective.

Yeah, thanks. So on the oil and gas, I would take more extreme space. We're certainly seeing closer to that four-year or better payback. And then on the larger long-term deals in the data center space with this larger infrastructure capital requirement, that's certainly probably towards the higher end of the four- to six-year payback. But ultimately, we're really continue to be excited about these two markets and broader power markets in general starting to levelize in terms of the contract requirements, the pricing structure. We think that's going to continue into oil and gas midstream space where we've got longer tenors that will hopefully be coming in the future because that's the expectation on these highly efficient, larger infrastructure.

Okay, that's helpful. And then maybe just switching gears a little bit to the frack business, can you just talk about what you're seeing in the market, maybe more so from equipment bifurcation? How should we think about pricing for some of these more electric feats, maybe some of the older age ones? And then how are you thinking about it as we go into maybe back half of 27 even?

Yeah. I mean, I think if you just kind of play off my comments in the opening remarks, it's really starting to set up really well. You know, on the outset of the Iran conflict earlier this year, we might have originally thought that that tightness would have come sooner than it has, but it is really starting to gradually tighten. And the natural gas burning equipment for us is, you know, in the way of dual fuel, a little bit of direct drive gas and electric has been sold out and has held its pricing a lot better than everything in our portfolio. So it starts from a little bit of a higher basis. That said, this whole dynamic of diesel right now and the high price of diesel with a continued lower price of natural gas continues to keep that equipment in very, very high demand. And frankly, you know, some customers that have been more of a dual fuel or a diesel focus in the past are now much more curious about things like direct drive and electric, which really plays into our hands and kind of our re-contracting timelines going into next year. So the overall market is tightening. I would say the leading edge on the spot market is already very tight. We're turning down a ton of work in that arena. All the meanwhile, we're still trying to manage all of our relationships and the market that we still play in into next year to create more consistency and stickiness with what we think are the top tier customers to move forward with. So we're, as you can tell in our scripted remarks and my answer to your question here, we're pretty excited about the setup for 27.

That sounds great. Thank you. We'll turn it back.

Your next question comes from the line of Derek Podhazer of Piper Sandler. Your line is open.

Hey, good morning. I wanted to ask about your comments, negotiation, the timeline's extending when negotiating with these big power projects. If you just could expand on those different drivers that's lengthening this process, is it community pushback, moratoriums, or just maybe more on the commercial terms? I have to imagine that your current 60-megawatt data center project helps de-risk some of the contracting structure and terms because it's something you can point to. Maybe help us understand more about the drivers behind these timelines being extended.

Yeah, thanks, Derek. It's really not anything to push back type thing to talk about. It's more the real contract risk exposure on both sides, liability damages. When you're talking about this large of an installation for this

longer period of time and really kind

of getting the scope right between the parties on these types of projects, the initial 60 megawatt contract certainly gives us A great starting point in these discussions, given that there's very few of us that have done this, right? But as they get a lot larger and longer in turn, there's just a lot more scrutiny on both sides to get the right answer.

Yeah, and Derek, I'll just add on to that. Watching Travis and his team work through all these commercial opportunities, the demand remains, like, super strong. We're very confident that the majority of our capacity is going to be placed in the data center market over time. Um, they, they juggle a lot in this commercial pipeline at any one time are running several opportunities in parallel that could affect one another. And as some of those opportunities, you know, that are running parallel to each other might speed up or slow down. Sometimes it changes your focus a little bit and then can change your timeline. All the meanwhile, you know, we're, we're, we're trying to make what is the next best decision for our company. Our teammates and our shareholders to create as much value in the future. So, you know, a few weeks or a month on the front end to get the right long-term deal just makes sense to us to make sure that, one, we get the right deal, and two, we do it with the right amount of risk sharing like Travis.

Right. No, that makes sense. I appreciate the comments. Maybe just sticking on the equipment side of things, I'm just curious now that you mentioned the 10-megawatt recips from CAT, the bigger ones, just the interplay between the 10-megawatt and maybe the smaller, I don't know, two to four-megawatt units of recips. I know those are on your current data center project, but you're clearly leaning into the higher density 10-megawatt recips. So how do we think about the different applications that fit the 10 megawatt versus the smaller resips, or maybe are the smaller resips used to initially scale a project where the larger units take over for the longer term? Maybe just some education on why leaning hard into the 10 megawatts and the interplay of the smaller units and how this is going to really fit inside of your portfolio as we look in the future of ProPower.

Yeah, it's a great question. I mean, as the sites get larger, obviously power density matters. But the efficiency matters. I think these markets are getting more aware of how that efficiency can play into the overall cost structure. So when you look at the high-efficiency engines, they're anywhere from 20% to 40% more efficient than a simple cycle turbine-type solution, which we think is extremely attractive. Bolting on smaller modular units does help with the variability of load. It also helps with your redundancy story when you start thinking about providing significant redundancy on these sites. And so the 10-megawatt units interplayed with the 2.6-megawatt engines as well as battery systems, we think is an extremely attractive power system to be able to deliver the most reliable, efficient solution while always making sure that the emissions are

high and allow us to have the most capacity.

Great. Appreciate all the comments, guys. I'll turn it back.

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

This question is a quick one just on completions CapEx in 27. Could you just comment directionally, if you hold a 13 fleet program steady, what that ultimately might look like into next year?

Yeah, it's probably a little early right now, Josh. We're heavy in kind of budget and forecasting season right now, so we'll probably punt that question the next quarter.

Okay, that's fine. So you highlighted the possibility of the market tightening from larger publics and independents. Can you just describe those conversations today, how they've evolved over the last couple of months? As it seems, obviously, most of the uptick has been driven by the privates.

Yeah, I was going to start my comments with what you just said right there at the end, that that is a fact that most of the rig increases earlier this year have been with the privates. But in conversations with the larger independents and the publics, I think every day these commodity prices remain higher is another, you know, piece of confidence that they gain going into next year and potentially increasing activity. That said, they're all pretty savvy. I think they understand what's going on in the supply chains, and they'd like to be as least disruptive as possible. Um, but, you know, judging off of our conversations and some other, um, you know, public commentary, we, we fully expect another batch of rigs to come into the system,

you know, towards the end of this year, going into next year.

Um, and we, we have seen all of those larger independents and privates to run operations that are extremely capital efficient. Therefore, they're not going to drill wells to just let them sit around. They're going to want to complete those wells and take kind of a combination of customer conversations and boots on the ground intel out here that, you know, bolster the overall 27 market tightening. And I guess the other piece of it that maybe sometimes we take for granted, but it's still important. We've already mentioned in our opening remarks here this morning is the market just the equipment market just doesn't have anything left to give. I mean, it's tapped out. We're tapped out. We've got no extra equipment, as we sit here today. We've heard several of our larger competitors say the exact same thing. There's no slack in the system in our larger private competitors, and there's not really anybody that's willing to underwrite any meaningful investments to fix that right now in our sector. So we think it's a good supply-demand equation, I think, in our favor going into next year.

That's helpful. Thanks. And then if I could just squeeze one more, you alluded in an earlier question that you were turning away work for 2027, but I assume you're not completely spoken for for the entire year. So for those opportunities that you are turning down, is it just more pricing you're holding out for? Is it a more comprehensive program, potentially with a larger operator? Maybe just talk us through that a little bit, and then I'll turn it back. Thanks.

Yeah, I'd say a lot of it's just spot market work that we just can't get to and don't really prioritize in our dedicated fleet model. But there is definitely a demand for it. And I think that that's what's helping push pricing along across the entire sector. 27, look, I mean, we historically, as I've already mentioned, like and prefer the dedicated fleet model. We don't like to jump around from customer to customer with an individual fleet. So we already feel pretty good about the 27 calendar. I think it's not going to be an effort to fill in gaps as we sit here today. It's going to be more of a portfolio optimization to make sure that we have our teams and assets sitting with the best opportunities. And that's really what the task is from a 27 standpoint today. Calendar's basically full. We just aren't convinced that it's full with the right work.

Understood. Thanks. I'll turn it back.

Your next question comes from the line of Jason Kim of JPMorgan. Your line is open.

Good morning, team. Thanks for taking my question. Just sticking on the FRAC side, you mentioned that more than two-thirds of horsepower is contracted. How much of the electric force fleet is up for renewal in 27, and how does the pricing on those E-fleets compare to You currently contracted rates. And just to confirm, has any recontracting not yet occurred? Just trying to think about how much upside might be remaining. Thanks.

Yeah, we've already we've already recontracted a little bit of that with a customer that wanted to keep what they had and was commercial with kind of like a click and drag. Um, maybe half the fleet going into next year is going to recontract, um, a little bit with the same, or we, we, we expect some, some same customers to stay and we expect that going into next year as well. And I had, it's a, it's a, it's interesting timing, uh, maybe a little bit of his luck, but almost a year ago we had a chance to recontract almost a hundred percent of that electric equipment. We chose not to do so because we didn't like the pricing opportunities in the market, and we sit here today with, you know, we're in negotiations with new customers under new terms for the remainder of that capacity right now, but everything's going to work in 27. We've got high confidence, almost zero doubt that any of that equipment is going to be stranded for even one second. And a lot of that has to do with how our team has performed with this electric equipment. I'd like to think, you know, we might not be the biggest electric provider and the electric track provider in the Permian Basin, but I'd put our operating stats really up against anybody in that arena. And that's been a huge help to our commercial efforts. And we expect that performance to continue.

And to garner a very attractive price.

Understood. And just as a very quick follow-up, directionally, is the force premium overdose tier 4 DGB widening as diesel stays elevated?

Sorry, ask that question again.

Is the force premium over some of the dual fuel fleets widening as diesel stays elevated?

It definitely helps. But the dual fuel, given its flexibility, modularity, has been very, It's a very, very attractive tool and application for us and our customers. It's a little bit apples and oranges, but the high diesel prices are definitely helping anything that burns natural gas.

Got it. I'll turn it back.

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

Your line is open.

Hi, good morning. So you said the data center pipeline includes several hundred megawatts in advanced negotiations. Can you frame for us how many distinct projects that represents? Just trying to get a sense that that's one to two projects or maybe closer to four, four to five maybe. And in these conversations with data center operators, are you finding that these operators would prefer that BTM providers like yourselves also provide the balance of plant equipment, or are they happy to just lease the power gen from you guys?

Yeah, so it's definitely more than one opportunity. I would say there's two that are really active that we're excited about in that several hundred megawatt range. We can't do everything in the pipeline right now, so we've had to narrow our focus on the most realistic, executable fields and the timelines that we have available. As far as the balance of plant, we get the question a lot. We see that as a necessity. We can't build a power plant without the balance of plant equipment, whether it's electrical, transformers, upfront gas conditioning, and distribution, as well as all of the emissions control. And then whether the hyperscaler or we are asked to take on the battery system, that's the discussion on a project-by-project basis. But we're providing a full turkey service. We're not interested in just dry leasing assets. Our business model is built on operating 24-7 and maintaining our assets and the reliability of that with power.

I understood. Thanks.

Thanks for that color.

And just shifting gears to the frack side of the business, you mentioned kind of the tightening market and that you guys are completely sold out. Just to confirm, I think that implies that you guys don't have a 14th fleet to reactivate, even if you wanted to. And if that's the case, do you think that pricing and economics could increase to a level next year that might justify new-built horsepower, or are we still far away from those levels?

We don't have any interest in working any more equipment than we're working today, nor do we have any interest in making any CapEx investments above replacement, refurbishment of our existing fleet. I can't sit here and speculate about what if and would we invest differently. We're just not today. That's just not in the conversation. So it's not something that we're really thinking about.

Got it. Got it. And just to confirm, you guys don't have a 14 fleet to be able to reactivate at this point, correct?

I mean, we have old worn out equipment that we don't plan to ever work again, if that's what you're referring to. And look, all this is fungible, too. Like 13, 14, we could have a fleet go from simulfrack to zipper back to simulfrack. We're just trying to provide you clean guidance that's not confusing here. And this is – I'll just add to that. There's a happy medium to around the equipment flex, the amount that you have to, you know, the maintenance rotation that reduces and keeps your MPT low, your maintenance costs low. So we're measuring all those options on the table right now as well.

Appreciate the color.

I'll turn it back.

Your next question comes from a line of Jeff LeBlanc of TPH. Your line is open.

Good morning, Salmon team. Thank you for taking my question. I wanted to see if you could talk more about the cadence of forced eFleet buyouts over 2027 and how quickly it'll flow through the financial results.

We're still expecting three next year. And as you know, right now, that eFleet lease expense is impacting our EBITDA. So as we execute those, the expense will begin to roll off when we do each buyout.

Okay, and then separately, on ProPower, I was flipping through the presentation, and for the power plants, you're targeting a 10- to 15-year term. I guess two questions there are, A, does that include an optional period, and then B, where do you expect the average term in that range to be? Thank you.

Yeah, I mean, for larger installations that you're seeing in the presentation, several hundred megawatts, we are only looking at 10-plus years. Options and extensions are all negotiable on the table, if it makes sense for us, but ultimately, we want to get a long-term partner on those types of projects, and 10-plus is growing up.

Okay, thank you very much. I'll hand the call back to the operator.

Thank you. And again, if you have a question, it is star one on your telephone keypad. Your next question comes from the line of Don Crist of Johnson Rice. Your line is open.

Good morning, guys. Hopefully, y'all are doing well. Sam, I wanted to ask about labor. You know, we've been hearing some antidotes about people leaving to go build data centers and drive trucks for data centers. And just any comments around labor and upward momentum and what you're paying for people?

Yeah, that's a good question, Don. Maybe we take some of that for granted sometimes because it's just such a normal, everyday thing that our team is focused on and working through, trying to make sure that we're acquiring and maintaining first-class people. So, it's hard. And, you know, when the broader economy pulls on a workforce, on a blue-collar workforce, you know, I think we definitely feel it. It causes inflation. We've not been without. So, our team's been able to acquire what we needed to do what we've done this year in standing up some more equipment across all of our oil field service lines. But it's something that we're having to keep a close eye on and likely over time creates more and more labor inflation, not less. You know, we also have, just as a reminder, I know, Don, you probably know this, but you have a fairly transient workforce, too. So, you know, we have a lot of people traveling in and out to, you know, work their shifts. And, you know, it's just as easy for them to commute from, you know, maybe a West Texas frack site as it might be, you know, a data center in the area as well. So, you know, the work kind of attracts a lot of the same people. So it's, you know, it's just to summarize, it's something we're keeping our eye on, but it hasn't totally inhibited us yet. Okay. I appreciate that color.

And I don't know if you want to answer this or not. Maybe you want to punt this question, but I'll ask anyway. The 10-megawatt deliveries, any way you could give us a schedule? Is it pretty even throughout, you know, all of the equipment that's on order, or is it kind of more back-weighted to 28 and beyond versus earlier than that?

Yeah, no, it's pretty even, but starts in the back half of 28, and then continues on an evenly distributed capacity through the end of the frame agreement.

Okay, so the smaller units are earlier in the delivery cycle.

Yeah, that's certainly what we have. What we have now that we're building, obviously, these power nodes today that are working on a data center and other microgrid applications, while in parallel able to stand up some larger 10-megawatt units for these infrastructure-type projects we've mentioned.

I appreciate the color. I'll turn it back. See you in a couple weeks.

Thank you. That concludes our Q&A session. I'll now turn the conference back over to Sam Sledge, Chief Executive Officer, for closing remarks.

Yeah, thanks, everybody, for your interest in the company. Thanks for joining us today. Thanks again to all my ProPetro teammates that are making things happen. We hope to talk to you all soon.

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