Good morning, everyone, and thank you for joining us. For today's call, I'll start by going over our financial and operational results for the first quarter and provide guidance for the second quarter and future periods.

I'll then provide an update on our flagship innovation, machine IQ and fleet automation, and finish with some comments on our emissions reduction initiatives, before turning to Q&A. Let me begin by mentioning that when referring to our fourth quarter results, I am referring to them on a combined basis.

That is, by combining the predecessor and successor periods that we're required to report. The predecessor period runs through November 19, 2020.

Revenue for the first quarter was $95.9 million compared to $49.8 million in the fourth quarter, an increase of over 90%. We had $7.8 million of adjusted EBITDA in the first quarter, a $13 million increase sequentially.

The higher revenue was primarily driven by 3 items, an increase in fully utilized fleets, an average price increase of roughly 10%, and an increase in the amount of materials and freight that we provided to customers. While the higher prices were instrumental in getting us to positive adjusted EBITDA in the first quarter, the full effect of those prices will not be realized until the second quarter.

Like others in the industry, we experienced significant disruptions from winter storm Uri in February. We estimate that the disruptions caused by the storm itself and lingering logistics impacts cost us about 700 stages, which we estimate adversely affected adjusted EBITDA by $2 million to $3 million.

We averaged 13 active fleets in the first quarter compared to 10.5 in the fourth quarter. When combined with higher fleet utilization, we were able to complete 35% more stages, and pumping hours increased by 51% in the first quarter.

Pumping hours increased more than stages because average pump time per stage increased by 12% due to changes in job mix. This quarter, we've started reporting pumping hours because it has become an increasingly important operating metric.

Most of our customers evaluate us based on pumping hours, and we are pricing jobs using pumping hours to ensure that we account for the variance in profitability between different job designs. We also are now reporting the cost of materials and freight we provide to customers, which increased to 20% of revenue in the first quarter, compared to only 7% in the fourth quarter.

Materials and freight specifically relate to the total delivered cost of sand and chemicals. As industry followers know, these percentages can vary significantly between periods and between frack companies.

Because there is essentially zero margin in materials, and most of our customers prefer to handle it themselves, we focus on equipment charges and what we call job profit, which is revenue less the cost of materials and freight. SG&A was $10.5 million in the first quarter compared to $9.8 million in the fourth quarter.

The increase was primarily due to compensation and professional fees, offset by $1 million reduction in stock-based compensation. We currently expect SG&A, including about $4 million of stock-based comp to be between $40 million and $45 million in 2021.

For depreciation and amortization, I did want to point out that our new quarterly run rate is between $14 million and $15 million, which has reduced from predecessor periods due to the revaluation of our assets in connection with our emergence from bankruptcy in the fourth quarter. We had a net loss of $7.9 million, or $0.56 per share, in the first quarter, compared to net income of $93.3 million in the fourth quarter, which included a net benefit of $115 million from reorganization items.

Capital expenditures were $5.3 million in the first quarter compared to $1.8 million in the fourth quarter. We had no growth CapEx in either period.

We continue to be capital disciplined and cost effective in maintaining our equipment in good working order, enhanced by our digital initiatives. The sustained solid performance of our equipment is evidenced by our ever-increasing operating efficiency, working in some of the industry's harshest conditions, in terms of rate and pressure.

We ended the quarter with $86.4 million of cash and $31.6 million of availability under our revolving credit facility, for total liquidity of 118 million. Cash used in operating activities was $15 million in the first quarter.

However, that included a $22 million increase in working capital to support higher revenue. We also had a cash usage in the fourth quarter, but that period is distorted by restructuring costs.

Looking ahead to the second quarter, we currently expect adjusted EBITDA to be between $11 million and $15 million, fully utilized fleets to be between 10 and 12, and continued strength in stages and pumping hours per fully utilized fleet. The slight reduction in fully utilized fleets in the second quarter relates to gaps in our operations counter caused by being ahead of schedule and quarterly budget exhaustion by a couple of our customers.

We currently expect to increase to 12 to 14 fully utilized fleets in the third quarter. The outlook for the back half of the year looks solid, and we currently expect adjusted EBITDA to be in the $50 million area for 2021.

We also expect further positive momentum in terms of fleet count and pricing levels, going into 2022, and that will allow us to achieve more normalized profitability levels next year, which we put in the area of $10 million of annualized EBITDA for a fully utilized fleet. Turning to technology.

Last month, we issued to 9 fleets as of today, and we expect then to have it rolled out to all of our remaining active fleets by the end of this month. This technology enables us to pump at a consistent rate throughout a stage more closely per engine or power-in problems.

By avoiding mid-stage disruptions, average pump times per stage will decrease, adhering to job demands for our equipment by avoiding more costly failures that could occur if not immediately identified and mitigated. Avoiding equipment failures during the stage also greatly improves safety on location.

Lastly, we remain committed to providing our customers with more emissions-friendly equipment. We currently have 7 dual-fuel fleets deployed and we stand ready to quickly and cost-effectively convert more fleets, depending on customer demand.

To further reduce emissions, we are working on utilizing the fleet automation technology I just discussed, to optimize diesel displacement rates on our dual-fuel units. We're excited about this potential, and we also are evaluating other ways to operationally lower fuel consumption and/or increased displacement.

We continue to seek opportunities to utilize our cost advantaged in-house manufacturing, to replace Tier 2 engines with Tier 4 DGB engines or build a new Tier 4 DGB fleet, to replace that Tier 2 fleet. DGB stands for dynamic gas blending.

However, we're finding that the economics for these upgrades still do not work in the current environment. To justify the investment, we will need to have a suitable commitment from a customer at a premium to today's pricing.

We think we'll get there, just not today. I'd like to draw some distinctions about the different types of engines that I'm referring to.

By DGB, I'm specifically referring to the Cat 3512E Tier 4 Final DGB engine, which is specifically designed to burn natural gas and diesel fuel. It's designed for a maximum displacement rate of 85%.

However, we expect average displacement to be closer to 75%. A Tier 2 or regular Tier 4 engine that has been outfitted with a dual-fuel upgrade kit has a lower average displacement rate.

Also, the use of upgrade kits is not as beneficial in reducing total greenhouse gases, due to methane slip. We believe that the Tier 4 DGB engines are the best emissions reduction solution currently available, in terms of displacement rate, performance, maneuverability, operational flexibility, and costs.

In the future, we think that natural gas fired reciprocating engines, as part of a modular electric fleet, could become a competitive solution. That's all I have for prepared remarks.

Operator, let's now open it up for Q&A.

Nice improvement in the revenue this quarter. Mike, you have a long list of benefits from the machine IQ.

And I'm just curious, is there any way to quantify that or is it just too much, or too early at this point?

Well, we think there's significant potential there, but it's a little too early to really quantify what it means. I think there's 2 elements to it.

There is reduced maintenance expenditures in terms of CapEx and R&M expense, which we've already started to realize some of that over the years, but we expect that to increase with MIQ deployed. And then, also monetizing that from the customer.

We think there's a good value proposition to be made with this technology, and we just need to make sure that, that gets out there and customers increasingly feel comfortable with it, and willing to pay for it.

Okay. Fair enough.

The other one is on simul-frac. Don't know if you guys have been actively doing any yet, or if you will do it, but assuming that answer's eventually, yes, are you going to treat that as one fleet or 2?

How are you going to report that? Any thoughts?

Yes. So in the first quarter we had 2 simul-fracs working, and I think in the second quarter we will have also 2, maybe 1.5.

But yes, we count that as one fleet. It's basically a fleet and a half worth of equipment.

But as you know, we're doing 2 Wells at a time.

Got it. Okay.

And then just on the outlook, I know you gave a positive guidance for Q2 and indicated rate. Do you have any reason at all to believe that there is a Q4 slowdown because people outspend budget, or is it too early?

It's too early to say. It does seem like E&P companies are now focused a little bit more on quarterly spend.

Maybe it has to do with the earnings season, and earnings calls, but it appears to us that they're trying to flatten that out, but I say that every year, and then every year it ends up being a little bit different in December.

Okay. Fair enough.

Now I just, if you look at some of the Marcellus guys, it seems like they might be front-end loaded, but others are not, so that was my observation thus far. Okay, guys.

Great. Thank you, John.

It looks like you averaged 13 fleets in Q1 and mentioned that the outlook going forward looks pretty positive, and it might be too early to tell, but specifically in the back half of 2021, where do you see the fleet count going? And if you could also touch on the pricing environment, and maybe where you see EBITDA of the fleet going in the back half of the year.

Yes, sure. So I think at the back half currently, we're anticipating somewhere between 13 and 14 active fleets, and so fully utilized fleets will be somewhere in that area.

And so that's our current expectation. And I think if the demand is there and the pricing is there, I think we're definitely willing to activate additional fleets, but at this point we're remaining pretty price disciplined, and really want to see prices move up before really doing much more on activations.

And so in terms of annualized EBITDA per fleet, I guess that had to do some quick math. I did give the $50 million guidance for the full year.

I think that equates to 5 million annualized EBITDA per fleet in the back half.

I guess 2 questions. One just around the whole pricing dynamic.

Can you talk a little more about what are you seeing in the market as far as the E&P's preference for the dual-fuel assets, and their willingness to pay up for them? And how do you think it evolves?

Yes, so that's a great question. I think everyone in the industry is talking about that.

We currently don't see much of any pricing power, as it relates to dual-fuels. Sometimes it's a qualifier on an RFP, but in terms of expected economics, what can be achieved at a pricing level, we don't see much of a premium.

And I'm talking about a Tier 2 dual-fuel, the one that's been with the upgrade kits. I think that's just because the market is still oversupplied, even though it's in much better condition than it was 6 months or a year ago.

There's still ample fleets out there bidding for work, and so there's a ceiling on where prices can go, we think. But as it relates to some of the Tier 4 DGB, it appears that there may be some increment to pricing that's been achieved.

We're working hard to try to get that ourselves, had a number of conversations, and we're just not seeing anything strong at this point. I think in terms of where that evolves, I definitely think that there will be more pricing power associated with those dual-fueled technologies, especially Tier 4 DGB.

There's quite an investment to be made to convert a fleet, or build a new fleet, and it just makes economic sense that there needs to be some backstop against that, in terms of a customer contract, and improved economics versus a Tier 2, for sure. And so I think, as the market tightens up, I think as more equipment gets attrited out of the market and tightens up a bit, I think, if we see an increase in demand along with commodity prices, you just get a tighter market, I think you'll start to see more spread in the pricing between legacy Tier 2 and the Tier 4 DGB.

I think the Tier 2 dual-fuel is basically priced right around the same as just a regular Tier 2, from what we're seeing.

Great. And without getting too specific and trying to narrow you down to a number, your guidance, as you noted, suggested $5 million in the back half year, annualized EBITDA per fleet.

Just on sort of efficiencies, where can that go, absent price? I imagine you need price to get dramatically higher, but can that number go in the 7, 8, 9 range without material price?

Or how should we think about that dynamic to overhead absorption on price, going forward?

Yes, they give 7, 8, 9, just based on [indiscernible]. We do think there's continued room for efficiency improvements, if there's more simul-fracs that we start seeing, there's just ever increasing efficiency as it relates to logistics, and getting more pumping hours per day.

There's only so many hours in a day to be able to pump, so we're hitting some limits. I do think the use of MIQ to shorten the average stage times could result in more stages and more productivity coming out of that.

Those kinds of digital technologies might allow some additional efficiency as it relates to stages per day or per period. But I wouldn't want to put too high of a number on it at this point.

It certainly would be helpful, but nowhere near as impactful as pricing, just given the operating leverage in the business.

So let me come back in. Mike, or, Buddy.

As you alluded to the different new power solutions that are coming out, whether it be DGB or the gen sets, I'm curious if you're looking at any new technology.

Well, we're certainly interested in that, because I don't think there's been nearly as much innovation on the pump side as there could be or should be. And so I think, if you start looking at some of these, you're talking about, on one trailer, 5,000 horsepower or something in that area, compared to today's 2,500 horsepower configuration.

As you know, we manufacture our own pumps. And so we're looking what opportunity and ability of our existing pumps are at those higher horsepowers, and to see what modifications we might need to beef it up and to be a reliable at those higher horse, and test some of those pumps as well, in addition to working on our own.

Buddy, do you have anything else to add on the pump side?

No.

And then, the last one for me, just on some of the leashing designs? I imagine some companies, the last couple quarters or last year for sure, maybe reduced profit modes and all that, per well, to save money.

And has there been much demonstrable change in the well designs, in the last few months?

We haven't seen nothing discernible, John.

Okay. Well, let's go ahead and wrap up.

I would like to say that I am very excited to be on an upward trajectory, especially after last year. As I mentioned in the press release, our financial flexibility, operating efficiency, safety record, and innovation has never been better in the history of this company.

Look forward to speaking with you again, next time.