Stephen Gengaro

Stephen Gengaro asked about the deepwater market outlook for completion fluids in 2026 compared to 2025, its evolution into 2027, and the factors influencing margin progression for the fluid segment, including the pricing environment and the impact of the CS Neptune projects. He also inquired about the proportion of bromine needs met by the long-term LANXESS agreement.

Answer

Brady Murphy, President, CEO, and Director, explained that 2025 was a record year for completion fluids despite the market being 55% below its 2014 peak. He noted a cycle shift in 2026 towards more drilling and less completion activity in the Gulf of Mexico, which will impact 2026 but is expected to reverse in 2027, with the overall deepwater market remaining positive. He stated that pricing power for completion fluids is strong due to innovation leadership and vertical integration. Elijio Serrano, Senior Vice President and CFO, added that approximately 75% of historical bromine needs were met by the long-term agreement, with open market purchases increasing due to growing demand from deepwater and Eos. Murphy confirmed that increased third-party bromine costs are anticipated and factored into the 25%-30% EBITDA margin guidance for the segment, consistent with the past 7 years, reinforcing the business case for the new bromine plant.

Stephen Gengro asked about the deepwater market outlook for completion fluids in 2026 versus 2025, its evolution into 2027, and the margin progression for the fluid segment, including normalized margins excluding CS Neptune projects and the deepwater fluids pricing situation. He also inquired about the proportion of bromine needs serviced by the long-term LANXESS agreement.

Answer

Brady Murphy, President, Chief Executive Officer, and Director, explained that 2025 was a record year for completion fluids despite the market being 55% below its 2014 peak. He noted a cycle towards more drilling and less completion activity in 2026, which is expected to reverse in 2027, with a positive overall deepwater market outlook for the next 3-4 years. Murphy highlighted strong pricing power due to innovation and vertical integration, which helps offset higher spot market prices for third-party bromine. He projected adjusted EBITDA margins for the segment to be in the 25%-30% range, consistent with the past 7 years, reinforcing the strong business case for TETRA's bromine plant. Elijio Serrano, Senior Vice President and Chief Financial Officer, added that historically, approximately 75% of bromine needs were met by the long-term agreement, with open market purchases increasing due to growing demand.

Steven Gengaro inquired about the margin progression for the Cactus International business over the next three to five quarters, specifically how applying the 'Cactus way' would impact synergies and profitability. He also asked for management's view on the evolving U.S. activity, particularly regarding rig count progressions.

Answer

Chairman and CEO Scott Bender stated that meaningful supply chain savings are expected to enhance margins substantially in 2027, as most 2026 orders are already placed. He expressed optimism about exceeding projected synergies for 2026. Regarding U.S. activity, Scott Bender noted that while most analysts project an exit rate of 500-510 rigs for 2026 (from 530 onshore), his personal opinion is closer to 490 due to the full impact of consolidation and geopolitical factors supporting current oil prices.

Steven Gengaro inquired about the expected margin progression for the Cactus International business over the next several quarters, specifically how applying the 'Cactus way' would impact profitability. He also asked for management's view on the evolving U.S. activity, particularly regarding the U.S. wellhead side and rig count trends.

Answer

Chairman and CEO Scott Bender indicated that meaningful supply chain savings, leveraging Cactus's own supply chain, are anticipated to substantially enhance margins starting in 2027, with optimism to exceed 2026 synergy projections. Regarding U.S. activity, Mr. Bender projected an onshore rig count around 490, lower than most analyst estimates, citing the full impact of consolidation and geopolitical factors.

Stephen Gengaro asked about the components of Eos Energy's 2026 revenue guidance, how the company is de-risking its parameters given past shortfalls, and the expected quarterly growth pattern for 2026 revenue.

Answer

CEO Joe Mastrangelo explained that the 2026 guidance range reflects implemented improvements, existing backlog for the lower end, and new line opportunities for the higher end, emphasizing a disciplined approach to scale. He also clarified that Q1 2026 revenue is expected to be around Q4 2025 levels, with sequential growth thereafter.

Stephen Gengaro of Stifel inquired about the de-risking parameters for Eos Energy's 2026 revenue guidance, considering the Q4 2025 shortfall, and asked for the expected quarterly growth pattern throughout 2026.

Answer

CEO Joe Mastrangelo explained that the 2026 guidance range reflects implemented improvements, existing backlog for the lower end, and new line opportunities for the higher end, emphasizing a disciplined approach to scale. He indicated Q1 2026 revenue would be around Q4 2025 levels, with sequential growth thereafter.

Stephen Gengaro asked about the nature and quantification of near-term demand for Solaris Energy Infrastructure's incremental 400 MW capacity, specifically if discussions are in the gigawatt range with multiple customers or more isolated. He also inquired about Solaris' power pricing strategy for long-term contracts, considering potential rising electricity costs over the next decade.

Answer

Bill Zartler, Founder, Chairman, and Co-Chief Executive Officer, explained that discussions vary widely, from 100 MW to 2-3 GW, with multiple customers. Amanda Brock, Co-Chief Executive Officer and Director, added that initial 400 MW contracts often expand over time due to phased electrification. On pricing, Mr. Zartler stated Solaris focuses on return on capital and protecting costs, often with customers buying their own gas. He noted that long-term contracts allow customers to hedge against rising power prices for 10-20 years.

Stephen Gengaro asked for quantification of the near-term demand for the incremental 400 MW, inquiring if discussions are in the GW range or more isolated. He also questioned how Solaris prices power in long-term contracts, especially given likely rising electricity costs over the next decade, and if they leverage this in their pricing strategy.

Answer

William A. Zartler (Chairman & Co-CEO, Solaris Energy Infrastructure) and Amanda Brock (Co-CEO, Solaris Energy Infrastructure) described discussions ranging from 100 MW to 2-3 GW with multiple or single customers, with a focus on closing 400 MW with one or two customers. Ms. Brock added that electrification is phased, allowing for additions over time. Mr. Zartler explained that pricing focuses on return on capital and protecting costs, with customers often buying their own gas. He noted that customers can lock in capacity deals with variable components to hedge for 10-20 years.

Stephen Gengaro questioned Atlas Energy Solutions' internal expertise for deploying and operating behind-the-meter power assets effectively, and also asked about the perceived length of the "bridge to permanent power" due to utility interconnection delays and its impact on the company's planning.

Answer

CFO Blake McCarthy highlighted Atlas's proven track record in large-scale infrastructure projects (e.g., Kermit, Monahans, Dune Express) combined with the electrical expertise gained from the Moser acquisition and new talent hires. SVP and President of Power Tim Ondrak and Executive Chairman Bud Brigham elaborated on utility delays, citing interconnection timelines ranging from 2028 to 2034, reinforcing the need for private capital bridge solutions and long-term, purpose-built facilities.

Stephen Gengaro of Stifel inquired about Atlas Energy Solutions' internal expertise and skill set for deploying and operating behind-the-meter power assets effectively. He also asked about the company's understanding of utility interconnection delays and queues for larger loads, and how these long "bridge to permanent power" timelines influence Atlas's planning and strategy.

Answer

CFO Blake McCarthy highlighted Atlas's history of building complex infrastructure projects like the Dune Express, combined with electrical expertise from the Moser acquisition and new talent. SVP and President of Power Tim Ondrak emphasized Moser's 50-year operating history and the team's 20+ years of experience with large engine systems. Tim Ondrak and Executive Chairman Bud Brigham noted that utility interconnection delays range from 2028 to 2034, reinforcing Atlas's long-term infrastructure play with bridge-to-permanent solutions, benefiting from private capital addressing grid shortfalls.

Stephen Gengaro asked about DynaEnergetics' strong Q4 revenue, questioning if the top line surprised management and how it impacted overhead absorption and margin performance, even excluding discrete items. He also sought clarity on whether DynaEnergetics' challenges are cyclical or structural and what is needed for margin expansion. Finally, he inquired about segment-specific puts and takes for Q1 and optimism for 2026 expansion.

Answer

President and CEO James O'Leary confirmed that DynaEnergetics' unit volume in Q4 was as expected and solid, but margin compression was significant due to tariffs and pricing pressure on perforating guns. He noted that while some metrics were down, unit volume was okay, making it difficult to precisely quantify cyclical versus structural issues. Mr. O'Leary mentioned substantial personnel changes at DynaEnergetics to address complacency and highlighted international shale and enhanced geothermal as growth avenues. For Q1 and 2026, he expects a tough Q1 across all segments, with NobelClad's pickup later in the year, and a potential recovery in the back half, contingent on interest rates and tariff clarity.

Stephen Gengaro questioned the strength of DynaEnergetics' Q4 revenue, asking if it surprised management and how it impacted overhead absorption, especially considering margin performance without discrete items. He also sought clarity on whether DynaEnergetics' challenges in the U.S. perf business are cyclical or structural and requested an outlook for segment expansion in Q1 and throughout 2026.

Answer

President and CEO James O'Leary stated that DynaEnergetics' Q4 unit volume was as expected and solid, but margin compression was significant due to tariffs, labor costs, and pricing pressure on perforating guns. He acknowledged the difficulty in distinguishing between cyclical and structural issues but highlighted efforts in international shale and enhanced geothermal as growth avenues. For Q1 2026, O'Leary anticipated continued tough conditions across all segments, with potential recovery in the second half, driven by factors like interest rates and tariff clarity.

Inquired about the implementation of the tariff surcharge for the Dyna business, pricing in the perforating gun market, the expected performance of Dyna in a potentially weaker second half, and the status of the Steel Connect situation.

Answer

The company has had partial success with the tariff surcharge, which is reflected in the guidance. Dyna's performance will depend on market conditions, with current expectations for flat to modestly down results. They provided no new information on Steel Connect, stating they are the largest shareholder and communications are periodic.

Stephen Gengaro, an analyst at Stifel, inquired about the impact of restructuring on the Completion and Production Services segment's Q4 2025 revenue run rate and future margins, the embedded margin profile of the Offshore Manufactured Products segment's backlog, and the sustainability of the 32% EBITDA margin in the Completion and Production Services segment. He also asked about the company's strategy for potential portfolio additions, specifically regarding geographic focus and product differentiation.

Answer

President and CEO Cindy Taylor confirmed that the exiting of underperforming businesses is largely reflected in Q4 2025 revenue run rates for Completion and Production Services, with adjusted EBITDA margins expanding to 32%. Executive Vice President and CFO Lloyd Hajdik specified that $1 million of Q4 revenue came from exited operations. For Offshore Manufactured Products, Ms. Taylor noted consistent margin improvement over decades, driven by mix and utilization, and highlighted new facilities and a strong 1.3x book-to-bill ratio in 2025. She also stated that the 32% EBITDA margin for Completion and Production Services is a healthy base for future assumptions. Regarding portfolio additions, Ms. Taylor indicated a preference for differentiated, technology-driven opportunities in offshore and international markets.

Stephen Gengaro followed up on potential portfolio additions, asking if the company's M&A focus would exclusively be on offshore international opportunities or if U.S. land-based acquisitions could also be considered.

Answer

President and CEO Cindy Taylor reiterated that the company seeks differentiated, technology-driven opportunities. She explained that while U.S. land acquisitions are not entirely ruled out, they would be highly selective due to the challenge of finding truly differentiated technologies that cannot be easily replicated in that market.

Stephen Gengaro asked about Tenaris's expectations for material changes in working capital in 2026 to understand free cash flow generation. He also inquired about the necessary operational cash level on the balance sheet, distinguishing between normal operating cash and excess cash.

Answer

Paolo Rocca, Chairman and CEO, emphasized the need for capital to run the business and for future expansion opportunities. Carlos Gómez Álzaga, CFO, projected a neutral working capital for 2026 with some swings, expecting an increase in Q1 driven by accounts receivable (following large Pemex collections in Q4 2025) and new customer terms in the U.S. Gabriel Podskubka, COO, added that Tenaris continuously seeks inventory optimization for Rig Direct programs and industrial efficiency, while acknowledging the need for significant inventory to support service strategy and long lead-time projects like LSAW pipelines.

Stephen Gengaro asked about Tenaris's expectations for material changes in working capital in 2026 and its impact on free cash flow generation. He also inquired about the necessary level of cash on the balance sheet to run the business, distinguishing between normal operational cash and excess funds.

Answer

Carlos Gómez Álzaga, CFO, expects working capital to be largely neutral for 2026, with an anticipated increase in Q1 driven by accounts receivable (Pemex collections, U.S. customer terms, slight sales increase). Paolo Rocca, Chairman and CEO, added that the company needs capital not only for operations but also for potential expansions and opportunities. Gabriel Podskubka, COO, mentioned ongoing efforts to optimize inventory for Rig Direct programs and industrial efficiency, noting that large pipeline projects require significant steel anticipation.

Stephen Gengaro of Stifel asked about the competitive dynamics between oil patch power demand and the increasing pull from data centers, and whether there are concerns about the evolving cost of power for e-frac operations. He also inquired if longer contract durations for data center projects might lead to potentially lower returns or pricing for ProPower's investments.

Answer

CEO Sam Sledge stated there are no current concerns about e-frac power costs, as that market has matured and power solutions are custom-tuned. President of ProPower Travis Simmering noted that both oil and gas and data center demand are growing, with data center demand being much higher, and ProPower is happy to participate in both. Regarding contract terms, Mr. Simmering explained it's a balancing act, weighing diverse contract groups and site sizes, and while longer terms could involve slightly lower returns, the company evaluates various metrics. Mr. Sledge added that ProPower prioritizes serious customers and real projects that generate immediate earnings.

Stephen Gengaro inquired about the demand dynamics for power in the oil patch versus other applications like data centers, and whether there are concerns about the cost of power for e-fracs. He also asked if longer contract durations for data center projects might lead to potentially lower returns or pricing compared to shorter-term agreements.

Answer

Sam Sledge, Chief Executive Officer, stated there are no concerns about e-frac power costs, as that market has matured with stable, custom-tuned power solutions. Travis Simmering, President of PROPWR, confirmed that both oil and gas and data center demand are growing, with data center demand being significantly higher, and ProPetro is diversifying into both. Mr. Simmering acknowledged that accepting slightly lower returns for very long-term contracts is a possibility, as it's a balancing act. Mr. Sledge added that ProPetro prioritizes real projects with clear timelines and earnings potential.

Stephen Gengaro inquired about the observed trends in the home standby generator business over the past couple of years, specifically regarding penetration rates and the expected multi-year growth rate in a market with normalized outage activity.

Answer

President and CEO Aaron Jagdfeld highlighted the current 6.75% penetration rate, noting that each incremental 1% represents a $4.5 billion market opportunity. He pointed to states like West Virginia, Maine, and Michigan with 17-24% penetration, suggesting significant runway for growth. He also mentioned the historical 15% growth rate for the category over the last 25 years and discussed how increasing grid instability due to demand growth and intermittent generation will drive future backup power needs, independent of weather events.

Stephen Gengaro asked about the observed trends in the Home Standby Generator (HSG) business over the past few years, current penetration rates, and the expected multi-year growth rate in a normalized outage environment.

Answer

President and CEO Aaron Jagdfeld noted the current penetration rate is 6.75%, with each 1% representing a $4.5 billion market opportunity. He highlighted states with 17-24% penetration, suggesting significant room for growth across the U.S. Jagdfeld stated the category's historical growth rate over 25 years has been roughly 15%, and current residential products are expected to grow mid-teens. He emphasized grid instability and rising energy costs as long-term drivers for backup power demand.

Stephen Gengaro asked about Centrus Energy's perspective on the evolution of SWU prices needed to support the economics of its capacity buildout over the next decade, and the dynamic for both HALEU and LEU SWU.

Answer

Amir Vexler, President and CEO, stated that SWU prices would only adjust down if demand decreases or supply outpaces demand, neither of which he foresees. He expects continued upward pressure on SWU prices as supply tightens towards the end of the decade and utilities seek bids, strengthening Centrus's business case. He also noted that advanced reactors becoming dominant would apply further pressure on both HALEU and LEU SWU capacity, representing a significant upside.

Stephen Gengaro asked about the expected evolution of SWU prices to support the CAPEX for capacity buildout over the next decade, and the dynamic for both HALEU and LEU SWU.

Answer

Amir Vexler, President and CEO, believes SWU prices will continue to face upward pressure due to tightening supply (no 'just-in-case' builds) and increasing demand, especially with geopolitical events and potential advanced reactor growth, which strengthens the business case.

Stephen Gengaro (Stifel) asked about NOV's aftermarket business, specifically the extent to which it serves its installed base and whether third-party service capabilities have dwindled competitively. He also inquired about the market opportunity for reactivations of stacked idle deepwater assets.

Answer

Jose Bayardo (CEO, NOV) stated that while customers sometimes seek third-party options, they often return to the OEM due to complexity and reliability needs, expressing confidence in NOV's market position. He indicated that the opportunity for deepwater drillship reactivations is "pretty limited," likely a "handful" of higher-spec rigs, which would involve significant costs but present a good opportunity for NOV as the market tightens.

Stephen Gengaro inquired about NOV's aftermarket business, specifically the extent to which it serves its installed base and if third-party competition for servicing existing assets has dwindled over the past couple of years.

Answer

CEO Jose Bayardo explained that while customers sometimes explore third-party options for efficiency, they often return to the OEM due to the complexity and critical importance of reliable operation, affirming NOV's strong market position. He stated that NOV continuously focuses on improving service and value. Regarding stacked idle deepwater assets, Jose Bayardo indicated that the opportunity for reactivating deepwater drillships is limited to a 'handful' of higher-spec rigs that meet current market demands. He noted that these would require significant investment to bring back online due to long stacking periods, presenting a good opportunity for NOV as the market tightens.

Stephen Gengaro of Stifel inquired about the margin impact of NOV's current backlog and recent orders for 2026 and beyond, referencing previous discussions about improved pricing. He also asked for NOV's perspective on whether the observed plateauing of U.S. production signals a critical turning point for stabilization and recovery in the U.S. land market.

Answer

Rodney Reid, Senior VP and CFO, stated that strong technological advantages and operational efficiencies in offshore production bookings have driven revenue and margins up, offsetting declines in aftermarket business. He expects the strong backlog to be positive for 2026 margins, with rig aftermarket recovery likely in the second half of 2026. Jose Bayardo, President and COO, emphasized the high quality of the backlog due to improved processes, controls, and clear contract provisions. Clay Williams, Chairman and CEO, acknowledged the deceleration of U.S. production growth, noting that Tier 1 locations are being exhausted, and this signals an inevitable shift of shale technology to other international basins.

Stephen Gengaro inquired about the impact of NOV's current backlog and recent orders on the margin profile for 2026 and beyond, specifically regarding 'better price backlog,' and whether the plateauing of U.S. production signals a critical turning point for stabilization and recovery in U.S. land activity.

Answer

Rodney Reed (Senior VP and CFO, NOV) and Jose Bayardo (President and COO, NOV) affirmed that strong technological advantages and high barriers to entry in offshore production, combined with the high quality of the current backlog and clear contract provisions, are driving improved margins in the Energy Equipment segment. Jose Bayardo, while hesitant to call a definitive U.S. production peak, noted decelerating growth, shrinking activity, and the exhaustion of Tier 1 locations, suggesting that U.S. shale is 'approaching the twilight' and driving the industry to pursue unconventional opportunities globally.

Stephen Gengaro with Stifel inquired about the potential for further consolidation in the frac business and the behavior of industry peers regarding pricing. He also asked if pricing in the North American rig market has stabilized.

Answer

Andy Hendricks, President and CEO, stated that the frac market is evolving with technology, leading to differentiation among the top three or four players. He highlighted investments in 100% natural gas Emerald fleets and the new eos Digital Completions Platform as key differentiators. For the rig market, Mr. Hendricks believes pricing remains relatively stable if commodity prices stay in the upper $50s-$60s, despite a competitive environment in West Texas.

Stephen Gengaro asked about the strengthening pipeline of opportunities for Liberty Energy's LPI power infrastructure business, specifically regarding the expansion to 3 gigawatts, and customer preferences for power generation technology (recips vs. turbines).

Answer

CEO Ron Gusek and CFO Michael Stock explained that the trend towards co-located behind-the-meter power as a long-term solution for data centers has gained momentum, leading to urgency in securing power supply. They confirmed the 3 GW target is achievable with recip technology, highlighting its capital efficiency, high heat rate, and competitive power pricing. They also noted customer recognition of recip benefits and Liberty's technology-agnostic approach.

Stephen Gengaro with Stifel inquired about the evolving mix of power generation technology (recips vs. turbines) for the 3 GW expansion and customer preferences.

Answer

CEO Ron Gusek and CFO Michael Stock confirmed that the 3 GW target can be achieved entirely with recip engines, highlighting their capital efficiency, high heat rate, and competitive power pricing. They noted customer recognition of these benefits and Liberty's technology-agnostic approach to finding the optimal solution.

Stephen Gengaro asked about Liberty Energy's visibility on demand for its planned power generation assets over the next 24 months, including contract status and target customer segments like data centers.

Answer

CEO Ron Gusek and CFO Michael Stock explained that the sales pipeline for power has more than doubled in 90 days with increased urgency. They have LOIs and contract terms for multiple gigawatts of capacity, expressing confidence in converting these to long-term (15+ years) contracts. They anticipate a higher percentage of capacity will be with data center customers than initially expected.

Stephen Gengaro asked why Q4 2025 activity was stronger than expected with less downtime, inquiring if it indicated a shift in E&P thinking or was primarily weather-related. He also questioned Halliburton's expectations for completion efficiency, its impact on U.S. production, and whether current activity levels are sufficient to sustain production.

Answer

Jeff Miller, Chairman, President, and CEO, attributed the stronger Q4 to a combination of factors, including weather and solid customer engagement from operators taking a long-term view of unconventionals and technology. He believes the U.S. is likely at or below maintenance production levels, with technology driving better recovery being the key going forward, rather than just faster pumping. Miller highlighted the increasing demand for larger frac fleets, more horsepower, and advanced technology for continuous pumping and sand placement, noting the strengthening of their drilling services business due to LOGIX automation and iCruise rotary steerable systems for longer, more complex wells.

Stephen Gengaro asked for reasons behind the stronger-than-expected fourth-quarter performance, particularly less downtime and white space, and what this indicates about E&P operator sentiment. He also inquired about expectations for completion efficiency, its impact on U.S. production, and whether current activity levels are sufficient to sustain production.

Answer

Jeff Miller, Chairman, President, and CEO, attributed the stronger Q4 to weather and operators taking a long-term view on unconventionals and technology. He believes U.S. production is currently at or below maintenance levels. He highlighted technology, such as Zeus IQ, LOGIX, and iCruise, as crucial for improving recovery, handling larger and more complex frac jobs, and drilling longer, more precise wells, driving growth across both divisions.

Stephen David Gengaro asked for Halliburton's views on 2026, specifically regarding frac activity being below levels needed to sustain U.S. production and how E&Ps might react. He also inquired about changes in the competitive landscape for growth areas like artificial lift and chemicals, and how these changes aid Halliburton's ability to gain market share.

Answer

Jeffrey Miller, Chairman, President, and CEO, projected North America to be 'flattish to down a little bit next year' in terms of activity and capital spend, with E&Ps conserving capital. He explained that in artificial lift, Halliburton's performance and technology, including IntelliVate software and AI, provide differentiation, driving outsized growth. He noted that ESP has become a more critical tool for maximizing oil production from existing assets, giving Halliburton a unique position for secular growth.

Steven Gengaro from Stifel asked about the significance of an early December date for the first contract conversion from LOI, questioning if it's a magical date or tied to projected timelines. He also inquired about potential customers' preferences for gas versus nuclear power, specifically if they desire nuclear as a long-term baseload given government support, or if they are power agnostic.

Answer

CFO Miles Everson explained that the early December target date (originally December 9th) was driven by the need to meet the customer's ambitious 2026 delivery schedule and secure financing, noting a three-week delay in the $150 million interim financing structure. CEO Toby Neugebauer added that Fermi is aggressively working to claw back this delay through intensive negotiations, tackling tough questions first. Regarding power preferences, Everson stated it's customer-specific, but larger companies show more interest in carbon-free nuclear. Neugebauer emphasized that Fermi aims to make nuclear competitive with natural gas by avoiding inflated construction costs, believing it won't be a major decision-maker if priced reasonably.

Stephen Gengaro from Stifel inquired about the comprehensive evaluation of capital allocation, business cost structure, and operations that Baker Hughes Company is undertaking in connection with the pending Chart Industries acquisition, asking what shareholders should expect in the coming quarters.

Answer

Chairman and CEO Lorenzo Simonelli explained that the evaluation is a natural progression of Baker Hughes Company's disciplined approach to enhancing shareholder value and accelerating its transformation into a differentiated energy and industrial technology company. He emphasized that this strategy is not new, citing Horizon 1's tangible results with over 300 basis points of EBITDA margin expansion and 60% EBITDA growth. Simonelli stated that the company, in conjunction with its board, will continue to explore all paths to drive shareholder value, assuring investors of substantial value recognition in the near, intermediate, and long term, while refraining from speculating on specific outcomes at this time.

Stephen Gengaro from Stifel inquired about the comprehensive evaluation of capital allocation, business cost structure, and operations that Baker Hughes announced in early October, particularly what this entails and what investors should expect to hear from the company in the coming quarters.

Answer

Chairman and CEO Lorenzo Simonelli explained that the evaluation is a natural progression of the company's consistent actions to enhance shareholder value and accelerate its transformation into an energy and industrial technology company, especially following the Chart Industries shareholder approval. He reiterated the company's track record of driving value, citing over 300 basis points increase in EBITDA margins and approximately 60% EBITDA growth during Horizon 1. Simonelli stated that the company and its board would continue to explore all paths to drive shareholder value and would not speculate on specific outcomes but assured investors of ongoing efforts to unlock additional value creation opportunities.

Inquired about the frac supply-demand balance for 2025, including the impact of asset attrition. Also asked for a sense of the magnitude of pricing changes over the last year and whether there was concern about rising electricity costs for e-frac due to competition from other industries like data centers.

Answer

Management sees the frac market as tight due to accelerated equipment attrition, which could become more acute with a recovery in natural gas markets. They declined to provide specific pricing data, emphasizing their strategy of securing long-term partnerships. They view potential competition for power as a 'high-class problem' and an opportunity, given their vertical integration and focus on allocating resources for the best returns.

Inquired about the Q3 active fleet count, the balance between pricing and deployments, Q4 revenue and decremental margin expectations, the potential impact of Dune Express on the Proppant business, and the strategy for the power generation segment.

Answer

The company confirmed the fleet count estimate was reasonable and that Q4 expectations are in line with seasonal trends. They do not expect a material impact from Dune Express and see upside in their Proppant business. The power generation business is currently focused on servicing internal e-fleet needs with potential for future expansion.

Stephen Gengaro inquired about ProFrac's perspective on the 2025 frac supply-demand balance, including the attrition rate of older assets, the magnitude of pricing changes over the last year, and potential risks from rising electricity costs due to demand from other industries like data centers.

Answer

Executive Chairman Matt Wilks described the frac market as 'pretty tight,' noting that high utilization is accelerating the attrition of legacy equipment, which he believes will become a major theme in 2025. He declined to quantify pricing changes but reiterated a focus on long-term partnerships over maximizing short-term pricing. CEO Ladd Wilks addressed the electricity cost question, calling it a 'high-class problem' and stating that while Livewire will prioritize internal needs, they will allocate capital to the best return opportunities while honoring customer commitments.

Gengaro sought clarity on the delivery ramp for the year, asking for visibility on the timing and volume of vehicle deliveries to align with the annual guidance.

Answer

Aquila explained that they are currently allocating limited production among major customers and are focused on long-term strategies rather than short-term delivery numbers. He declined to give specific quarterly guidance but reiterated the goal of reaching a 20,000-unit run rate by year-end and delivering a few thousand vehicles in 2024, emphasizing a focus on methodical execution and securing non-dilutive financing.

Asked for clarification on how acquired assets impact production capacity, the plan to address the funding gap given cash outflow guidance, and the expected revenue cadence for 2024.

Answer

The acquired assets are for increasing efficiency and automation within the 20,000-unit run rate, not for adding incremental capacity. The company will raise capital based on milestones to avoid waste. The revenue cadence will be a consistent step-up, but the primary focus is on achieving correct economics before scaling, rather than hitting specific quarterly targets.

Asked about the impact of natural gas prices on 2024 guidance, the mix of contracted versus spot volumes, the company's perspective on recent M&A and valuations in the sand market, total nameplate capacity, and the evolution and pricing of the Canadian market.

Answer

The company acknowledged that low natural gas prices are a variable for H2 2024 guidance but expect it to be offset by oil-driven basins. About 50% of their volume is contracted with stable pricing. They believe Northern White sand is undervalued compared to in-basin sand and that their markets will remain strong. Total capacity is 10 million tons. They are optimistic about growth in the Canadian market, which has complementary product needs and similar pricing to the U.S., albeit with more seasonality.