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Keane Group, Inc. (NYSE:FRAC)
Q3 2019 Earnings Call
Nov 7, 2019, 11:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to the NexTier Oil Field Solutions Third Quarter 2019 Conference Call.

[Operator Instructions]

For opening remarks and introductions, I'd like to turn the call over to Kevin McDonald, Executive Vice President, Chief Administrative Officer and General Counsel of NexTier. Please go ahead, sir.

Kevin McDonald -- Executive Vice President

Thank you, operator and good morning everyone. As a reminder, some of our comments today will include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 reflecting NexTier's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements.

The company's actual results could differ materially due to several important factors, including those risks and uncertainties described in both Keane Group and C&J Energy Services' Form 10-K for the year ended December 31, 2018, recent current reports on Form 8-K and other Securities and Exchange Commission filings.

Many of these risks are beyond the company's control. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Additionally, our comments today include non-GAAP financial measures, including adjusted EBITDA and adjusted gross profit. Please refer to our public filings and disclosures, including our earnings press release for the definitions of our non-GAAP measures and the reconciliation of these measures to the directly comparable GAAP measures.

These are posted on our website under the Investor Relations tab. With that I will turn the call over to Robert. President and Chief Executive Officer of NexTier.

Robert Drummond -- President and Chief Executive Officer

Thank you, Kevin, and thanks everyone for joining us on the call this morning. Before I begin and on behalf of the combined team from both Keane and C&J, I want to express how incredibly excited I am to be hosting our third-quarter earnings call, following the closing of our merger with C&J Energy Services last week. Given the timing of our transaction closing, today's discussion will cover Keane's results for the third quarter. We are also excited to formally introduce our new company formed as a result of Keane's merger with C&J which has recently announced, we have named NexTier Field Solutions, which now trades under the ticker NEX on the New York Stock Exchange. I'm pleased to be joined by Greg Powell, Chief Integration Officer of NexTier and JK van Gaalen, Chief Financial Officer of NexTier. After a review of third quarter results for Keane, JK , Greg and I will provide an update on NexTier, our strategy and outlook. With that introduction, let's start with Keane's results. For the third quarter, Keane achieved another strong performance delivering on the outlook provided last quarter and extending our track record of meeting our commitments despite a challenging backdrop facing the industry.

I'd like to touch on a few highlights from the quarter. From a top line perspective, total company revenue was $444 million approaching the high end of our guidance range reflecting sequential growth of approximately 3% compared to the average 3rd quarter US rig count, which decreased 7% sequentially. We grew adjusted EBITDA by 8% to $89 million due to proactive cost control and ongoing innovation that drove improved completion efficiencies. We maintained strong utilization with 22 fully utilized fleet, unchanged from the prior quarter and we continue to benefit from the completion efficiencies enabled by our dedicated model. We generated $42 million of free cash flow and on a year-to-date basis, Keane has generated nearly $90 million of free cash flow and allowing us to newly achieve our full-year estimate of $100 million or more in the first 9 months alone. Greg will discuss our third quarter results in greater detail, but first I'd like to make a few comments related to our recently completed merger. On October 22, we held a successful vote and with shareholders of both C&J and Keane voted overwhelmingly in favor of the transaction. About a week later, on October 31, we closed our merger creating an industry-leading US land services provider.

We are extremely excited to complete our transaction as planned and appreciate the hard work from both teams for their contributions in developing a thorough integration plan,specifically I am most excited about the unified approach across our operations teams and the opportunity set ahead of us. I would also like to personally thank Don Galovich [Phonetic] for his partnership and leadership throughout this process. Additionally, I'd like to extend my appreciation to shareholders for their continued support. Throughout the integration process we have remain focused on delivering for customers and ensuring continued safety and service quality as evidenced by our strong third quarter results. Integration planning will now transition to execution. There is work to be done and our entire organization will remain vigilant and seamlessly integrating our two companies with a laser focus on maintaining and improving service delivery for our customers.

Due to the importance of this role, Greg Powell has been appointed to lead this critical integration effort where he is focused on overseeing the integration plans and capturing the cost synergies we originally laid out, and we're off to an excellent start. We have a robust process in place and we look forward to keeping the investment community updated on our progress all along the way.

Now turning to our latest view on the market. Our business performed well throughout the third quarter. As we progress into the fourth quarter, pockets of softness have begun to emerge driven primarily by our customers' focus on operating within their cash flow and the associated budget exhaustion, and coupled with normal year-end seasonality and holiday schedules, we believe spending patterns throughout year-end will be a dynamic that the industry is going to continue to face.

Looking ahead, customer budgets for 2020 are being finalized and while it's too early to say with precision, we currently expect that overall 2020 activity will be flat to down slightly versus 2019 with the normal uncertainty associated with commodity prices and some uncertainty around the cadence of spending throughout the year.

With that said, we are seeing an increased demand for NexTier services starting in January of 2020 based on recent customer discussions regarding the resetting of capital budgets for the early part of next year. [Indecipherable] the supply side of available horsepower, we are starting to see a few dynamics play out. First, we are finally seeing attrition of sizable amount of horsepower, which in our view, represents under-maintained assets that in the current market backdrop don't make economic sense to revive.

We believe this attrition reflects the early innings of a much larger cycle. Second, and similar to 2018, we are seeing a significant reduction in man fleet which ultimately help balance the effective supply and demand equation, and finally in the range-bound macro environment we have been operating in for the past couple of years, we are seeing clear bifurcation and pressure pumping based on profitability, balance sheet strength and ability to deliver consistent operating performance while continuing to invest in innovation. The new NexTier is even better positioned to compete in these market conditions -- more on this later. These are the realities of the market as it stands today and I would like to give you an update on what we've been doing in response. In this environment, we are focused on controlling what we can control and this all boils down to efficiency, which to us simply means doing more with the same or doing the same with less.

We identify four main areas of opportunity to drive efficiency. First, investing in innovation to deliver further improvements in efficiency and sustainability; a combination of experience, capabilities and inflight initiatives from both companies provide NexTier with a tremendous opportunity to lead technology adoption across surface, subsurface and digital. I'd like to highlight a few of these areas that we're focused on.

As far as surface innovation, we are working diligently to simplify the way we work including well swap systems, Quik-Latch mechanisms and monoline missiles. We are also investing in efficiency and sustainability via the newly designed TR 4 dual-fuel engines driving improved emissions and natural gas substitution. On the sub-surface side, we continue to partner with customers to design custom fluid systems to optimize freight delivery. We're excited about the combination of Keane's fluid expertise with C&J's LateralScience expertise. Our digital journey is also progressing nicely. We are transforming the way we look across the business. We are collecting more data from more sources and starting to visualize and act on this data resulting in significant learnings and opportunities. Key efforts include real-time equipment health monitoring, supply chain control tower and asset lifecycle management. Second, proactively taken cost-out opportunities across our company. We are working with our operating teams and business partners to identify and execute on opportunities to optimize spend across key areas including direct materials, maintenance, labor and facilities; for example, given weakness in Northeast US gas basins, we have been proactive in reducing cost associated with our footprint and support structure, including reducing our crew staffing during the third quarter. This is an iterative process that requires constant recalibration to ensure we're most appropriately structured while maintaining safety and service quality and remaining nimble to be able to respond to market opportunities as they arise.

Third, our merger with C&J encompasses two main areas of opportunity -- one, we're now starting to capture the high confidence cost synergies that result from our merger. As Greg will discuss later in our call, we've [Indecipherable] the magnitude of synergies and accelerated the timing to achieve. And two, it allows us to pursue further efficiency by leveraging best practices to improve service delivery and profitability.

And finally, evidencing a commitment from both companies to right-sizing the business. Our combined workforce is down approximately 20%, since just before signing the merger in the second quarter of 2019. And we continue to be proactive and nimble in addressing market conditions.

I'll now pass the call over to Greg to discuss the third quarter financials.

Greg Powell -- President and Chief Financial Officer

Thanks, Robert. Revenue during the third quarter totaled $444 million, up from $428 million in the second quarter and approaching the high end of our guidance range. Within our completion services segment revenue totaled $437 million, reflecting a sequential increase of approximately $17 million or 4% driven by continued execution and efficiency enabled in part by technology adoption.

For the third quarter, we operated a total of 23 fleets and when factoring in whitespace, we had the equivalent of 22 fully utilized fleets, unchanged as compared to the second quarter. On a fully utilized per fleet basis, annualized adjusted gross profit was $19.9 million, 7% improvement compared to $18.6 million in the second quarter and at the high end of our guidance between $18 million and $20 million. We believe this performance continues to position us at the top end of the competitive stack and remains a key differentiator.

Revenues for other services segment, which includes our cementing operations totaled $6.6 million for the third quarter of 2019. Adjusted gross profit improved to $1.2 million, compared to $1.1 million last quarter and representing 18.2% margin. Adjusted gross profit totaled $110.5 million for the third quarter of 2019, compared to $103.2 million in the second quarter. Total company adjusted EBITDA in the third quarter was $88.8 million in line with our guidance range of between $85 million and 95 million and up approximately 8% compared to $82.4 million in the prior quarter. Adjusted EBITDA for the third quarter includes management adjustments of approximately $12.2 million dollars accounted for in SG&A, driven by $6.7 million of transaction costs related to our merger with C&J and $5.5 million of non-cash stock compensation expense. Selling, general and administrative expenses totaled $33.2 million for the third quarter compared to $32.6 million in the prior quarter. Excluding the management adjustments, SG&A totaled $21.1 million, unchanged from the second quarter of 2019.

Turning to the balance sheet. We exited the third quarter with cash of $157 million, reflecting growth of $40 million compared to $117 million at the end of the second quarter. We generated approximately $84 million of operating cash flow for the third quarter. Capital expenditures totaled approximately $42 million driven by maintenance CapEx and investments in technology resulting in $42 million of free cash flow. Total debt at the end of the third quarter was approximately $338 million net of unamortized deferred charges and excluding finance lease obligations effectively unchanged versus the second quarter. Net debt at the end of the third quarter was approximately $181 million resulting in a leverage ratio of 0.6 times on a trailing 12-month basis. We exited the third quarter with total available liquidity of approximately $323 million, which includes cash and availability under Keynes asset-based credit facility.

I will now hand things back to Robert for a more in-depth discussion of NexTier.

Robert Drummond -- President and Chief Executive Officer

Thanks, Greg. Look, we're excited to announce NexTier, our new name in conjunction with the merger. The name embodies continuous improvement and serves as a steady reminder to our employees and partners that we will always be innovating to move up to the NexTier value creation. Before reviewing the key priorities of NexTier, I would like to quickly reiterate the five primary benefits of the deal. First, we're increasing operational and financial scale across services and geographies. NexTier owns a base of 2.2 million high quality, will maintain hydraulic horsepower, will offer customers a more scaled and wider range of completion services including wireline, coiled tubing, cementing and well services. We're well diversified across geographies, with a national reach and local presence including the Permian, the Marcellus Utica, Eagle Ford, Rockies, Bakken, Mid-Continent and California. Second, we expect our combined platforms to drive significant cost synergies. We have a robust plan in place in our shift into execution mode now that the merger is officially closed. Third, our strong financial platform, which includes a solid balance sheet and liquidity position. On a simple pro forma basis combined and C&J's and our balance sheet as of September 30, without further adjustments, NexTier has net debt and a leverage ratio of effectively zero and total liquidity of $712 million positioning us to execute in a range of market conditions, while also serving as an enabler to continue into invest in innovation and evaluate alternatives for shareholder return.

Fourth, our complementary cultures and operating philosophies. With the combined base of talent, our best athletes are already on the field with a shared goal of delivering leading performance on safety, service quality and efficiency. We remain committed to maintaining and developing partnerships with highly efficient customers under dedicated agreement. And finally, we offer an enhanced platform for continued innovation. Together, we are focused on helping our customers address their challenges by leveraging technology with solutions for now, tomorrow and the next generation.

I've spoken with many of our customers who share in our excitement of the company we've created and our partnerships going forward. At the time of our merger announcement, we emphasized that we were creating an industry-leading US land completions company. During the integration planning process, our leadership team spent extensive time building our alignment and formulating our priorities, something that I believe is critical to the ensuring of our success. With the merger completed it's important to tell our stakeholders exactly how we intend to succeed.

NexTier will achieve its goals by executing on all four of these points of distinction. First, NexTier is founded on an unwavering commitment to partnerships and helping customers win by unlocking affordable, reliable and plentiful sources of energy; this includes partnering on a dedicated basis with high-quality customers in all aspects of the relationship through open collaboration. Second, NexTier will be focused every single day on delivering leading safety performance. Safety is a key differentiator that enables our partnership approach and honors our commitment to the well-being of our employees and partners.

Third, NexTier will strive every day to deliver leading efficiency on behalf of our customers, constantly challenging ourselves to do more. We're relentless in our pursuit of efficiency, which creates value for all of our stakeholders. Fourth, NexTier is committed to leading the charge on innovation. We see every day as a new opportunity for improvement, never settling for status quo. We continue to believe that innovation will drive the next leg of safety, efficiency and sustainability. We're committed to be in the clear choice for oil and gas operator seeking a forward-thinking partner. These priorities and the values they represent are not an aspiration, they're an expectation. It's the commitment we've made to our customers, employees, and business partners in how we intend to drive success over the long term. To learn more, we invite you to explore our newly launched website, which you can visit at www.nextierofs.com.

I'll now pass things back to Greg for an update on synergies in the asset portfolio.

Greg Powell -- President and Chief Financial Officer

Thanks, Robert. As Robert noted earlier, we initially identified $100 million of annualized cost synergies at the time of our merger announcement. As our integration planning progressed, invisibility increased; we found additional opportunities. We have two favorable updates to share with regards to our synergy commitment. First, we are upsizing the magnitude of our expected synergies. We now expect to achieve $125 million of cost synergies, up from our original target of $100 million. And second, we're accelerating our forecasted timing to achieve full run rate synergies, which we now expect by the end of the second quarter compared to our initial estimate of within one year of closing. We expect to realize approximately two-thirds of these synergies in fiscal year 2020. Our confidence has increased, we're keeping our eye on the ball and we'll continue to rely on our strong experience with M&A integration in an effort to build a leading platform and realize the significant base of synergies. We plan to keep the investment community updated on progress and are committed to tracking synergy separate from cost reductions related to activity levels.

As part of our integration planning, we performed a diligent study of our joined asset base and have some updates on the go-forward marketing capacity. Within hydraulic fracturing, the process involved two main pieces. First, we synced up definitions of horsepower and fleets across our two companies. Second, we established horsepower per fleet requirements based on the increasing service intensity we're facing in the field, plus the need for rotational horsepower to support a rigorous maintenance program. As a result of synchronizing definitions, standardizing fleet configurations and taking assets out of service, we effectively reduced our total combined fleet by 10% or 5 fleet resulting in 45 high-quality hydraulic fracturing fleet and permanently reducing our fracturing fleet by approximately 100,000 horsepower.

100% of our fleets are market ready without any required CapEx to redeploy. We are similarly high grading equipment across wireline, coil, cementing and well services, retiring equipment that we believe cannot generate attractive returns. A summary of our actions includes the following. Within wireline, our combined asset base included 161 units. Of this amount, we've retired 43 resulting in 118 marketed assets.

For coiled tubing, our asset base included 30 total units. Of this amount, we've retired 5 resulting in 25 marketed units, approximately 60% of which are large diameter. On the cementing side, our combined asset base included 140 units. Of this amount, we've retired 39 resulting in 101 marketed units. Our well service segment is primarily comprised of our rig services business. Of our 364 total workover rigs, we've retired 88, resulting in 276 marketed rigs. We are proud to be playing our part in reducing capacity, permanently removing a sizable base of equipment, a portion of which is operated in the last year. With these efforts completed, our marketed equipment base is even stronger, higher quality and capable of efficiently servicing our customers' needs today and into the future.

I'll now turn the call over to JK for some comments on our outlook

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

Thanks, Greg. Before I start, I would like to comment that the company plans to file an 8-K that will include C&J's historical financials including year-to-date results through to September 30. Taking a look at NexTier's consolidated pro forma balance sheet, we had a cash balance of approximately $335 million as of September 30. Total debt at the end of the third quarter was $338 million which was comprised of Keane's legacy term loan facility and excludes finance lease obligations. This results in net debt at the end of the quarter of approximately $3 million, which will reflect a total leverage ratio of essentially zero on a pro forma trailing basis. We have quickly executed on further improvement in our financial position with the successful expansion of our asset-based revolving credit facility from $300 million to $450 million effective at close. With this expansion, total pro forma liquidity is $712 million, which includes $335 million in cash, and $377 million of availability under our asset-based credit facility. The upsized facility with our expanded banking group was a favorable outcome and it demonstrates our lenders' recognition of both the financial and operational strengths of NexTier. We extend a thank you to our expanded banking group for their support, and we look forward to working with them over the coming years. Now, turning to our outlook for the fourth quarter. Given the timing considerations of our recent close, we are providing our outlook broken down between legacy Keane and C&J.

For revenue, Keane is expected to total between $310 million and $340 million, and C&J is expected to range between $290 million and $310 million resulting in total NexTier revenue of between $600 million and $650 million. At the adjusted EBITDA level, Keane is expected to total between $50 million and $60 million, and C&J is expected to range between $10 million and $15 million, resulting in total NexTier adjusted EBITDA of between $60 million and $75 million.

The reduction relative to the third quarter of 2019 is primarily driven by lower utilization, mainly due to customer budget exhaustion and seasonality as well as continued competitive pricing. With that, I would like to pass it back to Robert for a discussion of our future outlook.

Robert Drummond -- President and Chief Executive Officer

Thanks, JK. And while the fourth quarter in our industry has become more volatile and it's still too early to assess NexTier with too much precision. We want to frame how we're thinking about the earnings power for NexTier. The framework we're about to provide is based on a couple of key tenets. First, the environment we're now in feels a lot like last year. We're facing very similar dynamics including range-bound macro conditions, overcapacity, contract renewals and the need to drive efficiencies. In addition, we have high confidence in our ability and track record to execute things that we can control, which include right-sizing the cost structure of our business, executing our synergies, and driving the next leg of efficiencies.

So now let's look at some of the possible scenarios for the earnings power of NexTier. First, as an anchor point, assume that the market recovers from the abnormally low activity expected in the fourth quarter with increased activity driven by E&P budget resets offset by reduced pricing. In this scenario, our business could perform at level similar to what we expected in the fourth quarter or approximately $270 million of adjusted EBITDA at the midpoint, on an annualized basis. Layering in pro forma, $125 million in synergies results in approximately $400 million of adjusted EBITDA. While we believe this case to be overly pessimistic, it does help frame a conservative case of potential performance. Second, as an alternative scenario, we experience a market that is very similar to this year. In this case, we start with a full-year 2019 adjusted EBITDA estimate of approximately $450 million plus the $125 million of pro forma synergies resulting in $575 million of adjusted EBITDA, if you assume continued year-over-year pressure driven primarily by additional price concessions to support our customers. This would drive adjusted EBITDA degradation of approximately $150 million, resulting in adjusted EBITDA of $425 million.

Applying a more favorable outlook, where price and utilization stabilize due to a reduction in effective capacity, we exceed our synergy target and capture a higher base of efficiency. This could result in recovering at minimum half of the EBITDA degradation resulting in adjusted EBITDA in excess of $500 million. In all of these scenarios, we generate significant free cash flow. Our annual capital investments will include maintenance and strategic investments in innovation. Assuming a CapEx range of $165 million to $225 million driven by our ability to flex CapEx with activity and using the adjusted EBITDA book-ins of $400 million to $500 million. We generate free cash flow of between $235 million and $275 million reflecting a free cash flow yield well in excess of 20%. While simplistic, our intent is to provide a framework of how to think about the earnings power of NexTier. On this base of free cash flow generation and with the formation of our new Board, we will develop NexTier's approach to capital return. Overall, we believe we are in a differentiated position across our peer set and I'm excited to forge ahead as we focus on delivering leading efficiencies for customers, returns for investors and a rewarding work environment for our people. With that, we'd now like to open up the lines for Q&A, operator.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. One moment please while we poll for your questions. Our first question comes from the line of Tommy Moll with Stephens Inc. Please proceed with your question.

Tommy Moll -- Stephens Inc. -- Analyst

Good morning and thanks for taking my questions.

Robert Drummond -- President and Chief Executive Officer

Good morning, Tom.

Tommy Moll -- Stephens Inc. -- Analyst

So you all have only been operating as a pro forma for a week now post close, but there was obviously a lot of cooperation in advance of close. Robert, I wondered if you could comment on some of the additional things you learned as you approach closing and have since then in terms of the challenges -- both the challenges and the opportunities and specifically on the synergies, if you could give us context on what gave you optimism to upsize the the number and then pull the date forward on that.

Robert Drummond -- President and Chief Executive Officer

That's a good question. Tommy, and it has been a very, very fun process, I have to admit. Thanks to the co-operation that we have between the tow companies, particularly to leadership area, but also the cultures of the two companies are very, very similar, particularly in the field where the revenue is being generated. And what we've learned a lot is that we both have best practices that we can learn from each other. That's going to make a difference on a bottom line and that's not necessary even in the synergy assessment. So that's one thing that made me a lot very comfortable with the situation because where the rubber meets the road, it's working better than you could than I would have even expected. Second thing I'd say is the customer feedback has been extremely positive. I would have expected maybe a little bit of concern, but they mainly were concerned about us being able to continue to deliver excellent service and in Q3 we both kind of did that. On the synergy side, I would say that, you know, it was grassroots process that both teams working together in conjunction with some outside consulting help to help us make sure we had a good cost baseline for the first half of 2019, the benchmark [Indecipherable] and then as we went through the process that without a lot of coaxing, to try to get the number from me, I've been very impressed with the fact that they've been able to find additional synergies given us the confidence to commit to $125 million. So, so far so good. You're right, we're only a week into it, we got more to learn. But so far I'm extremely happy and Greg's doing in an excellent process so far.

Tommy Moll -- Stephens Inc. -- Analyst

Okay, thank you for that Robert. And then shifting gears to capital returns, which is something that you alluded to in your earlier remarks. Certainly, it's going to take some time with the combined company to figure out the go-forward plan in terms of a buyback, which is something that Keane had been pretty aggressive with prior to signing up the merger agreement.

So I know you can't give us the final answer now, but to the extent you can give us any indication on where you and potentially the board are leaning there. Your stock is certainly very attractive at these levels, you have a lot of dry powder that you could deploy. So, any thoughts there. And then also specifics on timing of when we might hear from you again with a more final decision on that point.

Robert Drummond -- President and Chief Executive Officer

Nice, good question Tom. Look, I would say, we had our first Board meeting this week to get the two boards together. And the nice thing is that we do have a nice war chest there to have this opportunity, not only the balance sheet but the projected free cash flow generation is going to support whatever decision we make there as far as capital returns go. I would say the Board's challenge does straightaway to come back with a full projection of what we want to do about that going forward.

Keeping in mind that the market has got some uncertainties in it and the go-forward look there is going to be a balance between stock buyback, potential dividend and strategic investments that we might need to make into the future to establish further differentiation. So timeline, I would say, not relatively soon,

but at this point, this is a little bit too early for us to be able to come out with a clear guidance on that.

Tommy Moll -- Stephens Inc. -- Analyst

Fair enough. And just a quick follow-up to make sure I heard you correctly, Robert. You mentioned the three buckets, fair to assume those are not mutually exclusive, so whatever plan you might recommend to the Board could include sum of all three.

Robert Drummond -- President and Chief Executive Officer

That's correct.

Tommy Moll -- Stephens Inc. -- Analyst

Okay. Thank you very much, I'll turn it back.

Robert Drummond -- President and Chief Executive Officer

Thanks, Tom.

Operator

Thank you. Our next question comes from the line of Sean Meakim with JP Morgan. Please proceed with your question.

Sean Meakim -- JP Morgan -- Analyst

Thank you. Good morning.

Robert Drummond -- President and Chief Executive Officer

Morning Sean.

Sean Meakim -- JP Morgan -- Analyst

So there is a pretty significant contrast in profitability between Keane and C&J. But this was -- this was known when you agreed to the merger. So could you maybe just talk about your expectations for convergence between those two levels of profitability on the one hand, what's your ability to pull up C&J's margins over time, and what are kind of the specific strategies there. And on the other, as you go into what could be a more difficult year in 2020, confidence in being able to sustain Keane's margin advantage. So we're not seeing convergence coming from that direction.

Robert Drummond -- President and Chief Executive Officer

Yeah, good question. Look, I would say -- I would say this is that -- as we've come together, it's early -- it's still early days, of course, and as I mentioned a bit earlier best practices of managing the [Indecipherable] business, there's been some real nuggets on both sides that we both probably wish we would have thought of earlier before we got together. So, these things are going to -- going to help us . The opportunity to leverage the support structure on a larger scale is not a minor point that gives us the ability to squeak out better profitability. But I would also point out that in the synergy numbers that we've projected closing the gap on profitability per fleet is not -- is not part of that and I'd also add that the guide that we provided on C&J for Q4 is not really indicative of the performance in general, because it was more related in Q4-the Q4 guide to client mix. So if you think about looking at C&J's history from Q3 to Q4, Q4 to Q1, 2018 to 2019 was a very similar start. So to benchmark Q4 is the gap -- I wouldn't do it -- to put -- to give you time and about how we converge. It's a little bit early for us to be able to do that, but I hope all the factors that I outlaid there is -- as you can see that there is a number of moving parts. The second point I'd make though is that when you look at the well construction and intervention business and the well servicing business inside C&G, the momentum -- the profitability momentum there is already improving and I'm impressed and happy about it.

They've been rationalizing and they're underperforming regions inside well servicing, and the support cost has come down dramatically and the divestiture of the fluids business inside well servicing has promoted improved profitability. So all of those things give us a lot of a lot of momentum as we roll into the latter part of Q4 and into next year. When we get more visibility on the profitability per frac spread going forward down the road [Indecipherable].

Sean Meakim -- JP Morgan -- Analyst

Understood. That's fair. So that, could you maybe also talk a little bit about the contribution to those EBITDA projections for next year in terms of how much is coming from the non-frac businesses or wireline, coiled tubing, cementing, well services? How -- to what extent are they contributing to those numbers, and you think about the flex from the downside to the upside case -- how much flex comes from those non-frac product lines?

Greg Powell -- President and Chief Financial Officer

Yeah. Hey, good morning, Sean, it's Greg. So if you -- in the Barclays deck we put out the second quarter contribution from those businesses is about $33 million. Those are relatively -- that's a good run rate to use. It's obviously dipped in the fourth quarter with activity, but the improvements Robert mentioned on the cost side will give those some uplift. So I think 35 to 40 is a good range of EBITDA for those businesses in a more steady state volume environment and there's not as much flex in those as there obviously is in the frac business with utilization and pricing.

Sean Meakim -- JP Morgan -- Analyst

Got it. Yes, as expected. Great, thank you very much.

Greg Powell -- President and Chief Financial Officer

Thanks, Sean.

Operator

Thank you. Our next question comes from the line of Marc Bianchi with Cowen. Please proceed with your question.

Marc Bianchi -- Cowen -- Analyst

Hey, thanks, Robert. I want to go in just C&J and I guess legacy Keane a little bit in the fourth quarter. I know maybe they're not representative of where you kind of see the businesses over time. But just to help us understand what the underlying assumptions are, maybe on a profit per fleet and number of fleets -- if you could help us out a little bit?

Greg Powell -- President and Chief Financial Officer

Hey, Mark, it's Greg. So in the fourth quarter, we have the fleet count is 17 for Keane and 8 for C&J. So a total of 25 fleets and then on an EBITDA per fleet Keane's at about 13 million and C&J about 6.5, for a combined weighted average of 11, kind of the underpinning of the guidance -- midpoint of the guidance.

Marc Bianchi -- Cowen -- Analyst

Okay. That's really helpful. And I mean I guess as you, as you alluded there is maybe some unusual customer mix for C&J in the fourth quarter, can you help quantify that? What -- where would that run-rate be or what kind of profitability will we be looking at for the C&J side of the business if you didn't have this sort of unusual [Indecipherable].

Robert Drummond -- President and Chief Executive Officer

Look, I would just say that the Q4 change from Q3 has driven a lot more of the schedule than it is anything and a lot of the customers are becoming more clear about what the holiday plans are, and the lack of a full schedule for these fleet as we get into the latter part of November, around Thanksgiving, through the end of the year is what's driving a large part of that but, and also want to point out the guide so far has been that we've got a lot of robust demand in Q1 for these fleets to come back online. And I think you'll see that EBITDA per fleet move back toward the kind of the Q3 combined number as opposed to staying in the Q4 area.

Greg Powell -- President and Chief Financial Officer

So Marc, historical -- I think the questions we got earlier on the disparity of profit per fleet when we signed the deal and the 2Q numbers, which are public, Keane's in the neighborhood of 14 million to 15 million of EBITDA per fleet for second and third quarter and C&J was in the 10 to 11 neighborhood. So that was kind of the disparity in a more normal market condition.

Marc Bianchi -- Cowen -- Analyst

Yes. Okay, thanks. And then just in terms of the sort of 400 million scenario that you laid out, I think you said it assumes some -- a little bit of activity recovery offset by some reduced pricing. How much pricing decline are you kind of expecting there and what have you seen so far. Do you have a good handle on kind of what that downside could look like? And is that something you've already sort of talked through with customers at this point?

Robert Drummond -- President and Chief Executive Officer

So if you remember from Keane perspective, when we went into 2019, we took a proactive position in the latter part of '18 to go to our customers proactively to trade early price correction for sustainable pricing through 2019. And during the year, we were able to claw back some of that cost -- take some cost out of the system and claw back some of that profitability. We're trying to do the same thing a bit this year, and that process is still going on and I would say that there is a little bit already in the Q4 numbers and there'll be a little bit more in Q1 but again largely the impact on the numbers so far. A look at Q4 and our current views in the Q1 is it's mostly activity driven in Q4, which we see to bounce back. So that scenario that you referred to is essentially just trying to point out that even an abnormally low Q4 activity run rate, you project that through 2020 and that's not what we're saying to do, but if you did, even in that case, we're still generating free cash flow north of 20%. That was the point we're trying to make there. As far as guiding on price beyond that, I think it's a little bit too early for next year. The spot market pricing is pretty well been discussed in previous calls and so forth, we don't refute that too much, it's just that we're not participating hugely in that part of the market. When we do, we're typically trying to go in with customers who are efficiency-minded long term because efficiency and price are so much hand-in-hand, when we can get a commitment for a certain volume, the price can be much more flexible than it is like in the spot market. So, we sometimes dive into the spot market to get a foot -- a toehold to demonstrate the efficiency and then established pricing going forward that's providing a lot of value for the customer and a fair deal for us. That's kind of our overall kind of overriding pricing effort right now.

Marc Bianchi -- Cowen -- Analyst

Okay, that's clear. If I could just one more on the -- just on the net debt position. The $3 million that just to confirm -- that does not include the payment of the dividend?

Greg Powell -- President and Chief Financial Officer

Correct.

Robert Drummond -- President and Chief Executive Officer

That's correct, was at September.

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

It's a September number. I mean we --

Greg Powell -- President and Chief Financial Officer

Yes, after the dividend.

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

That's before the dividend.

Marc Bianchi -- Cowen -- Analyst

That's before. So after the dividend net at September would be what?

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

So we're 335 of cash minus 65 compared to 338 of debt.

Marc Bianchi -- Cowen -- Analyst

Okay, great, thanks guys.

Operator

Thank you. Our next question comes from the line of Dan Boyd with BMO. Please proceed with your question.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

Hey, good morning guys. A question I think Greg might be uniquely positioned to answer this one. But there's just a lot of investor concern out there that Keane's legacy profitability or the GAAP relative to peers isn't sustainable and that all pressure pumping results are sort of going to revert to the mean primarily just due to pricing pressure. But I think having now seen the operations of both companies were Keane's profitability has clearly been top quartile, C&J's was not -- that's clearly in the 4Q numbers. So I was wondering how much of that higher profitability would you attribute to higher pricing versus operational efficiency and then when you think about the value being delivered to the customer in terms of stages or pumping hours per day, however you want to define it, how does the two fleets compare?

Greg Powell -- President and Chief Financial Officer

Look one thing I would say is that when you look at the profitability aspect of the completion crews, frac being part of that and wireline being another part, the fact that we have integrated operations at the well site is a factor in the differentiated profitability because it delivers differentiated pumping efficiency. So that's a big factor, I think, that sometimes not fully appreciated in the market, but 80%, 85% of our fleet pump and have our wireline with it. Given us the ability to crew that and put supervision across the entire completion spread is -- is a way to lever the cost a bit, that's one thing and I don't think you can talk about price being that big of a factor, but without talking about efficiency because we're in the same market as everyone else when it comes to the pricing. It's just that when you put efficiency and pricing together and then focus a lot on -- on taking non-productive time out of the business you can difference -- you can continuously differentiate, I think.

Robert Drummond -- President and Chief Executive Officer

Yes. So Dan, the only thing I'd add to that is look frac equipment is frac equipment and there is innovation going on in this space, which is exciting. But at the end of the day it's the management system, and the customer underwriting and customer selection that makes these things more profitable. And if you think back from a Keane history perspective, right when we ]IPO'ed about 3 years ago, we had just completed the Trican asset acquisition and tripled our asset base.

And there was -- when we were on the road to the IPO show, there was a lot of trepidation about how we're going to take these assets which were deemed to be suboptimal assets and put them into Keane's model. And Keane generated 400 million EBITDA last year and on track for 300 this year and significant cash flow. So I would just say and C&J -- this merger is in much better position because as Robert mentioned, there is a lot of best practices between the two companies will leverage. So you're, you're getting a running start versus in 2017 was more just getting assets off the fence. So I'm very confident, I think we've demonstrated a track record in the -- in the management system for customer selection execution on the wealth side, the dedicated model to take assets and drive profitability. And I think that's what's driving the bifurcation in this space.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

Okay. [Indecipherable] just to summarize that again just correct me if I'm wrong, but what you're saying is there is actually not much of a pricing difference, it primarily comes down to operational efficiency and there is a little bit of not completely apples to apples, because of the wireline being included. Is that a fair summary?

Robert Drummond -- President and Chief Executive Officer

I think that that's a fair summary. So maybe for the last part, I'm not sure exactly what you mean there other than say that I think the wireline leveraging FRAC efficiency because of the combined team aspect of it -- if that's what you mean.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

Okay.

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

Yes. It's material.

Robert Drummond -- President and Chief Executive Officer

Yes. Okay.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

And then just on the forward guidance -- certainly the forward expectation for the first quarter potentially having profitability for crew back to the third quarter level. Given that there is some pricing pressure in the system, are you saying that the synergies will offset the pricing pressure to get that fleet profitability back up there or is there something else that you see offsetting some of that pricing pressure?

Robert Drummond -- President and Chief Executive Officer

Look, I would point out that again Q4 is largely an activity issue where that efficiency component won't be as good because of the white spaces in the schedule. So, recovering that will be a large part of.

Greg Powell -- President and Chief Financial Officer

Yes, so, Dan, I wouldn't characterize this as both on the price environment. I think the scenarios we laid out the first one is assuming that you get a volume recovery and then that gets offset by price and we said, if the fourth quarter profitability was to track overlaying the synergies you still generate over $200 million in cash. The second scenario was, if the pricing environment stabilizes a little bit based on supply and demand balancing out on effectively man crews which we saw happen last year, then that pricing pressure might dissipate and like Robert said we're in the middle of the -- we're in the middle of the evolution of getting things set up for next year. So, I think those are the scenarios we are trying to lay out for the earnings power of the platform with where we are today.

Robert Drummond -- President and Chief Executive Officer

And this comment one more time on pricing -- I would just point out that we are able to go to our customers pretty much year-in and year-out and deliver deflationary cost and claw it back -- taking out operating cost or improving efficiency in the operation. And that's the same thing we're telling them again as we go into 2020.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

Okay. And then last one from me is when you look at the pro forma fleet and everything that you're going to have sort of available, has all of that worked at some point in the past three years, and if not, what percentage of that fleet maybe hasn't worked in the past three years?

Robert Drummond -- President and Chief Executive Officer

Yeah, I'd say for the assets we're retiring is probably about half of them have worked sometime in the last year and half have not. I mean it's different by product line, the well service you price the more stacked equipment given the overcapacity in that space and then wireline and frac you see stuff that worked more recently.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

And then what about the stuff that's being retained, is any of that not worked?

Robert Drummond -- President and Chief Executive Officer

No, the stuff that's been retained has all worked within a year and is in very good shape and we mentioned in the prepared remarks that there is zero CapEx required for any of that equipment to go to work -- which goes back to your team's philosophy over time to have kept the equipment fresh -- investing fully on the acquired maintenance CapEx. But once I came out clearing the prepared remarks is that -- but I thought the asset rationalization and some of the early morning reports that was taken a little lightly but, if you look at wireline we took 25% of the fleet out and cementing 25% of the fleet out, well servicing rigs, 25% of the fleet out, coil 15% and as Greg pointed out 10% in frac. So, I mean we took a big bite at it during this process.

Dan Boyd -- BMO Capital Market Corp. -- Analyst

So, alright, thanks guys. I'll turn it back.

Robert Drummond -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Stephen Gengaro with Stifel please proceed with your question.

Stephen Gengaro -- Managing Director

Thank you and good morning, gentlemen.

Robert Drummond -- President and Chief Executive Officer

Good morning.

Stephen Gengaro -- Managing Director

Two things, one is that, I just wanted to confirm something, but your maintenance CapEx expectations about 4 million of fleet. I think that's what you had in the Barclays presentation. Is that accurate?

Robert Drummond -- President and Chief Executive Officer

Correct. That's correct.

Stephen Gengaro -- Managing Director

Okay. And so when we think about your sort of the parameters around the CapEx, you guys gave, how should we think about fleet coming back into the market and what is sort of the -- what will be your key sort of financial decisions on parameters on when you bring fleets back, I mean obviously the fourth quarter's light right. But when you -- when you look beyond that are there -- are there levels of EBITDA per fleet that you sort of will require to reactivate fleets that are ready to come back?

Robert Drummond -- President and Chief Executive Officer

Okay. Good question. So look, when we are going through that process. I'm thinking about how to redeploy the dry powder that we have, we have the customer base that we already have that some of these have plans in the future to increase the number of fleet they have deployed, that's one avenue but one avenue that I'm extremely excited about -- I failed to mention earlier was that buying companies, sales and marketing organization is much enhanced to what we had individually and I mean I don't -- I don't say that lightly, because it will give us a better ability to sift through the customer opportunities out there to find like-minded partners that are focused -- focused on efficiency. So the reason I say it, say it that way -- simply to say that how we might deploy a new fleet into the market would have a strategic aspect to it. We might enter the market in the spot market, perhaps to try to convert one of these clients to the efficiency model that -- that we're -- efficiency dedicated model that we're used to being able to use a lot. So there is aspects of that. But certainly we would -- we've drawn the line and not be in any case, cash flow negative and that maybe distinguishes us somewhat from some parts of the market.

Stephen Gengaro -- Managing Director

Okay now that's helpful color. And then just finally, so you're -- when you look at the overall CapEx for the year, and I'm sure that the range you gave is that beyond those maintenance levels for the frac fleet. Is that -- is that maintenance on the rest of the assets or is there some incremental CapEx and those numbers based on activity?

Robert Drummond -- President and Chief Executive Officer

It's a combination of two things, Stephen. It's the maintenance CapEx and then it's the CapEx for the non-frac product lines which runs about 40 million a year depending on activity and then the last piece is strategic which is to continue to invest in innovation.

Stephen Gengaro -- Managing Director

Great, thank you.

Robert Drummond -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Jay Smallville with Bank of America. Please proceed with your question.

Analyst

Hey, good morning. Thanks for squeezing me in. Hey, Robert. So I guess I want to come back to C&J a little bit and just trying to connect the dots with the pro forma. It looks like C&J has some really strong cash flow in the third quarter. So I don't know if you could maybe provide some color around what actually free cash flow was in the quarter for C&J and really kind of what drove that.

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

Yeah. Hi, Jay. Good morning. This is Jan Kees. Look, I can't really talk about the numbers. The numbers will be coming out in about two weeks, but the organization as a whole C&J performed relatively well on the free cash flow.

Analyst

Okay. There was no one-offs or anything that kind of drove that cash flow number, correct?

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

Not that I'm aware of.

Analyst

Okay and then sticking with cash -- the cash -- how should we think about cash integration, Greg, as we go forward. Just trying to layer in some cash costs into the cash flow statement.

Greg Powell -- President and Chief Financial Officer

Yes. So look, there is kind of 3 pieces to the equation. The dividend was paid at 66 million on the deal cost side for the transaction. I think we'll have about $50 million, 20 of that was sunk in the second and third quarter and probably another 30 in the fourth quarter for pure transaction cost and then the third bucket is cost to achieve synergies, which we estimated about $50 million to 60 million, 50% of that will be in the fourth quarter of '19 and the other 50% will be in the first half of '20.

Analyst

Okay, all right, that's helpful. Appreciate it. And what have you, Greg, synergies in the fourth quarter -- how much are included in the guidance?

Greg Powell -- President and Chief Financial Officer

Look synergies in the fourth quarter are nominal, probably a couple of million dollars. And the reason for that is the way -- the way you ramp up to our 125 by the end of the second quarter means you got to get to a run rate of about 10.5 per month. So when you annualize that you get to the 125. So what we're saying is we'll be at that 10.5 per month synergy run rate by end of June. So the second six months, you'll get a full 10.5 per month. So that gives you kind of half of the 125 and then between close and June we'll be ramping that run rate up. That's kind of the math with very small amount in the fourth quarter.

Analyst

Okay, all right. That's all I have. I'll turn it back over. Thanks.

Greg Powell -- President and Chief Financial Officer

Thanks, Jay.

Operator

Thank you. Our next question comes from the line of Chris Boyd with Wells Fargo. Please proceed with your question.

Chris Boyd -- Wells Fargo -- Analyst

Good Morning, guys.

Robert Drummond -- President and Chief Executive Officer

Morning Chris.

Chris Boyd -- Wells Fargo -- Analyst

Just curious about the guidance you gave for 4Q 17 fleets for Keane and 8 for C&J. Is that on a fully utilized basis or is that active fleets, because that kind of could help and form any kind of rebound in 1Q 20 if you expect that to fill out from additional activity per fleet or if you expect to reactivate any fleets in that scenario?

Greg Powell -- President and Chief Financial Officer

Yeah, the fleet numbers I gave earlier the 17 in A for 25 fleets is on a fully utilized basis.

Chris Boyd -- Wells Fargo -- Analyst

Okay. And can you give the active fleet number that you had in 3Q for each company.

Greg Powell -- President and Chief Financial Officer

22 for Keane and 11 for C&J, so 33 fully utilized.

Chris Boyd -- Wells Fargo -- Analyst

Thanks. I'll turn it back.

Greg Powell -- President and Chief Financial Officer

Yeah. Thanks, Chris.

Operator

Thank you. Our next question comes from the line of John Daniel with Simmons & Company. Please proceed with your question.

John Daniel -- Simmons & Company -- Analyst

Hi, thanks. Greg, you touched on innovation. Can you say if you guys plan on introducing an electric option in 2020 or a willingness to purchase new pump designs that are forthcoming?

Greg Powell -- President and Chief Financial Officer

Yes, so, on the next-gen equipment, I mean we -- we worked very closely with our customers, John, and trying to go at a pace that makes sense for what the requirements are and also make sure we have a return profile and that's kind of consistent with what we've been saying. We don't think the electric math works right now. If there is a circumstance where a customer wants to go in that direction and with their partner, we'll certainly evaluate options if there is a mutual return.

We are finding dual fuel as we've talked about before to be a really nice bridge option to get the arbitrage on the fuel. We've got a nice portfolio of Tier 2 we were one of the early testers of the few prototype units of the Tier 4 DGB. We've since made some investment decisions in the Tier-4 DGB.

I think we're one of the -- the pioneers on putting that into production and it's all driven by customer demand. So when the demand profile is there, we'll continue to expand. But the dual fuel looks like a nice bridge technology as the electric solutions mature and hopefully the cost comes down.

John Daniel -- Simmons & Company -- Analyst

Okay. Can you say how many fleets you'll retrofit with Tier 4 DGB?

Greg Powell -- President and Chief Financial Officer

We're not putting out a number. I'd say we're dipping our toe from a fleet perspective and then any subsequent bills will be demand driven.

John Daniel -- Simmons & Company -- Analyst

Right. On the retired assets ex-frac, are you actually scrapping that or are you going to sell any of those old assets.

Greg Powell -- President and Chief Financial Officer

They're going to be scrapped.

John Daniel -- Simmons & Company -- Analyst

Okay, good. Alright. And then would you be -- as you have the opportunities to reactivate fleets in Q1 seen sort of the disparity in the EBITDA per fleet, is there a -- what is the threshold meeting the Keane Group EBITDA per fleet or would you reactivate at the C&J level? Walk us through what's that number that would entice you to bring a fleet back?

Greg Powell -- President and Chief Financial Officer

Look like Robert said it's a cash flow number. So it's not -- it's consistent up on our new cost structure. So the two things we look at, we take GP per fleet minus EBITDA per fleet minus CapEx per fleet. So we're 4 million CapEx and then let's say G&A is in 4 to 5 until we drive the synergies out, you're looking at $9 million. If you go below that, you're pumping dollar bills down the well bore and we have no interest in doing that. So I'd say that's a cash threshold for gross profit per fleet. That would be required to see us even consider activation.

John Daniel -- Simmons & Company -- Analyst

And then just two quick ones here. I know you said there are market ready -- the 45 fleets, but again you will probably have some opportunities to deploy stuff, I would think? Are we going to see fleet reactivation cost flow through or no?

Robert Drummond -- President and Chief Executive Officer

Zero. I mean the only activation costs will have is ramping up the employees, 30 days in advance to get them trained up and there is a good market of employees out there today. So I would expect zero activation.

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

This is what I mean by keeping the fleet warm.

John Daniel -- Simmons & Company -- Analyst

Fair enough. And -- the last one is just some simple housekeeping. Would you be willing to sort of offer view on depreciation G&A for 2020 and just where is the share count?

Greg Powell -- President and Chief Financial Officer

The share count is being finalized by the accounts, but as of 11/5 it was around 210 -- which is double the Keane. On SG&A, I'd assume a pre-synergy run rate of 65 per quarter. And then D&A is hard to give because we're going through purchase accounting, which will reset the D&A. So as soon as we have good numbers on that, we'll share what the investment is.

John Daniel -- Simmons & Company -- Analyst

Well, thank you very much.

Robert Drummond -- President and Chief Executive Officer

Thanks, John.

Operator

Thank you. Our final question comes from the line Vebs Vaishnav with Howard Weil. Please proceed with your question.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

Hey, thank you for squeezing me in. I guess, when -- first of all, a good quarter, very good quarter.

Greg Powell -- President and Chief Financial Officer

Thank you, Vebs.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

A couple of things struck me in the initial comments when Robert was talking. You talked about manned [Phonetic] fleet has balanced supply and demand. Could you please expand on that what you mean by that?

Robert Drummond -- President and Chief Executive Officer

Yes, it's a great question, Vebs. I think sometimes underestimate is that once a service company takes the capacity out of the market, [Indecipherable] taken the people off of the market -- out of the market, the layoffs or furloughs, it's much more of a different decision to reactivate because you don't want to be jerking people around back and forth and the cost associated with the restaffing crew is not insignificant. So, there's a little bit of a balance in the market, if we take is that -- how many of our idle fleet do we keep hot and ready meaning the difference between hot and warm being that hot fleet has got ready equipment and ready people and a warm fleet has ready equipment with no people. And I think a lot of people were taking action right now to reduce the number of crude fleets out there. So the reason we're pointing that out is that there is a pricing point associated with that. People are not going to redeploy people into a market as Greg points out -- the dollar bills down the well bore. So that's the reason for pointed out, and that's the difference.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

Okay. So I guess like, other way of thinking is when you guys talk about 17 fleets for legacy Keane, what you're saying is 17 would be equivalent, but there will be like 23 hot-stacked fleet, is that the way to think about it?

Robert Drummond -- President and Chief Executive Officer

No, I would just say that 17 is fully loaded, it may be 18 or 19 that are in the field making jobs to make the math work on 17 fully loaded. And besides that we might have another one or two, hot and ready to take advantage of our pipeline of sales opportunities that we are -- that we will risk handicap accordingly.

So, how you balance that flex capacity has a lot to do profitability if you carry too much cost, your profitability is going to be down, but you have opportunity to catch upside on, and so that we try to be smart about that. And every day we get -- try to get a little bit more information about what our pipeline looks like for the new jobs and handicap it accordingly.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

Okay. The second thing you mentioned was -- we are in the very early cycle on attrition. And you also, I guess -- if you can talk on that and also some thought process of why retiring only 100,000 horsepower?

Robert Drummond -- President and Chief Executive Officer

Yes. So a couple of points. The reason we said we think we're early in an attrition cycle is because I think the horsepower that's being served up for retirement has essentially been dead horsepower on the fence that -- now it's vogue to retire. So we're seeing that. And the one thing I would point out is both companies are relatively -- have relatively mature fleets that we've done a very good job of maintaining maintenance CapEx. And then the Keane side, we've been at 4, 4.5 for 3 years now and we keep the fleets fresh.

And I think there's other CapEx numbers out there in the market that are significantly lower. But I would argue the full fleets not being maintained. Right, so there is some leakage in that number versus an actual, because your fleets deteriorating. As it relates to the horsepower, I can kind of unpack that a little bit. So you know on the frac fleets we went from 2.3 to 2.2 and then we went from 50 to 45 fleets of marketed capacity -- there is a few moving parts in there. The first thing we had to do was standardize the definitions of horsepower. C&J had a definition of horsepower that was about 2000 per pump whereas Keane used, I think, what was a more common industry standard of nameplate engine capacity, which is 2250 or 2500 depending on the engine model.

So the first thing we did was adjust that which actually took C&J's horsepower up 130,000 on our definition. The next thing we did was increase the horsepower per fleet to deal with both the increasing service intensity as well as the need for rotational horsepower because the pumps are working so much at these efficiency levels. So that added a certain amount of horsepower per fleet where we're now running collectively at 49,000 horsepower for fleet in that math, and then 100,000 horsepower effectively two horizontal fleets was permanently retired.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

Got it. Okay and one last question if I may squeeze in? When you talk about the 10 million threshold level to restart a fleet. When you talk about included in that like 4 million of CapEx, is that just a maintenance CapEx around fluid ends or you're talking like every three years you may have to replace engines and transmissions and that's included in that number.

Robert Drummond -- President and Chief Executive Officer

Fluid ends all go through the income statements, that's not included in CapEx for Keane. What's included in that maintenance capEx number is or C&J -- what's included in the maintenance CapEx is the rotational refurb of key components including engine transmission and power and when you keep up with those and replace them, that's the 4 million we've been spending to keep the fleet fresh over the years. So as a recurring number goes through the CapEx to keep the fleets fresh, you take that plus G&A and that gets you to the threshold for gross profit.

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

That's very helpful. And thank you for taking my questions.

Operator

Thank you. Ladies and gentlemen, we have reached the end of our question-and-answer session. I'd like to turn the call back over to Mr. Robert Drummond for closing remarks.

Robert Drummond -- President and Chief Executive Officer

Thank you very much. Look, in closing, I'm going to highlight a few key points. First, we're very pleased to have closed our merger as planned. I appreciate the hard work and support provided by so many. Our combination has created an industry-leading US land service provider committed to delivering leading performance for customers and returns for investors. Second, we've identified more opportunities for cost savings and we've increased the magnitude of expected synergies and have accelerated the pace of achievement. Third, we're being responsible from an asset portfolio perspective rationalizing a sizable portion of our combined asset base resulting in an even stronger base of equipment on which to execute our strategy and deliver for our customers.

And fourth, we remain focused on driving efficiency and safety through continued investment and innovation. Our leading balance sheet position comprised of essentially zero net debt and more than $700 million of total liquidity positions us to maximize the impact of our robust innovation capabilities. We look forward to updating you on our progress and performance on our first quarter call early next year. And I also want to publicly thank all of our employees from both legacy companies for your extra effort and contributions that provide the foundations for NexTier. Many have been managing extra long hours [Indecipherable] to get to this point. Thank you very much and thanks to everyone on this call for your interest in NexTier. Have a great day.

Duration: 76 minutes

Call participants:

Kevin McDonald -- Executive Vice President

Robert Drummond -- President and Chief Executive Officer

Greg Powell -- President and Chief Financial Officer

Jan Kees van Gaalen -- Executive Vice President & Chief Financial Officer

Stephen Gengaro -- Managing Director

Tommy Moll -- Stephens Inc. -- Analyst

Sean Meakim -- JP Morgan -- Analyst

Marc Bianchi -- Cowen -- Analyst

Dan Boyd -- BMO Capital Market Corp. -- Analyst

Analyst

Chris Boyd -- Wells Fargo -- Analyst

John Daniel -- Simmons & Company -- Analyst

Vaibhav Vaishnav -- Scotia Howard Weil -- Analyst

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