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ProPetro Holding Corp. (NYSE:PUMP)
Q4 2019 Earnings Call
Apr 01, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the ProPetro Holding Corp. fourth-quarter and full-year 2019 earnings release conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Sam Sledge, chief strategy and administrative officer.

Please go ahead.

Sam Sledge -- Chief Strategy and Administrative Officer

Thanks, and good morning, everyone. We appreciate you -- we appreciate your participation in today's call. With me today is Chief Executive Officer Phillip Gobe, Interim Chief Financial Officer Darin Holderness, and Senior Vice President of Operations Adam Muñoz. Yesterday afternoon, we released our earnings announcement for the fourth quarter and year ended December 31, 2019.

Additionally, last week, we announced a number of strategic actions to align our cost structure to better reflect current expected lower activity levels. These press releases are available on our website at www.propetroservices.com. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control.

These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Also, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release.

Additionally, management continues to provide information to its independent registered public accounting firm in order to allow it to evaluate the sufficiency and scope of the audit committee's internal review and associated findings, as well as the company's proposed remediation plan. Management is working to complete its preparation of quarterly and annual financial statements to allow its independent registered public accounting firm to perform quarterly reviews and an audit of the financial statements as of and for the year ended December 31, 2019. The company cannot currently predict when this process will be completed. The company also continues to work diligently to become current in its filing obligations with the Securities and Exchange Commission as soon as reasonably practicable, and it currently expects to do so prior to the expiration of the additional trading period granted by the NYSE on July 15, 2020.

Finally, after our prepared remarks, we will answer any questions related to our results and operations. However, we will not answer any questions with respect to the internal review, the SEC investigation or our outstanding litigation. With that, I'd like to turn the call over to Phillip.

Phillip Gobe -- Chief Executive Officer

OK. Thanks, Sam, and good morning, everyone. We appreciate you joining us for today's call. Given the timing of our call, as well as recent developments with the COVID-19 pandemic and the depressed commodity price environment, we plan to focus the majority of today's commentary around the market and operational update, but I would first like to congratulate the ProPetro team on yet another strong finish to close out a solid year in 2019.

Our team proved throughout 2019 that our strong employee-led operation and blue-chip customer base continue to foster a truly differentiated service offering. We will leverage these differentiating factors to compete and protect our balance sheet in today's rapidly changing market. With that, I'd like to turn it back to Sam for a quick financial overview.

Sam Sledge -- Chief Strategy and Administrative Officer

Thanks, Phillip. I'd also like to thank our team and our customers for their continued efforts in the field. Without our employees' daily service to our customers, none of what we do is possible. As Phillip mentioned, we would like to spend as much time as possible today speaking with you about more recent developments, so I would like to refer you to our press release that we published yesterday for quarter-over-quarter and full-year financial commentary.

That said, I would also like to highlight what a solid start to 2020 we have had with effective utilization in the first quarter of 18.6 fleets with strong efficiencies and a favorable job mix. Although due to declining activity in March, we no longer expect our first-quarter financial performance to meet current consensus expectations. I would also like to take a moment to reiterate ProPetro's strong balance sheet and capital structure. As we announced yesterday, as of March 30, 2020, we had total liquidity of 193.4 million, including cash of 143 million, and 50.4 million of available capacity under the company's revolving credit facility which had an outstanding balance of 110 million at March 30, 2020.

Although our borrowing base will be adversely impacted by the expected decline in our customers' activity, our disciplined commitment to executing projects with positive returns will also allow us to protect our capital structure. With that said, we continuously look for ways, both internally and externally, to protect the financial health of our company moving forward. I'll now turn it back to Phillip.

Phillip Gobe -- Chief Executive Officer

OK, Sam. Thanks. I'd like to turn and take a chance to give you a brief update on our DuraStim project. As we have previously announced, our first electrically powered DuraStim fleet began its first payout on January 5.

The fleet successfully completed multiple stages on one pad with some limited assistance from conventional fleets that were supporting the operation. During this acclimation process, our team saw promising developments from the DuraStim system. Through close collaboration with our manufacturer, we've made improvements to certain parts of the system. Upstream of the DuraStim pumps themselves, we witnessed outstanding performance from the electric motors, the electric distribution equipment, the power -- the turbine powering the fleet and the gas delivery system.

In February, our team, along with AFGlobal, decided it would be best to remove the fleet from our customers' location and return the fleet back to the manufacturing facility, so some modifications could be made to things like the software and the calibration to pump cylinders. At the time, we believe this was the most effective way to allow our manufacturing partners the opportunity to make the adjustments to the equipment in a controlled environment, so we did not risk interruption to our customers' operations. We also believe these modifications to be vital to allow us to provide an efficient service to our customers going forward. As I mentioned earlier, along with our first DuraStim customer, we remain encouraged by what we have seen thus far from the system in the field.

Although we are still early in the process of proving this technology, we have already seen early signs of prolonged life of certain expandable parts that we believe will eventually lead to a more efficient and cost-effective operation. We also continue to evaluate and improve the system and its operation as we gather more operating data and have more experience with it at the well site. We're excited to see the first fleet back in action after the most recent improvements has been recently redeployed to the well site. As we have previously disclosed, we have options on additional DuraStim fleets.

These options expire at different times through December 31, 2020. AFGlobal has indicated a willingness to extend the duration of these options as our evaluation of the new fleets continues, and we navigate the current market and industry uncertainty. Just as we have done with DuraStim, ProPetro will continue to internally evaluate its own equipment offering by exploring innovative tools that are safer, more environmentally friendly, efficient and cost effective. The quest for equipment that is more purpose fit for the wells and jobs of today will be vital in our arena to remain competitive.

As Sam mentioned earlier, we did see a very strong start to the year with activity beginning to drop off in March after the onset of the COVID-19 pandemic and the sharp decline in crude prices. As both of these dynamics developed, our operating and sales team began to work very closely with each of our customers to understand how these events would affect their near and long-term plans. It soon became evident that completions activity would rapidly decline. Over the past few weeks, our activity outlook has been very fluid.

As we always have, our team remains in close contact with our customers to best position ourselves to remain active and viable. That said, we're experiencing severe negative impact on pricing for our services and activity as the economics for our customer's projects have deteriorated substantially. With the backdrop of these challenges, it will be very important for ProPetro to preserve its strong financial position through controlling costs internally, as well as having the discipline to step away from work that does not produce a positive return. As we announced last week, we have already implemented multiple cost measures such as rightsizing our workforce, reducing capital expenditures, negotiating lower pricing on expendable items, as well as internalizing certain services that were previously outsourced.

We will continue to evaluate additional measures to assist us in further streamlining the cost structure. From an employee standpoint, the COVID-19 pandemic has undoubtedly produced a very unique set of challenges to our business and businesses across the globe. To ensure that we are protecting the health and safety of our employees, our customers, and the community, we have implemented various strategies and processes aimed at mitigating the threat of the virus to our employees, and we will be monitoring and adapting to new challenges moving forward. And finally, a blue chip customer base is immensely important in challenging times.

These vital partnerships we share with our customers will help us navigate market uncertainty because of our financial discipline and focus on the Permian Basin. And with that, I would like to open it up for questions. Sarah?

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Praveen Narra with Raymond James. Please go ahead.

Praveen Narra -- Raymond James -- Analyst

Hi. Good morning, guys. Hope everything is OK otherwise. I guess, I had a question.

Maybe if you can give us a little bit more color on the number of crews maybe that are working today or which you have line of sight to, or any color you can give us? Obviously, it's a fluid situation. And so, not holding to it, but just maybe any color you can give on activity today.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah, Praveen. This is Sam. Obviously, that's -- you're exactly right. It's a very fluid situation, and it tends to change on a daily basis and sometimes multiple times within a single day.

I can tell you from an effective utilization standpoint, we did enter the first quarter right around 20 fleets, and we exited -- looks like we're exiting March just under 17 fleets -- 16 fleets, sorry, from a monthly average. We do think it goes lower from there. Like I said, it's changing on a daily basis, almost, but that's kind of the trend that we saw throughout the first quarter with the last couple of weeks of March taking a significant step down.

Praveen Narra -- Raymond James -- Analyst

That's helpful. And then, I guess, maybe can you talk about the threshold on cash flow or EBITDA per fleet that you guys are seeing is necessary to keep a fleet working? And how -- what are you seeing from your competitors as your customers are asking for what seems like pretty steep pricing requests?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. I mean, it's hard to see what the competitive environment is, in general, right now because of how quickly things are changing and how quickly most of our customers are reevaluating their plans. We can tell you our goal moving forward is to remain cash positive, right? There might be some more extreme measures that we're willing to go to from a pricing standpoint that we haven't gone to in the past, but not knowing the longevity of this downturn and just really not being able to have very much visibility across our customer base. We're going to do whatever we can to remain cash positive and keep as many members on our team through keeping as much activity as we can in this environment.

Praveen Narra -- Raymond James -- Analyst

OK. Thank you very much, guys.

Operator

Our next question comes from Sean Meakim with JP Morgan. Please go ahead.

Sean Meakim -- J.P. Morgan -- Analyst

Thank you. Good morning, Can we maybe put some more parameters around expectations for your cost-reduction targets? And so, if we talk through variable versus fixed costs, just trying to get a little more of a handle on how you think that progresses as we go through 2020.

Phillip Gobe -- Chief Executive Officer

Well, I think right now, as we look at that, obviously, we've cut out the growth capex, new technology capex, reevaluating maintenance capex. As you are probably well aware of our overhead is extremely low, so not a lot of money to be stripped out there. We've got our vendors working in coordination with us on lowering prices of certain equipment and services we've got. We've eliminated a lot of the work we outsourced and bringing that in-house, so there are a number of levers we're pulling right now at this time.

And again, we're very concentrated. We're able to react quickly to the environment we're in, and we've got a plan that looks at the activity at various levels and the various levers we can pull.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. And, Sean, I think all I will add to that is that it is both variable and fixed in terms of savings we are seeking or we've already executed on. Just as we were very effective in years like 2017 and '18 scaling up, we think that experience across our operating team is very helpful in an interesting way and scaling down as well. Our operating team is very effective at rightsizing the operation to whatever activity level that we are experiencing, so we're reacting as quickly as we can, and we're seeking savings across the entire value chain.

Sean Meakim -- J.P. Morgan -- Analyst

OK. Fair enough. I appreciate that feedback. And then, could you maybe just reaffirm the contracts with Pioneer, as well as for the three DuraStim fleets? Are those as firm as they were three or six months ago? Is there anything else you can elaborate on with respect to the context around those contracts?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. I'll speak to the Pioneer contract quickly and might let Phillip talk about the DuraStim options. Really at the heart of our agreement with Pioneer was to make our business maybe a little more structural and a little less cyclical and to plan for kinds of loose -- both looseness and tightness within the market. That contract has been functioning as we hoped it would to this point to allow Pioneer to adjust their activity as they see fit, so we feel good about working with Pioneer through this time.

We think we've got a great relationship there, and I think both sides are willing to be as collaborative as possible.

Phillip Gobe -- Chief Executive Officer

As it relates to DuraStim, we're working with a great partner with AFGlobal. They've been very responsive to our concerns and needs. As you will recall, I think the first DuraStim fleet was deployed later than we expected, so we didn't get the amount of time we wanted to evaluate it. They were -- they recognize that and told us they would be willing to think about extending the option periods given the time we needed.

Talked to them again last week given the current pricing environment and the macro picture right now on oil, they understand the issue is growth capital is pretty much cut out. And right now, you're down to maintenance. And they told me that they would push our options out and work with us so that we both end up in a place that works for both of us. But they're very cooperative with us.

They understand the situation, and they're working with us closely on it.

Sean Meakim -- J.P. Morgan -- Analyst

Phil, just to clarify, my question is really more directed with the customers for the three committed fleets.

Phillip Gobe -- Chief Executive Officer

I would say this. Where we're deployed now, given the environment we're in and the reduction in that customers' -- particularly, the number of fleets they were running and what they're running now, I think it's a big tribute to DuraStim that they agreed with us that they wanted that fleet on location. They believe in the technology. Think they believe that, going forward, we're going to be in a lower-priced world.

They need new technologies, more efficient, less in people, less cost to run, and they're willing to let us bring it out and continue. So, we are now deployed for the second time, so as far as the other commitments, I don't have enough knowledge. I don't know if they were ever firm commitments, but at this point, we've got extensions on the three options and one in service, and we'll see where it goes from there.

Operator

Our next question comes from Tommy Moll with Stephens. Please go ahead.

Tommy Moll -- Stephens Inc. -- Analyst

Good morning, and thanks for taking my questions. I just wanted to follow up with one more on DuraStim. So, for what you have paid for and taken delivery of versus what you've got options on, are there three fleets that you've already got paid for, or is it just the one? And then you've referenced options a few times. Any detail you could give us on how many that applies to would be helpful.

Phillip Gobe -- Chief Executive Officer

Yeah. We've essentially paid for the three DuraStim fleets we committed for. Virtually all of that capital has been paid. As far as the options, it is for three additional DuraStim units.

And as I mentioned earlier, those options were due to play out through this year when we've got an understanding with AFGlobal that we can push those options out which we will do.

Tommy Moll -- Stephens Inc. -- Analyst

Got it. That's exactly what I was expecting you'd say, and that's helpful. And on the power gen side, obviously, you've got one power gen set that you've taken possession of and/or deploying in the field. Do you own the power gen for the other two DuraStim fleets that you already have, or is that a TBD item, just based on demand at some point in the future?

Phillip Gobe -- Chief Executive Officer

I would say it's a TBD item. There is a dialogue going on whether who's going to own that power. Is it going to be the operator? Is it going to be the customer? To your specific question, we have the one turbine that is currently in operation on the pad where our DuraStim fleet is, and we have another turbine that is paid for that's available. But where we go from here on power, I think, is still an open question and whether it's going to be a turbine or another power source still remains to be seen.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. And, Tommy, I'll just add to that. We're seeing some pretty rapid innovation on the mobile power side of many different types, so I think we're all -- us and our customers that are interested in DuraStim are just fine kind of letting a little bit of this play out to see that if a more creative, cost-effective solution comes to market here over the coming months, so that's obviously something we're watching very closely. There's a lot of innovation going on in that arena that is only going to make those systems better.

Tommy Moll -- Stephens Inc. -- Analyst

Yeah. That makes sense. Pivoting to another topic here, dedicated agreements. For the customers that you've really got the close relationships with or have had historically under the dedicated-type arrangements, how much visibility do you have in terms of the type of work that they're going to have for you, even at a much reduced utilization which we all expect and you've indicated as much today, just in terms of the fleet that you've laid down.

But for those where you do expected to have work, let's just say in the second quarter or even one month ahead, if that's all the visibility you have, is it still a dedicated type of arrangement where you've got pretty good insight in what pads, how efficient you can be, all that, or is it really just, like you said earlier, Sam, evolving on a daily basis and hard to really predict?

Adam Munoz -- Senior Vice President of Operations

Tommy, this is Adam Muñoz. I would say the relationships we have and the fleets that we currently still have deployed are definitely of that dedicated model. It's still with customers that have been with us for long periods of time and showed commitment from the operation field level to the office level. But like Phillip and Sam were saying, this is a real fluid time we live in, and things are changing day by day, sometimes multiple times a day, like Sam said.

So, visibility, it's really tough to judge right now. Like -- just like us, our operators are being asked to fly by the seat of their pants, I guess, and just operate as well as they can in this tough environment that we're living in and basically keep focused on day-by-day operation.

Phillip Gobe -- Chief Executive Officer

I think events are moving so quickly that there's talk of proration, there's talk of oil storage filling up that seems to be the general consensus. I am not sure that our operators know what their activity level is going to be. So, at this point, I think it's amazing how much the world has changed in 30 days. And I think at one point, we thought we had some pretty good idea of visibility into the activity and had some confidence around it.

But I'd have to say in the last two weeks, things are evolving so quickly that it is very difficult to anticipate what activity level any operator is going to be going -- have going forward, just given what's going on, on the macro level.

Tommy Moll -- Stephens Inc. -- Analyst

All right. Thank you, guys. I'll turn it back.

Operator

Our next question comes from Scott Gruber with Citigroup. Please go ahead.

Scott Gruber -- Citi -- Analyst

Yeah. Good morning. I wanted to touch on maintenance capex. I assume with lower utilization, you can defer some external purchases, and there should be some deflation on parts as well.

How should we think about maintenance capex per fleet going forward?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. Scott, that's a great question. We had some learnings from the fourth quarter of last year when we saw our utilization come down off of 100%. We used a lot of that extra equipment to kind of redeploy it to the active fleets.

We saw efficiencies go up, downtime go down. And that's basically what we think produced those profitability numbers for us in the fourth quarter. We also think that using that extra equipment to, say, increase the size of the active fleets is only going to prolong equipment life for our large component items that fall into our maintenance capex, engines, fluid ends, power ends, transmissions. So, we think that we'll have a lot of opportunities with some extra equipment to manage the per-fleet maintenance capex spend down.

I think our most recent guidance in 2019 was, when we're very active, we expect to spend about $7 million per crew per year in maintenance capex. We think we can take a pretty good cut to that number. We now -- we're still working through internally what we think that number might be, but there's no reason why that number shouldn't come down pretty significantly as our activity comes down. It still, in essence, is an activity-based spend, right, because we will minimize, if not totally cut, maintenance capex spending on equipment that is parked and only spend maintenance capex dollars on equipment that is supporting the operation.

Scott Gruber -- Citi -- Analyst

But is it safe to assume that you'd be able to defer some external purchases and maybe cannibalizing some parts on what's inactive and in addition to some deflation was low anytime on the deflation potential?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. I think things like cannibalization are kind of a last resort. We wouldn't want to do that, unless we had to, but you're right. If we use this excess equipment on our active fleets, prolong the equipment -- prolong the life of these large components, then we are, in essence, deferring maintenance indirectly by prolonging equipment life.

Scott Gruber -- Citi -- Analyst

Got it. And then, just circling back on DuraStim, just to clarify. Assuming the first DuraStim fleet takes the required milestones, are the customers committed to taking fleets two and three at this point, or is that at their discretion?

Sam Sledge -- Chief Strategy and Administrative Officer

No. We don't have any hard commitments for those, Scott. But, I mean, just the market, in general, right now, there's just not visibility for anything, right? And I don't know if it matters what type of equipment you have right now. Activity is declining so rapidly, and I think the economics -- our customers' economics are so threatened that it just might not matter.

Are we still very encouraged by DuraStim? And do we still believe that it's going to take a different type of equipment to play the game that we play? Yeah. Will we keep searching for those tools? No doubt about it. But right now, it's much more of a fight.

Scott Gruber -- Citi -- Analyst

Yeah. So, if I could just slip one more, and sorry if I missed this earlier. But what's a reasonable adjusted EBITDA per fleet for 1Q on the 18.6 actives?

Sam Sledge -- Chief Strategy and Administrative Officer

It'll -- really, all we can say right now is because we haven't seen data for March is that it is down -- it is a good step down off of Q4 levels. That's about all we can say at this point.

Scott Gruber -- Citi -- Analyst

OK. Appreciate it. I'll turn it back.

Operator

Our next question comes from George O'Leary with TPH and Company. Please go ahead.

George O'Leary -- Tudor, Pickering, Holt & Co. -- Analyst

Good morning, guys. Just wanted to piggyback on Scott's question to make sure I'm understanding the kind of maintenance question correctly. So, I wonder if you could frame maybe the average size of your active fleets point in time today or in March? And then it sounds like as you beef up the fleets with some of the idle equipment that you guys are maybe just going to run more pumps but pump at lower rates to defer that maintenance. Is there any -- that horsepower that's also being used as rotational or backup horsepower on the pads? I just kind of want to understand all those moving parts.

Adam Munoz -- Senior Vice President of Operations

Yeah, George. This is Adam. Yes. Currently, I mean, if you're talking current fleet out there, we're probably at the 50,000 horsepower -- hydraulic horsepower per fleet on location which already allows us the additional equipment to be able to operate at a more efficient and with less wear and tear on the equipment.

But to answer your question, yes, we are working closely with our maintenance division and the rest of the operations team as far as developing per se. You can call it like a leapfrog system with the spare equipment that we're going to have here at the yard, and I think Sam led to this on the last question, but to kind of extend the calendar life of this equipment by rotating it from pad to pad on the active fleets and reducing the amount of wear that each piece of equipment endures on a job-to-job basis.

George O'Leary -- Tudor, Pickering, Holt & Co. -- Analyst

OK. That's very helpful, Adam. And then, you guys mentioned you want to stay cash positive if things get kind of as bloody as it seems they might in this -- against this macro backdrop. So, does that mean, annual aside, is that keeping annualized EBITDA per fleet above wherever that maintenance capex level settles out, or do you think about that through a different strategic lens? Just curious how you think about cash flow-positive.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah, George. Well, I think when you hear us say cash-positive, that's EBITDA minus maintenance capex at the fleet level. We obviously have overhead to account for outside of the fleet level as well. We're doing our best to account for that kind of more fixed cost.

Yet as activity fluctuates, that calculation continues to be a bit of a moving target. But in essence, the end goal is to remain cash positive, right? We don't have much interest in burning cash just to keep equipment to work. And, I mean, that said, we think that in times like these, it will be the more efficient pressure pumpers that will really show the best because efficiency on location gives you the best opportunity to make EBITDA and therefore make cash with the fleet. So, we come from a pretty good starting point on a relative basis across our peer group, and we're trying to take advantage of that right now to not only allow ourselves to produce a positive return at the fleet level but to stay active and to pose a very strong value proposition to the customers that are going to stay active.

George O'Leary -- Tudor, Pickering, Holt & Co. -- Analyst

All right. Does help. I'll sneak one more in, if I could. You guys have, to your point, a blue-chip customer base but also good mix of public and private operators as customers.

I was just curious if there are any notable differences in behavior between the public customer base versus the private customer base. Or are we just all kind of in the same boat at this point?

Phillip Gobe -- Chief Executive Officer

All in the same boat, rowing upstream.

George O'Leary -- Tudor, Pickering, Holt & Co. -- Analyst

Figured that was the answer. Thought I'd ask anyway. Thanks a lot.

Phillip Gobe -- Chief Executive Officer

Thank you.

Operator

Our next question comes from Chris Voie with Wells Fargo. Please go ahead.

Chris Voie -- Wells Fargo Securities -- Analyst

Thanks. Good morning.

Sam Sledge -- Chief Strategy and Administrative Officer

Good morning.

Chris Voie -- Wells Fargo Securities -- Analyst

So just to kind of follow up on some of the activity questions. I totally understand the lack of visibility, but I'm sure you're tracking your customer's announcements on activity and having conversations. I'm sure you're aware of some incremental drops that are likely to come. If you're to only add up the incremental fleet drops that you do have visibility for, can you give a sense of how much that might be compared to the 16?

Sam Sledge -- Chief Strategy and Administrative Officer

You're talking about what else do we have visibility for that might drop?

Chris Voie -- Wells Fargo Securities -- Analyst

Yeah, yeah, based on their public announcements of your customers or conversations you've had.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. It's just too fluid to quantify that right now. We -- it is -- there's significant downside to the 16 number, I can tell you that. But quantifying that is fairly difficult at this time.

Phillip Gobe -- Chief Executive Officer

Several of them have come out with multiple press releases on capital reduction, so it kind of gives you an idea of just how fluid it is, how sentiments are changing, if not weekly, getting to be daily right now, so it's very hard to get visibility. Especially as storage fills up, that could change their whole outlook again, so.

Chris Voie -- Wells Fargo Securities -- Analyst

Fair. Fair enough. And then, on the pricing side. So, obviously, EBITDA per fleet and whether you can cover your cash cost is a function of efficiency as well, and you guys are generally at the high end of the efficiency spectrum.

But if we just think about the price level itself, can you give us some color on where leading edge is evolving to just the change quarter over quarter or where it stands compared to 2016 levels?

Sam Sledge -- Chief Strategy and Administrative Officer

It's a pretty wide range. As you know, Chris, we do our best to treat every customer on an individual basis. So, given that we had a range of pricing and profitability within our own customer group to start with, I'd hate to just oversimplify it and stick an average on it. I mean, everything is definitely moving down.

And I can tell you from just, say, -- I mean, we've taken a few steps in pricing here. We had some small steps in Q4 of '19 down, and we had some -- a couple more small steps in Q1 of this year down. So, it's a -- as we've said before, it's a very fluid situation, and we continue to work those numbers on a daily basis as we continue to alter our cost structure and pass as much of that along as possible to our customers.

Chris Voie -- Wells Fargo Securities -- Analyst

OK. And maybe just one more. In the release and on the call, you've mentioned your borrowing base will probably be adversely impacted, partly due to receivables. Can you quantify the extent that you expect it to be impacted? Is there a range you can give us?

Sam Sledge -- Chief Strategy and Administrative Officer

The borrowing base.

Phillip Gobe -- Chief Executive Officer

The borrowing base is just basically tied to receivable, roughly 85% of receivables. And as activity goes down, the borrowing base will follow that, so.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. It's going to be a direct function of activity, Chris. I mean, we're going to work with our lenders as best we can in this process, so.

Chris Voie -- Wells Fargo Securities -- Analyst

All right. That's it for me. Thank you.

Operator

Our next question comes from Chase Mulvehill with Bank of America Securities. Please go ahead.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Hey, good morning. I guess, maybe a follow-up on a few questions we've kind of had about the current environment. We've seen some press releases from a few E&Ps about basically halting completions for a month or some through the end of the year, so I don't know if you can maybe just kind of characterize what you're seeing from your customer base about the potential for them to halt completions. Do you think that these are more one-offs, it's going to be more widespread? Just your general thoughts because you are having conversations with the E&Ps and we are not.

Phillip Gobe -- Chief Executive Officer

Clearly seeing probably all of the above, obviously, one of our customers is out with a press release talking about a holiday on completion activity, and that's changed more than once. We are getting signals that -- given that the pipelines are now starting to at least signal that maybe oil isn't going to flow, that it would be likely the completion activity will continue to go down, so. But it's all over the map right now. One thing you can say, as a general rule, everybody's activity is down.

Who's going to go lower or who's going to stop is just not a -- no way to determine at this point.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

OK. All right. Appreciate the color there. Coming back to the DuraStim fleet.

I guess when you took the one DuraStim fleet out in 1Q and did some modifications, were the modifications related more to cost, emissions or efficiency? Like what were you trying to improve?

Adam Munoz -- Senior Vice President of Operations

This is Adam, Chase. It's primarily on increasing the efficiency of how efficient the equipment ran on location, more so like adjustments. The big one was adjustments to the software and how efficient it caused the pumping mechanisms or each cylinder to pump on location. There was also some minor mechanical changes to the units as far as helping that unit perform and achieve its maximum performance.

Sam Sledge -- Chief Strategy and Administrative Officer

And, Chase, one thing I'll add to that. Aside from ProPetro, AFGlobal and our customer, they're working extremely well together. Upstream of the pumping units themselves, right? If you work back upstream from the pump trailers to the electric motors, to the electrical distribution equipment, the turbine, these things that Phillip mentioned in his remarks, we saw outstanding performance in that area of the system. There were some minor tweaks that we had to make along the way, but just the electrical system itself performed very well.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

OK, great. And one quick follow-up on the DuraStim. There was -- one of your competitors put out a paper and talked about electric frac versus Tier 4 DGB and kind of argued that the emissions profile for Tier 4 DGB was better when they looked to greenhouse gas emissions. I guess maybe you -- this is the first public conference call that we've really that we've heard from anybody with electric fleets since that's come out.

So, I don't know if you have any comments about Tier 4 DGB versus electric and whether you're looking converting any Tier 4 DGB down the road or you're going to just go all electric?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. I mean, there is something to the Tier 4 DGB conversation, and I think everything in that paper was factually correct. And is that something that we're looking at as well? Yeah. We think you're going to need multiple tools because, at the end of the day, we are providing a service to a customer, and most of our equipment decisions to date have been fairly customer-led or demand-driven.

So, if that -- if something like a Tier 4 DGB is something that's asked of us by customers that we have a good working relationship with, then no doubt, that will be something that we will work toward. Our move with DuraStim and mainly electric was very customer-driven in itself, and we think has benefits in its own way.

Phillip Gobe -- Chief Executive Officer

Yeah. I don't think I would link a turbine as the power source for DuraStim. That was just our election at that point for that power source because I appreciate AFGlobal will soon have a power-generation system that will actually have an emissions profile equivalent to or lower than the Tier 4 dual fuel. So, there are multiple options to generate power, but I think that paper was probably referring to the turbine generating the power.

That's independent of the DuraStim product.

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Got it. OK. All righty. Makes sense.

I'll turn it back over. Thanks, gentlemen.

Operator

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

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Thanks and good morning, gentlemen. Two things I wanted to just touch on. And the first, rightly or wrongly, I think a lot of investors sort of think about ProPetro when we think about Dale and the relationships in the market, etc. As you go forward here, how do you manage the relationships? And how have the customer discussions gone at this point? And can you give us some color and comfort around that?

Phillip Gobe -- Chief Executive Officer

Yeah. I'll take that, and Adam might have something to add. We contacted all of our customers the day of the release about Dale. The one thing I can say about Dale is he founded a great company, picked great people and then put them to work with some great customers.

And through that process, the interaction with our customers happens at multiple levels right now. And while Dale was integral in getting the customer, keeping the job has been the efficiency and the effectiveness of the ProPetro employees on site and on location. You can only get a job and keep it if you're performing, so I think our customers were very sad and disappointed to see Dale leave. They had great relationships with him.

But first and foremost, they focus on the business. And there, they see no change in terms of morale, attitude and execution. Adam, I don't know if you have anything else.

Adam Munoz -- Senior Vice President of Operations

I mean, I think you hit it on the head right there, Phillip. We definitely developed a great culture here at ProPetro that continues to survive, even through these tough times, but I would just second what Phillip had mentioned. The relationships are up and throughout every customer we have at the field site, as well as in the offices and at the higher levels. So, the safety and the operational efficiencies that our crews perform out there have just been key to be able to keep those customer relations strong and moving forward.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Great. I appreciate the color. And, I guess, as a follow-up, how are you managing the personnel in the field? I mean, obviously, activity is coming down, you're working to keep your cost structure low, but it does seem like the efficiency of the crews is tied to the experienced employee base. And I think if I remember correctly, your retention rates are very, very high.

How are you managing that process?

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. I mean, Stephen, it's tough, right? I mean, our -- we truly believe that our biggest assets are our people, right? We can all -- at the end of the day, all the pressure pumpers, we can all go find the same type of equipment if we want to, but it is the people on location at the well site that make us different on a daily basis. So, as activity changes, our focus on who those key players are within our operating teams almost intensifies, right? So if our personnel offering has to shrink with activity, it's not as simple as the crews and arcs that those people aren't needed anymore. There's a constant analysis across the entire company of who are our best teammates, who helps us protect our culture and our operation, and it's an ongoing iterative process as we learn more and more about our activity levels.

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Great. Thank you for the answers. I appreciate it.

Operator

Our next question comes from Kurt Hallead with RBC. Please go ahead.

Kurt Hallead -- RBC Capital Markets -- Analyst

Good morning, everyone. Good morning, Philip, and welcome to the conference call. And hope everybody is well and healthy. Excuse me for my hoarse -- this morning.

I just had a couple of questions here. So, in the context of the dynamics that play in the market, we all know that it's very difficult to predict exactly what's going to happen with activity. But if we were to say, let's say, frac activity declines by 50% on a year-on-year basis in the Permian, is there any superpowers that PUMP has to offset that kind of decline?

Phillip Gobe -- Chief Executive Officer

Just our outstanding efficiency on the location. I think as activity goes down, you're looking for the most efficient pumpers. We're not the cheapest, and we're still working. So, I think people that look at the full value stream and not just price appreciate what we're doing, and we can do it with fewer people and fewer fleets.

So, I think we do have a differential advantage there, so.

Sam Sledge -- Chief Strategy and Administrative Officer

Yeah. And, I mean, Kurt, just to add to that, you mentioned superpowers. Nobody in this environment has superpowers. What we developed from an operational efficiency standpoint is a total testament to our operating team and our people.

That is hard-earned, and we're going to be leaning on that hard to try and pose great -- as good value as we can to our customers.

Kurt Hallead -- RBC Capital Markets -- Analyst

OK. Thanks for that. Second follow-up was you talked about some severe pricing pressure and that, obviously, you're not the cheapest in the marketplace. We're aware of these letters that have been sent around by varying E&P companies asking for 25% discounts.

I'm assuming that you had received those letters as well. So, is that the kind of magnitude of pricing pressure you guys are facing?

Sam Sledge -- Chief Strategy and Administrative Officer

I mean, that's -- those are the type of asks, yes. I mean, those rumors and those letters are true. They're looking for collective savings across their projects, I think. So, to say that there's a lot of pressure pumpers out there that are even -- we're even making 25% margins coming into this is quite a stretch, right? So we plan to stay as disciplined as possible to stay cash positive like we've said multiple times earlier.

How low we will go or where we will go with individual customers kind of remains to be seen and is still a bit of a moving target.

Kurt Hallead -- RBC Capital Markets -- Analyst

Got you. And then, I know you guys mentioned you're very lean on overhead, but we've seen a number of companies furlough employees, and we've seen executives take pay cuts and so on and so forth. So, what kind of flexibility do you have on SG&A?

Phillip Gobe -- Chief Executive Officer

All the above, and we're talking about all of it. What we -- implementing measures, I'm sure, in the near term, but everything is on the table. But first and foremost, we've got to size correctly with the activity that we think we're facing. And we need to anticipate various activity levels and be ready to respond.

I think that's the -- one of the unique attributes. We don't have to figure out what district to close down, what facilities to shut down, what employees to move around. It will be -- we've got it all right here. We're going to respond very quickly.

We've been thoughtful about how we've done it, and you'll probably see more activity in the future as things continue to evolve. But everything is on the table, all those things.

Kurt Hallead -- RBC Capital Markets -- Analyst

That's great. And I have one more, just on the maintenance capex. Sam, you mentioned historically about $7 million per active crew per year, and you're looking to reduce that. To what magnitude do you think you can reduce that maintenance capex? Is it 20%, 25%? Can you give us some general sense as kind of what you're looking to target?

Sam Sledge -- Chief Strategy and Administrative Officer

I mean, I think 20% would be the starting point. We think there are some things we can do to do that near term, and where it goes from there will be -- we'll have to dig a little deeper, maybe get a little more creative to go from there. But I think your -- the number you quoted there, I think 20% is a good starting point.

Kurt Hallead -- RBC Capital Markets -- Analyst

And then cash positive, is that adjusted EBITDA less maintenance capex, or is that the EBITDA when you account for the fluid ends minus capex?

Sam Sledge -- Chief Strategy and Administrative Officer

It'd be adjusted EBITDA minus maintenance capex. I mean, fluid ends are in the maintenance capex, so it's kind of -- you'd be getting to the same number kind of either way.

Kurt Hallead -- RBC Capital Markets -- Analyst

Got you. OK. Thanks for that. Appreciate your answers.

Sam Sledge -- Chief Strategy and Administrative Officer

No problem. Thanks, Kurt.

Operator

Our next question comes from Waqar Syed with AltaCorp Capital. Please go ahead.

Waqar Syed -- AltaCorp Capital -- Analyst

Thank you. And a couple of questions here. No. 1, the turbine that you ran for the first fleet, were you using feed gas, or was it CNG or LNG?

Adam Munoz -- Senior Vice President of Operations

Yeah. This is Adam. Yes. The first DuraStim was actually supplied by a flare capture with a customer we have that out there with -- compressed into CNG and delivered to location.

Waqar Syed -- AltaCorp Capital -- Analyst

OK, great. Secondly, of your fleets -- active fleets, let's say, around February, how many of them were doing 100% of your -- meeting 100% of your customers' pumping needs?

Sam Sledge -- Chief Strategy and Administrative Officer

Small, it's a pretty small number. Obviously, we're a sole provider to Pioneer, and it's maybe two or three other fleets with small customers.

Waqar Syed -- AltaCorp Capital -- Analyst

OK. And then, what was the Q1 capex?

Sam Sledge -- Chief Strategy and Administrative Officer

We don't -- I don't have that number in front of me right now, Waqar. We can follow up on that later. We'll have that number for you in another six weeks or so.

Waqar Syed -- AltaCorp Capital -- Analyst

OK. Fair enough. And what is your current or last number of manned fleets that you had?

Sam Sledge -- Chief Strategy and Administrative Officer

How many fleets down are we? I mean, I think -- I just think that the only number I quoted that we were comfortable with quoting was that the exit rate for Q1 March average was in the ballpark of 16 fleets average, right? So it was already below that at the end of March.

Waqar Syed -- AltaCorp Capital -- Analyst

No. Fair enough. But is the number of manned fleets a number higher than that? Is that 16 a fully utilized number or both are just virtually the same?

Sam Sledge -- Chief Strategy and Administrative Officer

We are rightsizing in real time, so hard to say.

Waqar Syed -- AltaCorp Capital -- Analyst

OK. Fair enough. And how many active cementing units do you have today?

Sam Sledge -- Chief Strategy and Administrative Officer

I think in Q1, sometime in February, we were around 25 total.

Waqar Syed -- AltaCorp Capital -- Analyst

OK. Is -- are the cementing units going to follow the rig count pretty closely as well, or is there something unique about -- on the cementing side as well?

Sam Sledge -- Chief Strategy and Administrative Officer

I think you'll see that run in parallel with the Permian rig count.

Waqar Syed -- AltaCorp Capital -- Analyst

OK. That's all I have. Thanks, sir.

Sam Sledge -- Chief Strategy and Administrative Officer

Thanks, Waqar.

Operator

Our next question comes from Blake Gendron with Wolfe Research. Please go ahead.

Blake Gendron -- Wolfe Research -- Analyst

Hey. Thanks for squeezing me in here. I want to circle back on working capital. It was a source of cash in '15 and '16.

Wondering if you expect that this year. And then, do you anticipate any major collections issues or potentially bad debt risk as you move forward here, just given your customer base?

Phillip Gobe -- Chief Executive Officer

I'd just say with the blue chip customer base, I think that takes our bad debt risk down to a relatively low level. And as we do move through this period of time, managing our working capital smartly will be definitely something -- one of the tools in our kit.

Blake Gendron -- Wolfe Research -- Analyst

Got it. So, if we assume that operating cash flow doesn't go to zero here, deleveraging, is that the primary focus at this point?

Phillip Gobe -- Chief Executive Officer

Deleveraging.

Sam Sledge -- Chief Strategy and Administrative Officer

Deleveraging. Yes. I mean, we'll -- I mean, I think you'll find that our debt balance will go down, maintain and stay within our borrowing base. We're going to try to -- not buy like covenants of our agreement.

So, we will use cash to pay down debt to a certain level to stay within the borrowing base.

Blake Gendron -- Wolfe Research -- Analyst

OK. And I know you're taking the capex question off-line. I would assume there's some growth capex that was in the first quarter. Do you have a target for 2020 for total gross capex at this point?

Sam Sledge -- Chief Strategy and Administrative Officer

The total growth?

Blake Gendron -- Wolfe Research -- Analyst

Gross. Sorry. Gross.

Sam Sledge -- Chief Strategy and Administrative Officer

Gross. Well, a lot of it's variable because of the maintenance aspect of it so that would be hard to pinpoint.

Blake Gendron -- Wolfe Research -- Analyst

OK. Just a [inaudible]

Sam Sledge -- Chief Strategy and Administrative Officer

It might -- we'll, I mean, probably, by the time we host another call on the right, we'll have some hard, fast-growth capex numbers, and we'll have a better estimation on the capex at that point, too. It's just early right now. Down significantly is all we can say at this point.

Blake Gendron -- Wolfe Research -- Analyst

I got you. OK. Just to finish up with some pretty interesting commentary on the workforce moving around. I would imagine your workforce reductions.

Most recently, you're having a mix and match, maybe some of the legacy crews. I was wondering if you could give us a breakdown of how much of your field crew is legacy ProPetro versus Pioneer? And then maybe some of the considerations with respect to how you're approaching workforce reductions moving forward. Are you trying to keep crews together as best you can, or are you trying to mix and match, just given that, potentially on the upswing, it will be easier to attract some folks back. Also, with your agreement with Pioneer, is there a certain specific crew members or crew configuration that you have to maintain to keep working with those guys?

Adam Munoz -- Senior Vice President of Operations

Blake, no. I would just say that, like Sam mentioned earlier in the call, we're keeping the personnel that best fits our organization, the culture that provides the best service to our customers out there in the field. Whether that's Pioneer or legacy ProPetro guys, I mean, I would say it's a mixture of both. We've got a lot of great people that work for us and -- but no.

I don't think there's any number you could say for each one that -- if one's higher than the other.

Blake Gendron -- Wolfe Research -- Analyst

Got it. Thanks.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Phillip Gobe for any closing remarks.

Phillip Gobe -- Chief Executive Officer

OK, everybody. Thanks for calling in. I'd like to end the call with the thought that we are very differentially positioned. We start with the people.

Many of these people started with the company when it began. They know how to scale up. They know how to scale down. We've got concentration which is working for us in terms of we're quick to react.

We don't have to do a lot of evaluation of different operating areas and what's going to survive and what's not likely to make it, and we're in the Permian Basin. And while it may be going down, it will probably continue to be the most active basin. And when things come back, it's probably the basin that's going to respond the fastest after that. We're going to be positioned to take advantage of that.

So, thank you, everybody, and we look forward to the next quarter call.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Sam Sledge -- Chief Strategy and Administrative Officer

Phillip Gobe -- Chief Executive Officer

Praveen Narra -- Raymond James -- Analyst

Sean Meakim -- J.P. Morgan -- Analyst

Tommy Moll -- Stephens Inc. -- Analyst

Adam Munoz -- Senior Vice President of Operations

Scott Gruber -- Citi -- Analyst

George O'Leary -- Tudor, Pickering, Holt & Co. -- Analyst

Adam Muoz -- Senior Vice President of Operations

George OLeary -- Tudor, Pickering, Holt & Co. -- Analyst

Chris Voie -- Wells Fargo Securities -- Analyst

Chase Mulvehill -- Bank of America Merrill Lynch -- Analyst

Stephen Gengaro -- Stifel Financial Corp. -- Analyst

Kurt Hallead -- RBC Capital Markets -- Analyst

Waqar Syed -- AltaCorp Capital -- Analyst

Blake Gendron -- Wolfe Research -- Analyst

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