Welcome to the ProPetro Holding Corp third quarter of 2026 conference call. Please note that this event is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. I would now like to turn the call over to Matt Augustine, ProPetro's Vice President of Finance and Investor Relations. Please go ahead.
Thank you and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer, Sam Sledge, Chief Financial Officer, Caleb Weatherl, President and Chief Operating Officer, Adam Muñoz, and President of PROPWR, Travis Simmering. This morning, we released our earnings results for the third quarter of 2026. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC. Also, during today's call, we will reference certain non-GAAP financial measures.
Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question and answer session. With that, I would like to turn the call over to Sam.
Thanks, Matt, and good morning, everyone. ProPetro delivered a solid third quarter, higher revenue, net income, and adjusted EBITDA in both our completions and PROPWR business. PROPWR posted a meaningful sequential step-up as we continue to advance its commercial and operational execution and activity across frac, cementing, and more. While the cost of rebuilding its completions capacity continued to weigh on margins, our fleet is now essentially sold out, positioned to recontract into a tighter, better-priced market in 2027. Let's start with PROPWR. Since our last update, we have made significant progress across the business. PROPWR generated approximately $8 million of adjusted EBITDA in the third quarter, a meaningful sequential increase. Results and margin performance at the project level continue to meet our already high expectations, which reinforces our confidence in the earnings and return profile of the outlet.
We expect to keep scaling deployments through year-end, reaching between approximately 250 MW- 275 MW deployed by the end of 2026 and stair-stepping to more than 500 MW by early 2028. We expect this growth to come from three sources: scaling our currently contracted capacity, deploying or preparing to deploy on the Targa award, which is scheduled to be fully deployed by early 2028, and beginning to scale one or more additional data center projects over time. Looking further ahead to 2027, much of our work will be preparing for larger infrastructure scale projects, including the Targa award and potential additional data center awards, which could begin deploying as early as late 2027.
As a result, we expect 2027 earnings to be weighted towards the latter part of the year, with growth following a stair-step pattern as projects come online rather than a straight line throughout the year. Projects of larger scale require significant lead time. We expect certain costs, including personnel, site preparation, mobilization to build ahead of these deployments for the corresponding revenue and earnings contributions. By emphasizing disciplined execution and actively de-risking these larger deployments, we are building on the strong operational foundation we established in 2026, and we remain confident in our PROPWR guidance and the long-term earnings and return profile of the business. On the commercial front, our recently announced agreement with Targa for approximately 230 MW brings our total capacity committed under contract to approximately 510 MW. This award represents meaningful progress in our commercial efforts.
It also shows how broad power demand is across end markets, including oil and gas, upstream and industrial, in addition to data center. Contract terms and economic factors are generally shorter than those in the data center arena. Pricing and expected annual return are very attractive. That said, given the larger load requirements and longer contract duration in the data center arena, along with the depth of our pipeline there, we continue to expect to deploy the majority of our assets to data center projects over time. Of the approximately 2.6 GW power generation capacity we have secured, more than 1 GW consists of Caterpillar's highly efficient 10-MW units that are part of our strategic framework agreement. With supply chains for power generation equipment remaining very tight, we believe this agreement and our early mover position provide a meaningful advantage.
Beyond just securing supply, the 10-MW units themselves are highly efficient, stationary natural gas engines, purpose-built for permanent high-density installations. They maximize efficiency for our customers while lowering our total cost of ownership. The vast majority of our fleet will be natural gas reciprocating engines ranging from 2 MW- 10 MW, which we believe are the ideal fit for every vertical we are currently pursuing. Of note, our smaller units are also proving to be very successful. Our first data center deployment, which is live and operating today in the Midwest United States, is largely built on 2.6-MW units. Reciprocating engines offer a number of advantages that we believe make them the right fit for our customers. They are a proven technology with a long track record in both mechanical drive and power generation applications.
They are continuous duty-rated machines trusted in high availability environments, including data centers, oil and gas, mining and industrial operations, and marine and heavy transport, where uptime and performance are all critical. They provide flexibility, scaling, and modular blocks alongside customer demand with built-in redundancy. They deliver high fuel efficiency, are cost-effective for both PROPWR and our customers, and are emissions-friendly, which supports an efficient permitting. These advantages apply across our entire fleet, with our 10-MW units adding even greater scale for our customers' largest power demands. In the data center arena, despite broader volatility and the noise in the AI market, we remain in advanced negotiations on several hundred megawatts and continue to progress a number of additional opportunities behind them. The pipeline also continues to grow, strengthening our conviction in our strategy and investments.
As we have noted previously, timelines have extended as we work through diligence with counterparties. These agreements involve long-term capital commitments on both sides, so getting the risk-sharing provisions right is critical. Strong demand for our assets can also lengthen rather than shorten the contracting process because we are being deliberate about choosing the right long-term partners. In addition, change in scope or timing on the project can make a previously unworkable opportunity viable or free up capacity for customers who otherwise could not have supported it. Because we are allocating capacity across multiple customers, individual deal timelines may shift as we determine how each opportunity fits within our broader portfolio. Accordingly, we remain very confident in the pipeline. Importantly, we are currently deployed and operating on a hyperscaler project and execution is exceptionally well.
We are one of the very few behind-the-meter power providers live on a data center site today, and we believe this operating track record validates our strategy and has helped accelerate our broader growth. Our PROPWR guidance also remains clear and unchanged. We continue to expect capital costs of approximately $1.4 million- $1.5 million per megawatt. That figure includes balance of plant and expected inflation over the life of the Caterpillar framework agreement, and it reflects the advantage of our early mover position. We continue to target payback periods of four to six years, with oil and gas and midstream projects closer to four years, given their generally shorter contract terms. From a financing perspective, we have raised approximately $1.5 billion to support PROPWR, including our highly successful $690 million convertible notes offering earlier in May, which largely addresses our near-term capital needs.
Going forward, we will approach future capital decisions opportunistically as we continue expanding our commercial footprint and executing against our strategy. Now turning to completions. I want to address the cost that weighed on margins this quarter. As activity declined during 2024 and 2025, with tariff-related uncertainty and OPEC+ production increases adding to the pressure, we took decisive action to reduce operating costs and capital spending during those years. That protected the free cash flow through a challenging market, but we have had to rebuild some of that capacity as demand has recovered this year. Improved pricing and better visibility into the duration of work supported the reactivation of two fleets this year, bringing us to 13 active fleets today. The latest addition deployed in the third quarter earlier than we originally anticipated. We are now essentially sold out of available frac capacity.
Supporting the increase in activity has required rehiring field personnel, restocking inventory and spare parts, and preparing additional pumps for deployment. Higher utilization has also put pressure on our field operations and maintenance shop. While the cost of ramping back up has been higher than we originally anticipated, we are proud of how responsive our operations team have been in meeting increased customer demand. We expect to maintain approximately 13 active fleets in the fourth quarter. That said, we expect meaningful seasonality in the fourth quarter from typical holiday slowdown, which will temporarily affect utilization and results, along with continued margin pressure from the rebuilding costs we experienced in the second and third quarters. As activity stabilizes as we move into 2027, we expect to begin optimizing those costs, although the full benefit may take time.
We're optimistic that our investments will pay off and create meaningful value for our shareholders as fleet recontracting is done. The way we have managed through this period, flexing capacity up and down with the market while keeping our balance sheet strong, reflects our discipline as well as the resiliency of our industrialized model. Now, stepping back to the broader market. Conflict in the Middle East continues to influence commodity prices and customer activity, but it's also highlighted something that we've been talking about for several years, the amount of frac capacity that has already exited the market through consolidation and attrition. Smaller, less disciplined competitors could not sustain the downturn, and much of the excess capacity is disappearing. As activity stabilizes, customers are increasingly recognizing that tighter supply environment, which is constructive for our business.
To put some numbers around that, we estimate the active Permian frac fleet count is in the mid-70s today, and years of attrition have drastically reduced the supply of high-quality horsepower behind it. On the demand side, even a modest increase in drilling activity, particularly from large public and independent operators, would be enough to fully tighten the market. On the supply side, we believe the industry could only bring back perhaps a handful more fleets in the Permian, or it would need to make significant new investments to add capacity. Given the capital discipline and focus on free cash flow across the completion space, we do not expect that investment to materialize anytime soon. In short, demand is poised to grow and supply is not. This bodes well for our long-term setup for our services. That tighter market is already showing up today in pricing.
We're seeing early pricing momentum led by next-generation natural gas-burning fleets, which command a clear premium given today's spread between diesel and natural gas price. Those fleets are effectively sold out industry-wide, and we expect that premium to hold regardless of how the conflict in the Middle East plays out, as limited supply and global refining constraints keep diesel prices elevated for the foreseeable future. That pricing momentum is also relevant to the timing of repricing our contracted fleets. More than two-thirds of our active horsepower is contracted, with most agreements currently scheduled to renew in the first half of 2027. Much of that equipment is next generation and natural gas burners, which positions us well for recontracting, particularly for agreements signed in the more challenging pricing environment of the past two years.
As that horsepower reprices in a more constructive environment, we believe the completions business is poised to deliver improved results over time. Before I hand it to Caleb, let me summarize how we are thinking about the outlook as we head into 2027. In completions, the setup is straightforward. Sold-out fleet, tightening market, and early pricing momentum. We still have work to do on the cost side as we absorb elevated expense of ramping the system back up. But as activity stabilizes, our focus shifts from rebuilding to optimizing, and we expect to bring those costs down in 2027. In PROPWR, our primary focus remains commercial and operational execution. Converting our pipeline into signed long-term contracts, then deploying and operating those assets reliably for our customers.
We've secured the equipment to support that growth, and our performance in the field is strengthening our commercial position as we advance on additional data center opportunities. As I noted earlier, we expect 2027 to be a year of building towards larger infrastructure-scale deployments, with growth weighted to the second half. Across both businesses, we are doing what we said we would do. We are excited about the opportunities in front of us. Completions market is moving in our favor. PROPWR is executing and scaling, and we have the balance sheet, equipment, and the team to capture what is in front of us. With that, I'll turn it over to Caleb.
Thanks, Sam, and good morning, everyone. As Sam mentioned, both PROPWR and our completions business delivered higher revenue, net income, and adjusted EBITDA this quarter, while completions margin reflected the costs of rebuilding the operational infrastructure needed to support higher activity. During the third quarter, ProPetro generated total revenue of $355 million, increase of 16% compared to the prior quarter. Net income totaled $13 million, or $0.09 income per diluted share, compared to a net loss of $8 million, or $0.07 loss per diluted share in the prior quarter. Adjusted EBITDA totaled $60 million, representing 17% of revenue and increased 33% sequentially. The increase was primarily driven by higher utilization in the completions business and incremental deployments in PROPWR, partially offset by higher costs associated with rebuilding capacity to support increased completions activity. Adjusted EBITDA includes approximately $16 million of lease expense related to our electric fleets.
Net cash provided by operating activities was $46 million. This compared to $66 million in the prior quarter. The decrease is primarily attributable to working capital headwinds in the third quarter, which consumed approximately $15 million of cash and working capital tailwinds in the prior quarter, which were an approximately $20 million source of cash, partially offset by higher adjusted EBITDA. During the third quarter, capital expenditures paid were $123 million. Capital expenditures incurred were $171 million, including approximately $43 million supporting the completions business and approximately $128 million supporting PROPWR equipment orders. Notably, the difference between incurred and paid capital expenditures is primarily comprised of PROPWR-related capital expenditures that have been financed and paid directly by the financing partner and unpaid capital expenditures included in accounts payable and accrued liabilities.
Net cash used in investing activities, as shown on the statement of cash flows during the third quarter of 2026, was $122 million, which included capital expenditures paid of $123 million, offset by $1 million in proceeds from certain asset sales. Turning to our outlook, we anticipate full-year 2026 capital expenditures incurred to be between $525 million and $575 million. Of this, the completions business is still expected to account for approximately $125 million- $145 million, largely dependent on delivery timelines of certain CapEx-related items heading through year-end and into 2027. We continue to expect buyout costs for our first FORCE electric fleet to be between $15 million and $20 million, with at least three additional buyouts expected to occur in 2027.
In addition, we anticipate incurring capital expenditures of approximately $400 million- $430 million for our PROPWR business in 2026, narrowed from prior guidance due to greater year-end visibility into the timing of additional equipment deliveries. Notably, our previous guidance of approximately $1.4 million- $1.5 million per megawatt, inclusive of balance of plant, remains unchanged. While these PROPWR capital expenditure estimates reflect the total cost of equipment, they do not reflect the impact of financing arrangements, which have and are expected to continue reducing our near-term actual cash outflows. Looking ahead to 2027, we are aligning equipment delivery schedules under the Caterpillar framework agreement and remain in active discussions on data center opportunities, both of which could affect the timing and amount of capital expenditures for the year.
In particular, the size, timing, and structure of any new data center agreements could change when equipment is needed and how much balance of plant investment is required next year. However, we expect that any such changes would affect the timing and total amount of capital expenditures rather than the cost per megawatt, which we continue to expect to remain within our guided range. That said, we expect 2027 PROPWR capital expenditures to increase from 2026 levels, driven by the delivery of additional equipment and funding of down payments and milestone payments under the Caterpillar framework agreement. One more item on PROPWR before I turn to the balance. Certain PROPWR contract structures may include reservation fees that are collected in cash up front, but not recognized in revenue or adjusted EBITDA until the assets are deployed and generating power.
As a result, PROPWR's revenue and adjusted EBITDA in a given period may trail the level implied by its contracted capacity and guidance, but underlying contract economics remain intact. Importantly, our balance sheet remains a significant source of strength. As of September 30th, 2026, cash and cash equivalents were $729 million, including net proceeds from the issue of $690 million aggregate principal amount of convertible senior notes. Borrowings under our financing agreement with Caterpillar Financial Services Corporation were $172 million. Total liquidity at the end of the third quarter of 2026 was $934 million, which included cash and cash equivalents, $185 million of available borrowing capacity under the ABL credit facility, and $20 million of availability under our Caterpillar Equipment Loan Agreement. We currently have no outstanding borrowings under the ABL credit facility.
Finally, as Sam mentioned, we plan to continue approaching PROPWR funding opportunistically, which gives us confidence in our ability to execute on future capital needs as we expand our commercial footprint to drive our strategy forward. Sam, back over to you.
Thanks, Caleb. Before we open the line up for questions, I want to leave you with a few additional thoughts. ProPetro has been built into a resilient company over the last several years, one that has performed through even the most challenging months, generated free cash flow when even our industry could not, and used that period to reposition itself for what comes next. Today, we are entering a market that is turning in our favor. A higher completions market and a power business that has scale. Our conviction in our business remains very strong. Let's start with completions. Some unexpectedly higher rebuilding costs weighed on our margins in the second quarter into the third. Those costs are the price of standing the system back up to meet higher activity. We're optimistic that 2027 is where that investment really pays off.
Since the second quarter, the underlying fundamentals have only strengthened. Rig prices remain elevated. The conflict in the Middle East is ongoing. Expectations for incremental rig additions next year should further tighten the frac market, which is already tight. None of this is theoretical. It's showing up right now in our 2027 activity in pricing conversations. Our fleet is essentially sold out. Demand is very high, and we are turning away opportunities today because we do not have the capacity to serve them. We are seeing early pricing momentum for three of our contracted horsepower reprices in the first half of next year. Data for our completions business is better today than it ever was six months ago. Now PROPWR. We believe the market is waiting on a transformational data center. We recognize this has become a show me story. Candidly, it's justified.
Our conviction in landing those agreements has not changed. We're in advanced stages commercially, and we're not going to ask anyone to take that on faith. But we could ask that you take a look at our track record. Our message has not changed from one call to the next. We are executing on three fronts, commercially, operationally, and across our supply chain. Commercially, that means strong contract wins with large investment-grade partners, including Targa, that have taken our contracted base to approximately 510 MW. Operationally, it means real assets running in the field today, including a data center site and several Permian microgrids for oil and gas customers, each with excellent execution. On supply chain, we're in a premium position relative to most competitors in the space. We moved early and secured our megawatts through the Caterpillar framework agreement.
The result is 2.6 GW of secured equipment, including over one gigawatt of 10-MW Cat reciprocating engines purpose-built for data centers, locked in at advantage costs. In a market where access to equipment has become the gating item, that is a real durable advantage. Behind all of this sits a strong execution support system. The people, the maintenance infrastructure, and the operating discipline we have built over years in the completion space and are now applying to power. We have not overpromised on contract timelines. We have been deliberately disciplined in how we communicate with you. We would much rather underpromise and deliver than the reverse. Simply put, we are doing exactly what we said we would do, and we are building a track record of execution one quarter at a time. We look forward to demonstrating that execution across every one of our service lines in the years ahead.
Let me leave you with this. This is a very strong company. We have a strong balance sheet and first-class customers across both completions and power. From leading operators in the Permian Basin to investment-grade midstream partners like Targa, the data center customers we are serving today with more expected. We are led and operated by first-class people. To our employees, thank you. Your execution in the field, in the maintenance shop, and on the power sites is what gives this management team the confidence to move forward with this strategy. Every fleet we stood back up this year and every megawatt we have commissioned happened because of you. We are excited about where the business is headed, and we are confident in the setup for 2027. We look forward to sharing more with you again soon. With that, operator, let us open the line for questions.
Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, to join the queue, it is star one. Your first question comes from the line of Saurabh Pant of Bank of America. Your line is open.
Hi. Thank you. Good morning, Sam and Caleb.
Morning, Saurabh.
Sam, so really good update on PROPWR, especially the $8 million positive EBITDA. You are turning the corner there, so that is a really good update. Then you also expect to deploy more than 500 MW by early 2028, and I noted that includes one or more additional data center contracts. Just on that point, can you talk a little bit about where you are in your conversations with these data center customers on contracts? Then just from a timing standpoint, how should we think about timing of signing a contract relative to ordering the balance of plant equipment and then putting it all together for deployment starting in, I think, you are targeting late 2027 or early 2028. So maybe if you can help us with that a little bit.
Yeah. Thanks, Saurabh. I will point out a couple things here real quickly and then let Travis talk about the power contracts. Look, just to reiterate what was at the end of my scripted remarks there, we are doing exactly what we said we would do, and we are really hitting our guidance and executing well in the field. So we are just really trying to overcommunicate the fact that, and I know you have been paying close attention, Saurabh, but this has all been in the plan for almost a year now from a guidance standpoint. So we are excited to see it come to fruition.
Yeah, just to be clear on the capacity also, Saurabh, a data center contract would be incremental to that 500 MW. That 500 MW reflects the 510 MW that we have contracted and have guided will be deployed in early 2028. But as far as the conversations in the data center space, despite kind of the broader turmoil in the data center market, our specific conversation, companies we are dealing with are continuing positive, headed in the right direction towards execution. As you mentioned, that includes balance of plant, equipment that needs to be ordered for these large infrastructure projects. We are in the middle of ordering some of that already, have line of sight to anything that we might want on a project-specific timeline, and just continue to make really good progress on those projects to deploy potentially late 2027, but for sure in 2028 at scale.
Got it. Got it. Thanks, Sam and Travis. That is a good point. Good clarification on the 500+ MW data center number. For a quick follow-up, maybe Caleb, this one is more for you. On the balance sheet financing side of things, the good thing is that you have ample liquidity, like you noted, north of $900 million over there, which I think should be enough for all of 2027. As you sign these bigger data center contracts that Travis was talking about, what do you think makes the most sense for future potential sources of financing as you get these contracts and get deeper into the execution phase? Related to that, I think you mentioned this a little bit, Sam, but you were talking about some customers willing to give prepayment, some upfront cash reservation fees right now.
Just maybe a little more color on that, especially I am thinking about the bigger 10-MW Cat units, which would be much more desirable, I am thinking, for these customers.
Yeah. Thanks, Saurabh. Like you said, we feel really good from a liquidity standpoint. Over $900 million of liquidity, over $700 million of cash. That does not count the $350 million undrawn Stonebriar facility. We want to just continue to be opportunistic and look at all available options and make the best choice when we need the capital. We are going to evaluate all of our options when we need the capital and make the best choice. Of course, prepayments are part of the conversation on these larger.
Got it. Okay. Thank you, Caleb. I will turn it back.
Your next question comes from the line of Alexa Breño of Goldman Sachs. Your line is open.
Good morning, team, and thanks for taking our questions. On the power side, it sounds like you are seeing attractive returns across all different end markets. Can you just talk about the varying economics of some of the shorter duration contracts you mentioned, versus maybe some of the potential data center contracts? How do you evaluate the opportunities from a return and capital requirement perspective?
Yeah, thanks. On the oil and gas, and I would say more upstream space, we are certainly seeing closer to that four-year or better payback. On the larger long-term deals, in the data center space with this larger infrastructure capital requirement, that is certainly probably towards the higher end of the four to six-year payback. Ultimately, we really continue to be excited about these two markets, and broader power markets in general, starting to levelize in terms of the contract requirements, the pricing structure. We think that is going to continue into oil and gas midstream space, where we have longer tenors, that will hopefully be coming in the future because that is the expectation on these highly efficient, larger infrastructure projects.
Okay. That is helpful. Maybe just switching gears a little bit to the frac business, can you just talk about what you are seeing in the market? Maybe more so from equipment bifurcation. How should we think about pricing for some of these more electric fleets, maybe some of the older age ones? How are you thinking about it as we go into maybe back half of 2027 even?
Yeah, I think if you just play off my comments in the opening remarks, it is really starting to set up really well. On the outset of the Iran conflict earlier this year, we might have originally thought that that tightness would have come sooner than it has, but it is really starting to gradually tighten. The natural gas burning equipment for us is in the way of dual fuel, a little bit of direct drive gas and electric, has been sold out and has held its pricing a lot better than everything in our portfolio. So it starts from a little bit of a higher basis. That said, this whole dynamic with diesel right now, and the high price of diesel with the continued lower price of natural gas, continues to keep that equipment in very high demand.
Frankly, some customers that have been more of a dual fuel or a diesel focus in the past are now much more curious about things like direct drive and electric, which really plays into our hands and our recontracting timelines going into next year. The overall market is tightening. I would say the leading edge on the spot market is already very tight. We are turning down a ton of work in that arena. All the meanwhile, we are still trying to manage all of our relationships and the market that we still play in into next year to create more consistency and stickiness with what we think are the top-tier customers, to move forward with. As you could tell in our scripted remarks and my answer to your question here, we are pretty excited about the setup for 2027.
That sounds great. Thank you. We will turn it back.
Your next question comes from the line of Derek Podhaizer of Piper Sandler. Your line is open.
Hey, good morning. I wanted to ask about your comments, negotiation, the timelines extending when negotiating with these big power projects. If you just could expand on those different drivers that is lengthening this process. Is it community pushback, moratoriums, or just maybe more on the commercial terms? I would have to imagine that your current 60-MW data center project helps de-risk some of the contracting structure and terms because it is something you can point to. So maybe help us understand more about the drivers behind these timelines being extended.
Yeah. Thanks, Derek. It is really not anything pushback, type thing you are talking about. It is more the real contract risk exposure on both sides, liability damages when you are talking about this large of an installation, for this longer period of time, and really, kind of getting the scope right between the parties on these types of projects. The initial 60-MW contract certainly gives us a great starting point in these discussions, given that there are very few of us that have done this, right? But as they get a lot larger and longer in term, there is just a lot more scrutiny on both sides, to get to the right answer.
Yeah, Derek, I will just add onto that. Watching Travis and his team work through all these commercial opportunities, the demand remains super strong. We are very confident that the majority of our capacity is going to be placed in the data center market over time. They juggle a lot in this commercial pipeline and at any one time are running several opportunities in parallel that could affect one another. As some of those opportunities that are running parallel to each other might speed up or slow down, sometimes it changes your focus a little bit and then can change your timeline. All the meanwhile, we are trying to make what is the next best decision for our company, our teammates, and our shareholders to create as much value in the future.
A few weeks or a month on the front end to get the right long-term deal, just makes sense to us to make sure that, one, we get the right deal, and two, we do it with the right amount of risk-sharing, like Travis said.
Right. No, that makes sense. I appreciate the comments. Maybe just sticking on the equipment side of things, I am just curious now that you mentioned the 10-MW recips from Cat, the bigger ones, just the interplay between the 10 MW and maybe the smaller, I do not know, 2-MW to 4-MW units of recips. I know those are on your current data center project, but you are clearly leaning into the high-density 10-MW recips. So how do we think about the different applications that fit the 10 MW versus the smaller recips? Or maybe are the smaller recips used to initially scale a project where the larger units take over for the longer term?
Maybe just some education on why leaning hard into the 10 MW and the interplay of the smaller units and how this is going to really fit inside your portfolio as we look in the future of PROPWR.
Yeah, it is a great question. As the sites get larger, obviously power density matters. 10 MW is helpful, but the efficiency matters. I think these markets are getting more aware of how that efficiency can play into the overall cost structure. So when we look at high efficiency engines, they are anywhere from 20%-40% more efficient than a simple cycle turbine type solution, which we think is extremely attractive. Bolting on smaller modular units does help with the variability of load. It also helps with your redundancy story, when you start thinking about providing significant redundancy on these sites. The 10-MW units interplay with the 2.6-MW engines as well as battery systems, we think is an extremely attractive power system to be able to deliver the most reliable, efficient solution while always making sure that the emissions are compliant and allow us to have those capacities.
Great. Appreciate all the comments, guys. I will turn it back.
Your next question comes from the line of Josh Jayne of Daniel Energy Partners. Your line is open.
First question is a quick one just on completions CapEx in 2027. Could you just comment directionally if you hold a 13 fleet program steady, what that ultimately might look like in the next year?
Yeah. It's probably a little early right now, Josh. We're heavy in kind of budget and forecasting season right now, so we'll probably punt that question to next quarter.
Okay. That's fine. You highlighted the possibility of the market tightening from larger publics and independents. Can you just describe those conversations today, how they've evolved over the last couple of months? As it seems, obviously, most of the uptick has been driven by the privates.
Yeah. I was going to start my comments with what you just said right there at the end, that that is a fact that most of the rig increases earlier this year have been with the privates. In conversations with the larger independents and the publics, I think every day these commodity prices remain higher is another piece of confidence that they gain going into next year in potentially increasing activity. That said, they are all pretty savvy. I think they understand what is going on in the supply chains, and they would like to be as least disruptive as possible. Judging off of our conversations and some other public commentary, we fully expect another batch of rigs to come into the system towards the end of this year, going into next year.
We have seen all of those larger independents and privates to run operations that are extremely capital efficient. Therefore, they are not going to drill wells to just let them sit around. They are going to want to complete those wells and take advantage of the spot oil price as much as they can. So it is kind of a combination of customer conversations and boots on the ground intel out here that bolster that confidence that we have about the overall 2027 market tightening. I guess the other piece of it that maybe sometimes we take for granted, but it is still important, we have already mentioned in our opening remarks here this morning, is the equipment market just does not have anything left to give. It is tapped out. We are tapped out.
We have got no extra equipment as we sit here today, and we have heard several of our larger competitors say the exact same thing. There is no slack in the system in our larger private competitors, and there is not really anybody that is willing to underwrite any meaningful investments to fix that right now in our sector. So we think it is a good supply-demand equation, I think, in our favor going into next year.
That is helpful. Thanks. If I could just squeeze one more. You alluded in an earlier question that you were turning away work for 2027, but I assume you are not completely spoken for the entire year. So for those opportunities that you are turning down, is it just more pricing you are holding out for? Is it a more comprehensive program, potentially with a larger operator? Just maybe just talk us through that a little bit, and then I will turn it back. Thanks.
Yeah. I would say a lot of it is just spot market work that we just cannot get to and do not really prioritize in our dedicated fleet model. But there is definitely a demand for it, and I think that that is what is helping push pricing along across the entire sector. 2027, look, we historically, as I have already mentioned, like and prefer the dedicated fleet model. We do not like to jump around from customer to customer within the individual fleet. So we already feel pretty good about the 2027 calendar. I think it is not going to be an effort to fill in gaps as we sit here today. It is going to be more of a portfolio optimization to make sure that we have our teams and assets sitting with the best opportunities.
That is really what the task is from a 2027 standpoint today. Calendar is basically full. We just are not convinced that it is full with the right work quite yet.
Understood. Thanks. I will turn it back.
Your next question comes from the line of Jason Kim of JPMorgan. Your line is open.
Good morning, team. Thanks for taking my question. Just sticking on the frac side, you mentioned that more than two-thirds of horsepower is contracted. How much of the electric FORCE fleet is up for renewal in 2027, and how does the pricing on those e-fleets compare to currently contracted rates? Just to confirm, has any recontracting not yet occurred? Just trying to think about how much upside might be remaining. Thanks.
Yeah. We've already recontracted a little bit of that, with a customer that wanted to keep what they had and was commercial with pricing. So it's just kind of like a click and drag. Maybe half the fleet going into next year is going to recontract, a little bit with the same customers. We expect some same customers to stay, and we expect to have some new electric customers going into next year as well. It's interesting timing, maybe a little bit of is luck, but almost a year ago, we had a chance to recontract almost 100% of that electric equipment. We chose not to do so because we didn't like the pricing opportunities in the market. We sit here today with that capacity that we're in negotiations with new customers under new terms, for the remainder of that capacity right now.
Everything's going to work in 2027. We've got high confidence, almost zero doubt, that any of that equipment is going to be stranded for even one second. A lot of that has to do with how our team has performed with this electric equipment. I'd like to think we might not be the biggest electric frac provider in the Permian Basin, but I'd put our operating stats really up against anybody in that arena. That's been a huge help to our commercial efforts. We expect that performance to continue and to garner a very attractive price.
Understood. Just as a very quick follow-up, directionally is the FORCE premium over those Tier IV DGB widening as diesel stays elevated?
Sorry, ask that question again.
Is the FORCE premium over some of the dual-fuel fleets widening as diesel stays elevated?
It definitely helps. But the dual fuel, given its flexibility, modularity, has been very attractive tool and application for us and our customers. It's a little bit apples and oranges, but the high diesel prices are definitely helping anything that burns natural gas.
Got it. I'll turn it back.
Your next question comes from the line of Eddie Kim of Barclays. Your line is open.
Hey, good morning. You said the data center pipeline includes several hundred megawatts in advanced negotiations. Can you frame for us how many distinct projects that represents? Just trying to get a sense if that's one to two projects or maybe closer to four to five maybe. In these conversations with data center operators, are you finding that these operators would prefer that BTM providers like yourselves also provide the balance of plant equipment, or are they happy to just lease the power gen from you guys?
Yeah. It's definitely more than one opportunity. I would say there's two that are really active that we're excited about in that several hundred-megawatt range. We can't do everything in the pipeline right now, so we've had to narrow our focus on the most realistic executable deals and the timelines that we have available. As far as the balance of plant, we get the question a lot. We see that as a necessity. We can't build a power plant without the balance of plant equipment, whether it's electrical transformers, upfront gas conditioning, and distribution, as well as all of the emissions control. Then whether the hyperscaler or we are asked to take on the battery system, that's a discussion on a project-by-project basis. But we're providing a full turnkey service. We're not interested in just dry leasing assets.
Our business model is built on operating 24/7, and maintaining our assets and the reliability of that with power.
Understood. Thanks. Thanks for that color. Just shifting gears to the frac side of the business, you mentioned kind of the tightening market and that you guys are completely sold out. Just to confirm, I think that implies that you guys don't have a 14th fleet to reactivate, even if you wanted to. If that's the case, do you think that pricing and economics could increase to a level next year that might justify new build horsepower, or are we still far away from those levels?
We don't have any interest in working any more equipment than we're working today, nor do we have any interest in making any CapEx investments above replacement refurbishment of our existing fleet.
I can't sit here and speculate about what if and would we invest differently? We're just not today. That's just not in the conversation. It's not something that we're really thinking about.
Got it. Just to confirm, you guys don't have a 14th fleet to be able to reactivate at this point, correct?
We have old worn out equipment that we do not plan to ever work again, if that is what you are referring to.
Okay.
We do not. Look, all this is fungible too, like 13, 14, we could have a fleet go from simul frac to zipper back to simul frac. We are just trying to provide you clean guidance that is not confusing here. This is-
Got it.
I will just add to that, there is a happy medium to around the equipment flex, the amount that you have to, the maintenance rotation that reduces and keeps your NPT low, your maintenance cost low. So we are measuring all those options on the table right now as well.
Appreciate the color. I will turn it back.
Your next question comes from the line of Jeff LeBlanc of TPH. Your line is open.
Good morning, Sam and team. Thank you for taking my question.
Sure.
I wanted to see if you could talk more about the cadence of FORCE eFleet buyouts over 2027, and how quickly it will flow through the financial results.
Yeah. We are still expecting three next year. As you know right now that eFleet lease expense is impacting our EBITDA. As we execute those buyouts, that will begin to that will be the expense will begin to roll off, when we do each buyout.
Okay. Then separately on PROPWR, I was flipping through the presentation, and for the power plants, you are targeting a 10-15 year term. I guess two questions there are, A, does that include an optional period? Then B, where do you expect the average term in that range to be? Thank you.
Yeah. For larger installations that you are seeing in the presentation, several hundred megawatts, we are only looking at 10+ years. Options and extensions are all on the , on the table if they make sense for us. But ultimately, we want to get a long-term partner on those types of projects. And 10+ is really kind of where we are landing.
Okay. Thank you very much. I will hand the call back to the operator.
Thank you. Again, if you have a question, it is star one on your telephone keypad. Your next question comes to the line of Don Crist of Johnson Rice. Your line is open.
Morning, guys. Hopefully you all are doing well. Sam, I wanted to ask about labor. We've been hearing some anecdotes about people leaving to go build data centers and drive trucks for data centers. Just any comments around labor and upward momentum and what you're paying for people?
Yeah. That's a good question, Don. Maybe we take some of that for granted sometimes because it's just such a normal everyday thing that our team is focused on and working through, trying to make sure that we're acquiring and maintaining first-class people. It's hard and when the broader economy pulls on a workforce, on a blue collar workforce, I think we definitely feel it. It causes inflation. We've not been without, so our team's been able to acquire what we needed to do what we've done this year in standing up some more equipment across all of our oil field service lines. But it's something that we're having to keep a close eye on and likely over time creates more labor inflation, not less. We also have, just as a reminder, I know, Don, you probably know this, but you have a fairly transient workforce too.
We have a lot of people traveling in and out to work their shifts. It's just as easy for them to commute from maybe a West Texas frac site as it might be a data center in the area as well. So, the work kind of attracts a lot of the same people. Just to summarize, it's something we're keeping our eye on, but it hasn't totally inhibited us yet.
Okay. I appreciate that color. I don't know if you want to answer this or not, maybe you want to punt this question, but I'll ask anyway. The 10-MW deliveries, any way you could give us a schedule? Is it pretty even throughout all of the equipment that's on order, or is it kind of more back weighted to 2028 and beyond versus earlier than that?
Yeah, it is pretty even, but starts in the back half of 2028, and then continues on an evenly distributed capacity through the end of the framework agreement.
Okay. The smaller units are earlier in the delivery cycle?
Yeah, that is certainly what we have now that we are building, obviously these power nodes today that are working on a data center and other microgrid applications, while in parallel able to stand up some larger, 10-MW units for these infrastructure type projects we have mentioned.
I appreciate the color. I will turn it back. See you in a couple of weeks.
Thank you. That concludes our Q&A session. I will now turn the conference back over to Sam Sledge, Chief Executive Officer, for closing remarks.
Yeah. Thanks everybody for your interest in the company. Thanks for joining us today. Thanks again to all my ProPetro teammates that are making things happen. We hope to talk to you all soon.
This concludes today's conference call. You may now disconnect.