ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE:
PUMP) today announced financial and operational results for the
second quarter of 2022.
Second Quarter 2022 and Recent Highlights
- Total revenue for the quarter increased 11% to $315 million
compared to $283 million for the first quarter of 2022.
- Net loss for the quarter was $33 million, or $0.32 per diluted
share, compared to net income of $12 million, or $0.11 per diluted
share, for the first quarter of 2022.
- Recorded impairment expense of $57 million in connection with
our DuraStim® equipment.
- Adjusted EBITDA(1) for the quarter increased 13% to $76 million
or 24% of revenues compared to $67 million for the first quarter of
2022.
- Effective utilization for the second quarter improved 8% to
14.8 fleets compared to 13.7 fleets for the first quarter of
2022.
- Net cash provided by operating activities for the quarter of
$78 million as compared to $25 million for the first quarter of
2022.
- Positive Free Cash Flow(2) for the quarter was approximately
$0.6 million as compared to negative Free Cash Flow of
approximately $39 million for the first quarter of 2022.
- Recently ordered additional Tier IV Dynamic Gas Blending ("DGB"
or "dual-fuel") frac units.
(1)
Adjusted EBITDA is a Non-GAAP financial
measure and is described and reconciled to net income (loss) in the
table under “Non-GAAP Financial Measures”.
(2)
Free Cash Flow is a Non-GAAP financial
measure and is described and reconciled to cash from operating
activities in the table under “Non-GAAP Financial Measures".
Sam Sledge, Chief Executive Officer, commented, “The Company
produced another strong quarter of operational and financial
performance in spite of many crosswinds and challenges, including
continuing supply chain disruptions and cost inflation. We
attribute this success to the hard work and effort of our team
executing on our returns-focused strategy to take advantage of
improving market conditions and increased demand for our services,
all bolstered by first-in-class service at the wellsite.
As part of our fleet transition strategy announced last year, we
now have three Tier IV DGB fleets operating and expect a fourth
Tier IV DGB fleet to be operating in the fourth quarter of this
year, subject to final equipment deliveries over the coming months.
With the additional orders announced today, we anticipate having
approximately six marketed Tier IV DGB fleets during the first
quarter of 2023. Given customer interest in long-term contracts for
gas-burning equipment with our efficient crews, we are experiencing
accelerating demand for Tier IV DGB assets into 2023.
Additionally, I want to comment that the demand for electric
solutions from efficient frac providers is gaining momentum and
ProPetro plans to play a significant role in the electric future of
the Permian Basin. We have assessed multiple electric frac
offerings with plans to deploy an electric solution in 2023,
therefore putting our team in a position to participate directly in
the electrification and industrialization of the Permian Basin. We
are excited about continuing our transition to more efficient
solutions that support gas-burning opportunities for our customers
to help lower costs, reduce greenhouse gas emissions, and enhance
our future competitiveness and free cash flow profile."
David Schorlemer, Chief Financial Officer, commented, "Our
positive financial performance in the second quarter is a result of
our commitment to our strict fleet deployment strategy and our
pursuit of margin-over-market share. Achieving mid-cycle economics
this early in the year gives our team confidence to move forward
with our customers to prioritize Tier IV DGB equipment and the
deployment of electric frac fleets in 2023."
Second Quarter 2022 Financial Summary
Revenue for the second quarter of 2022 was $315 million,
compared to revenue of $283 million for the first quarter of 2022.
The 11% increase was attributable to our increased effectively
utilized fleet count of 14.8 fleets, from 13.7 fleets in the first
quarter of 2022, driven by fleet repositioning and increased
pricing.
Cost of services, excluding depreciation and amortization of
approximately $31 million, for the second quarter of 2022 increased
to $219 million from $197 million during the first quarter of 2022.
The 11% increase was attributable to the increased operational
activity levels and cost inflation in the second quarter of
2022.
General and administrative expense of $25 million for the second
quarter of 2022 decreased from $32 million in the first quarter of
2022. General and administrative expense, exclusive of a net
expense of $5 million relating to a non-recurring net legal expense
of approximately $2 million and non-cash items consisting of
stock-based compensation of approximately $3 million, was $20
million, or 6% of revenue, for the second quarter of 2022 compared
to 7% of revenue for the first quarter of 2022. The decrease in our
general and administrative expense as a percentage of revenue was
driven by higher revenue in the second quarter of 2022.
Net loss for the second quarter of 2022 totaled $33 million, or
$0.32 per diluted share, compared to net income of $12 million, or
$0.11 per diluted share, for the first quarter of 2022. The net
loss recorded in the second quarter of 2022 was primarily driven by
the non-recurring and non-cash impairment expense of $57 million in
connection with our DuraStim® equipment.
Adjusted EBITDA increased to $76 million for the second quarter
of 2022 from $67 million for the first quarter of 2022. The
increase in Adjusted EBITDA was primarily attributable to increased
activity, fleet repositioning and net pricing improvements.
Liquidity and Capital Spending
As of June 30, 2022, total cash was $70 million and the Company
remained debt free. Total liquidity at the end of the second
quarter of 2022 was $185 million including our total cash balance
and available borrowing capacity under the Company’s revolving
credit facility.
Capital expenditures incurred during the second quarter of 2022
were $89 million, the majority of which related to maintenance
expenditures and our previously announced Tier IV DGB conversions.
Net cash used in investing activities from our statement of cash
flow during the second quarter of 2022 was $78 million.
Outlook
Effective utilization for the second half of 2022 is expected to
be in the range of 14 to 15 fleets. Based on that range and
assuming current market and industry conditions, the Company
currently anticipates full year 2022 adjusted EBITDA to be at or
above $300 million with capital expenditures increasing to a range
of $300 million to $350 million due to the additional orders of
Tier IV DGB frac units.
Mr. Schorlemer added, "As we plan to meet customer demand for
gas-burning offerings in the face of pronounced supply chain
constraints, we have accelerated some of our 2023 capital
expenditures into 2022 that would otherwise have been allocated to
maintaining and upgrading our conventional fleets, in favor of Tier
IV DGB equipment. We believe this investment will protect our
ability to expand margins further in 2023 and enhance our free cash
flow longer term. Assuming a continuing favorable operating
environment, which we believe will continue to strengthen as we
move into 2023, capital expenditures next year are currently
expected to be meaningfully lower. This sets the Company up for
material free cash flow in 2023 and a further bolstering of our
already strong liquidity position which enables our longer term
capital allocation strategy."
Mr. Sledge concluded, "As we begin to approach 2023 into what we
believe is a structurally undersupplied global crude oil market, we
are optimizing ProPetro to fully benefit from global demand for
short-cycle barrels in the Permian Basin. It is clear to our team
that the transition to dual-fuel and electric equipment is an
important step in maintaining our position as a leading Permian
frac provider. The dual-fuel investment decisions announced today
and the role we expect to have in the electric frac market in 2023
and beyond will support a structural shift in the capabilities of
our future fleet portfolio. While these assets will certainly be a
highlight in 2023, optimizing our existing footprint and evaluating
new technologies and other strategic opportunities will continue to
play an important role in enhancing cash-on-cash returns and the
long-term competitiveness of ProPetro as we move through a
sustained up cycle. We expect that favorable industry conditions,
our strong balance sheet, and our relentless pursuit of operational
excellence will enable success in the execution of these
initiatives."
Conference Call Information
The Company will host a conference call at 8:00 AM Central Time
on Wednesday, August 3, 2022, to discuss financial and operating
results for the second quarter of 2022. The call will also be
webcast on ProPetro’s website at www.propetroservices.com. To access the conference
call, U.S. callers may dial toll free 1-844-340-9046 and
international callers may dial 1-412-858-5205. Please call ten
minutes ahead of the scheduled start time to ensure a proper
connection. A replay of the conference call will be available for
one week following the call and can be accessed toll free by
dialing 1-877-344-7529 for U.S. callers, 1-855-669-9658 for
Canadian callers, as well as 1-412-317-0088 for international
callers. The access code for the replay is 1560734.
About ProPetro
ProPetro Holding Corp. is a Midland, Texas-based oilfield
services company providing pressure pumping and other complementary
services to leading upstream oil and gas companies engaged in the
exploration and production of North American unconventional oil and
natural gas resources. For more information visit www.propetroservices.com.
Forward-Looking Statements
Except for historical information contained herein, the
statements and information in this news release are forward-looking
statements that are made pursuant to the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995. Statements
that are predictive in nature, that depend upon or refer to future
events or conditions or that include the words “may,” “could,”
“plan,” “project,” “budget,” “predict,” “pursue,” “target,” “seek,”
“objective,” “believe,” “expect,” “anticipate,” “intend,”
“estimate,” and other expressions that are predictions of, or
indicate, future events and trends and that do not relate to
historical matters identify forward‑looking statements. Our
forward‑looking statements include, among other matters, statements
about our business strategy, industry, future profitability,
expected fleet utilization, sustainability efforts, the future
performance of newly improved technology, expected capital
expenditures and the impact of such expenditures on our performance
and capital programs. A forward‑looking statement may include a
statement of the assumptions or bases underlying the
forward‑looking statement. We believe that we have chosen these
assumptions or bases in good faith and that they are
reasonable.
Although forward‑looking statements reflect our good faith
beliefs at the time they are made, forward-looking statements are
subject to a number of risks and uncertainties that may cause
actual events and results to differ materially from the
forward-looking statements. Such risks and uncertainties include
the volatility of oil prices, the operational disruption and market
volatility resulting from the COVID-19 pandemic, the global
macroeconomic uncertainty related to the Russia-Ukraine war, and
other factors described in the Company's Annual Report on Form 10-K
and Quarterly Reports on Form 10-Q, particularly the “Risk Factors”
sections of such filings, and other filings with the Securities and
Exchange Commission (the “SEC”). In addition, the Company may be
subject to currently unforeseen risks that may have a materially
adverse impact on it, including matters related to shareholder
litigation. Accordingly, no assurances can be given that the actual
events and results will not be materially different than the
anticipated results described in the forward-looking statements.
Readers are cautioned not to place undue reliance on such
forward-looking statements and are urged to carefully review and
consider the various disclosures made in the Company’s Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and other
filings made with the SEC from time to time that disclose risks and
uncertainties that may affect the Company’s business. The
forward-looking statements in this news release are made as of the
date of this news release. ProPetro does not undertake, and
expressly disclaims, any duty to publicly update these statements,
whether as a result of new information, new developments or
otherwise, except to the extent that disclosure is required by
law.
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share data)
(Unaudited)
Three Months Ended
June 30, 2022
March 31, 2022
June 30, 2021
REVENUE - Service revenue
$
315,083
$
282,680
$
216,887
COSTS AND EXPENSES
Cost of services (exclusive of
depreciation and amortization)
218,813
197,271
162,837
General and administrative (inclusive of
stock-based compensation)
25,135
31,707
17,529
Depreciation and amortization
31,462
31,854
33,243
Impairment expense
57,454
—
—
Loss on disposal of assets
22,485
16,117
15,025
Total costs and expenses
355,349
276,949
228,634
OPERATING INCOME (LOSS)
(40,266
)
5,731
(11,747
)
OTHER INCOME (EXPENSE):
Interest expense
(669
)
(134
)
(159
)
Other income (expense)
6
10,357
(302
)
Total other income (expense)
(663
)
10,223
(461
)
INCOME (LOSS) BEFORE INCOME TAXES
(40,929
)
15,954
(12,208
)
INCOME TAX (EXPENSE) BENEFIT
8,069
(4,137
)
3,697
NET INCOME (LOSS)
$
(32,860
)
$
11,817
$
(8,511
)
NET INCOME (LOSS) PER COMMON SHARE:
Basic
$
(0.32
)
$
0.11
$
(0.08
)
Diluted
$
(0.32
)
$
0.11
$
(0.08
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic
104,236
103,683
102,398
Diluted
104,236
105,384
102,398
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
data)
(Unaudited)
June 30, 2022
December 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
69,789
$
111,918
Accounts receivable - net of allowance for
credit losses of $217 and $217, respectively
182,026
128,148
Inventories
3,491
3,949
Prepaid expenses
3,493
6,752
Other current assets
202
297
Total current assets
259,001
251,064
PROPERTY AND EQUIPMENT - net of
accumulated depreciation
806,513
808,494
OPERATING LEASE RIGHT-OF-USE ASSETS
755
409
OTHER NONCURRENT ASSETS:
Other noncurrent assets
1,354
1,269
Total other noncurrent assets
1,354
1,269
TOTAL ASSETS
$
1,067,623
$
1,061,236
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
170,145
$
152,649
Operating lease liabilities
588
369
Accrued and other current liabilities
22,925
20,767
Total current liabilities
193,658
173,785
DEFERRED INCOME TAXES
56,732
61,052
NONCURRENT OPERATING LEASE LIABILITIES
197
97
Total liabilities
250,587
234,934
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value,
30,000,000 shares authorized, none issued, respectively
—
—
Common stock, $0.001 par value,
200,000,000 shares authorized, 104,308,413 and 103,437,177 shares
issued, respectively
104
103
Additional paid-in capital
856,605
844,829
Accumulated deficit
(39,673
)
(18,630
)
Total shareholders’ equity
817,036
826,302
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
1,067,623
$
1,061,236
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June
30,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(21,043
)
$
(28,886
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
63,317
66,721
Impairment expense
57,454
—
Deferred income tax expense (benefit)
(4,321
)
(10,360
)
Amortization of deferred debt issuance
costs
655
269
Stock-based compensation
14,822
5,396
Provision for credit losses
—
140
Loss on disposal of assets
38,603
28,076
Changes in operating assets and
liabilities:
Accounts receivable
(53,878
)
(53,762
)
Other current assets
561
325
Inventories
457
89
Prepaid expenses
3,343
7,711
Accounts payable
(426
)
44,933
Accrued and other current liabilities
3,764
828
Net cash provided by operating
activities
103,308
61,480
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(144,519
)
(52,187
)
Proceeds from sale of assets
2,951
1,267
Net cash used in investing activities
(141,568
)
(50,920
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of insurance financing
—
(4,093
)
Payment of debt issuance costs
(824
)
—
Proceeds from exercise of equity
awards
741
3,235
Tax withholdings paid for net settlement
of equity awards
(3,786
)
(5,773
)
Net cash used in financing activities
(3,869
)
(6,631
)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
(42,129
)
3,929
CASH AND CASH EQUIVALENTS - Beginning of
period
111,918
68,772
CASH AND CASH EQUIVALENTS - End of
period
$
69,789
$
72,701
Reportable Segment Information
Three Months Ended
June 30, 2022
March 31, 2022
(in thousands)
Pressure
Pumping
All Other
Total
Pressure
Pumping
All Other
Total
Service revenue
$
309,445
$
5,638
$
315,083
$
277,112
$
5,568
$
282,680
Adjusted EBITDA
$
86,291
$
(10,344
)
$
75,947
$
76,995
$
(10,462
)
$
66,533
Depreciation and amortization
$
30,528
$
934
$
31,462
$
30,930
$
924
$
31,854
Capital expenditures
$
83,170
$
5,911
$
89,081
$
71,602
$
126
$
71,728
Non-GAAP Financial Measures
Adjusted EBITDA and Free Cash Flow are not
financial measures presented in accordance with GAAP. We believe
that the presentation of these non-GAAP financial measures provide
useful information to investors in assessing our financial
condition and results of operations. Net income (loss) is the GAAP
measure most directly comparable to Adjusted EBITDA, and net cash
from operating activities is the GAAP measure most directly
comparable to Free Cash Flow. Non-GAAP financial measures should
not be considered as alternatives to the most directly comparable
GAAP financial measures. Non-GAAP financial measures have important
limitations as analytical tools because they exclude some, but not
all, items that affect the most directly comparable GAAP financial
measures. You should not consider Adjusted EBITDA or Free Cash Flow
in isolation or as a substitute for an analysis of our results as
reported under GAAP. Because Adjusted EBITDA and Free Cash Flow may
be defined differently by other companies in our industry, our
definitions of these non-GAAP financial measures may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
Three Months Ended
June 30, 2022
March 31, 2022
(in thousands)
Pressure Pumping
All Other
Total
Pressure Pumping
All Other
Total
Net income (loss)
$
(24,392
)
$
(8,468
)
$
(32,860
)
$
29,370
$
(17,553
)
$
11,817
Depreciation and amortization
30,528
934
31,462
30,930
924
31,854
Impairment expense
57,454
—
57,454
—
—
—
Interest expense
—
669
669
—
134
134
Income tax expense (benefit)
—
(8,069
)
(8,069
)
—
4,137
4,137
Loss (gain) on disposal of assets
22,680
(195
)
22,485
16,421
(304
)
16,117
Stock-based compensation
—
3,458
3,458
—
11,364
11,364
Other expense (income)(2)
—
(6
)
(6
)
—
(10,357
)
(10,357
)
Other general and administrative expense,
net(1)
21
1,333
1,354
274
1,193
1,467
Adjusted EBITDA
$
86,291
$
(10,344
)
$
75,947
$
76,995
$
(10,462
)
$
66,533
(1)
Other general and administrative expense,
(net) relates to nonrecurring professional fees paid to external
consultants in connection with the Company's pending SEC
investigation and shareholder litigation, net of insurance
recoveries. During the three months ended June 30, 2022 and March
31, 2022, we received approximately $2.4 million and $1.0 million,
respectively, from our insurance carriers in connection with the
SEC investigation and Shareholder litigation.
(2)
Includes $10.7 million of net tax refund
received from the Comptroller of Texas in March 2022 in connection
with sales and use tax audit for periods 2015 through 2018.
Reconciliation of Cash from Operating
Activities to Free Cash Flow
Three Months Ended
(in thousands)
June 30, 2022
March 31, 2022
Cash from Operating Activities
$
78,138
$
25,170
Cash used in Investing Activities
(77,520
)
(64,048
)
Free Cash Flow
$
618
$
(38,878
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220802006170/en/
Investor Contacts:
David Schorlemer Chief Financial Officer
david.schorlemer@propetroservices.com 432-688-0012
Matt Augustine Investor Relations
matt.augustine@propetroservices.com 432-848-0871
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