ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE:
PUMP) today announced financial and operational results for the
second quarter of 2023.
Second Quarter 2023 Results and Highlights
- Total revenue increased 3% sequentially to $435 million
compared to the prior quarter.
- Highest quarterly net income in over four years of $39 million,
or $0.34 per diluted share.
- Adjusted EBITDA(1) for the quarter decreased 5% sequentially to
$113 million or 26% of revenue.
- Net cash provided by operating activities of approximately $114
million.
- Free Cash Flow(2) was approximately $6 million.
- Effective frac fleet utilization increased to 15.9 fleets
compared to 15.5 fleets in the prior quarter.
- Repurchased 2.3 million shares during the quarter, representing
2% of outstanding shares, for $17.5 million at a 27% discount to
the share price as of July 31, 2023.
(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."
Management Comments
Sam Sledge, Chief Executive Officer, commented, “Building on the
year's momentum and the dedication of the ProPetro team, we are
pleased to report solid results for the second quarter. All of our
service lines exhibited strong performance, particularly wireline
and cementing that both had record performance, contributing to our
highest quarterly net income in over four years. We're also making
significant headway in our fleet modernization, a strategic
priority, with the recent addition of our seventh Tier IV DGB
dual-fuel hydraulic fracturing fleet. These next generation fleets
are highly valued by our customers, as they not only reduce
completion costs but also reduce GHG emissions by offering
industry-leading diesel displacement. I’d also like to note that
toward the end of the second quarter, we voluntarily opted to idle
one of our frac fleets that was experiencing pricing pressure that
could have put us below our financial return threshold. This should
serve as an example that we are dedicated to a margin over market
share asset deployment strategy."
Mr. Sledge continued, "During the quarter, our strategic
initiatives continued to create momentum, notably with the
successful performance of our newly acquired wireline business,
Silvertip, acquired in November 2022, which substantially enhanced
our earnings and cash flow. Further, the approval of our $100
million share repurchase program by the Board in May underscored
this period of positive developments and confidence in our
strategy. We are proud of these accomplishments that stem from our
continued focus on capital discipline and superior field
performance across all of our service lines with more opportunities
ahead. In the third and fourth quarter, we plan to begin our new
FORCESM Electric Frac Fleet deployments with two additional
fleets expected to be deployed in the first half of 2024. The seven
Tier IV dual-fuel fleets and four FORCESM electric fleets
will represent a tremendous transformation to next generation
technology from a diesel-only fleet just a couple of years ago. Our
team is excited to deliver these differentiated services to our
customers and we expect our strategy to continue to generate
improved financial returns.”
David Schorlemer, Chief Financial Officer, said, "The second
quarter was indicative of the significant investments in our
business over the last few years. During the past 18 months and
through the end of this year, we will have invested nearly a
billion dollars in recapitalizing our hydraulic fracturing fleet
and bringing state-of-the-art technologies and completion services
to ProPetro, all done while maintaining a strong balance sheet,
strong liquidity, and executing on our share repurchase program. We
believe efforts like these and other strategic actions create an
attractive value proposition for our customers and an opportunity
for our shareholders. We expect to yield continued financial
returns from these investments for many years to come. The second
quarter was our fourth consecutive quarter of increasing net income
and as Sam mentioned our highest in over four years. Our results
reflect continued strength in net cash provided by operating
activities and our free cash flow was positive this quarter and is
expected to accelerate in the coming quarters. Since the share
repurchase program announcement and through the quarter-end, we
repurchased two percent of our outstanding shares at a 27% discount
to our share price as of July 31, 2023. Finally and after quarter
end, we paid down our ABL Credit Facility by $15 million reducing
the balance outstanding to $45 million. This momentum in our
financial performance is only eclipsed by the significant
investments we expect to benefit from going forward. We are
incredibly well positioned for the future and look forward to
progressing our strategy further."
Second Quarter 2023 Financial Summary
Revenue was $435 million, compared to $424 million for the first
quarter of 2023. The 3% increase in revenue is attributable to
increased utilization across all our service lines. Notably, the
Company experienced lost revenues of approximately $15 to $20
million related to an idled frac fleet for over a month and almost
twice the weather-related downtime as compared to the second
quarter of last year.
Cost of services, excluding depreciation and amortization of
approximately $51 million relating to cost of services, increased
to $298 million from $280 million during the first quarter of 2023.
The 6% increase was attributable to the increased operational
activity levels across our service lines and unabsorbed labor and
related costs of an idled frac fleet in the second quarter of
2023.
General and administrative expense of $29 million was unchanged
from $29 million in the first quarter of 2023. G&A expense
excluding nonrecurring and noncash items (stock-based compensation
and other items) of $4 million, was $25 million, or 6% of
revenue.
Net income, the Company's highest net income since the first
quarter of 2019, totaled $39 million, or $0.34 per diluted share,
compared to net income of $29 million, or $0.25 per diluted share,
for the first quarter of 2023.
Adjusted EBITDA decreased to $113 million from $119 million for
the first quarter of 2023. The decrease in Adjusted EBITDA was
primarily attributable to costs related to higher weather-related
downtime and an idled frac fleet during the quarter.
Net cash provided by operating activities was $114 million as
compared to $73 million in the prior quarter. Free Cash Flow was
approximately $6 million as compared to Free Cash Flow of
approximately negative $41 million in the prior quarter.
Liquidity and Capital Spending
As of June 30, 2023, total cash was $62 million and our
borrowings under the ABL Credit Facility were $60 million. Total
liquidity at the end of the second quarter of 2023 was $170 million
including cash and $108 million of available capacity under the ABL
Credit Facility. Since the close of the second quarter we have paid
down our ABL Credit Facility by $15 million, and as of July 31,
2023, our cash balance was $63 million and we had $45 million of
borrowings under our ABL Credit Facility and $175 million of total
liquidity.
Capital expenditures incurred during the second quarter of 2023
were $115 million, the majority of which related to maintenance
capital expenditures and the Company's previously announced Tier IV
DGB dual-fuel conversions. Net cash used in investing activities
during the second quarter of 2023 was $108 million.
Guidance
The Company continues to expect full-year 2023 cash capital
expenditures to be in the range of $250 million to $300 million,
with a bias toward the upper end of the range.
Due to some industry pricing pressures, the Company decided to
idle one of its fleets during the second quarter to strategically
preserve this fleet and avoid running the equipment at sub-economic
levels. The Company expects frac fleet utilization for the second
half of 2023 to be between 14 to 15 fleets with 14 fleets active
today.
Outlook
Mr. Sledge added, “Looking ahead, we are on track to deploy our
first two FORCESM electric frac fleets in 2023, with
deployment of our first fleet planned for this month and the second
expected to be deployed early in the fourth quarter. We believe
that electric equipment will play a significant role in the future
of ProPetro and are pleased to see strong demand for our
FORCESM electric frac fleets. Additionally, with our strong
balance sheet, we continue to make excellent progress on our
strategic initiatives, and we will continue to seek value-accretive
acquisition opportunities to further enhance our cash flow profile.
We will do all of this in a disciplined and opportunistic manner,
prioritizing only high-return prospects that will enhance free cash
flow and create incremental shareholder value.”
Mr. Sledge concluded, “In the second half of 2023, we remain
focused on advancing our strategy and have no intentions of
slowing. Despite some near-term headwinds and fears of a broader
market slowdown, we expect to achieve consistently strong financial
performance and anticipate continued solid demand for our services.
ProPetro is differentiated by service quality, a young, next
generation equipment offering, a dedicated blue-chip customer
portfolio, and operational density in the Permian. This
differentiation continues to insulate us from some of the market
inconsistency outside the Permian and in the spot market. As we
continue to optimize our operations, transition our fleet, and
pursue opportunistic transactions, while maintaining a disciplined
asset deployment strategy, we are confident in ProPetro’s future
for years to come.”
Conference Call Information
The Company will host a conference call at 8:00 AM Central Time
on Wednesday, August 2, 2023, to discuss financial and operating
results for the second quarter of 2023. 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 7479217. The Company
also posted the scripted remarks on its website.
About ProPetro
ProPetro Holding Corp. is a Midland, Texas-based provider of
premium completion services to leading upstream oil and gas
companies engaged in the exploration and production of North
American unconventional oil and natural gas resources. We help
bring reliable energy to the world. For more information visit
www.propetroservices.com.
Forward-Looking Statements
Except for historical information contained herein, the
statements and information in this news release and discussion in
the scripted remarks described above 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 the supply of and demand for hydrocarbons, our business
strategy, industry, future profitability, expected fleet
utilization, sustainability efforts, the future performance of
newly improved technology, expected capital expenditures, the
impact of such expenditures on our performance and capital programs
and our fleet conversion strategy. 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 global macroeconomic uncertainty
related to the Russia-Ukraine war, general economic conditions,
including the impact of continued inflation, central bank policy
actions, bank failures, and the risk of a global recession, 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, 2023
March 31, 2023
June 30, 2022
REVENUE - Service revenue
$
435,249
$
423,570
$
315,083
COSTS AND EXPENSES
Cost of services (exclusive of
depreciation and amortization)
297,791
280,486
218,813
General and administrative (inclusive of
stock-based compensation)
29,021
28,746
25,135
Depreciation and amortization
52,889
50,798
40,969
Impairment expense
—
—
57,454
Loss on disposal of assets
3,065
22,080
12,978
Total costs and expenses
382,766
382,110
355,349
OPERATING INCOME (LOSS)
52,483
41,460
(40,266
)
OTHER (EXPENSE) INCOME:
Interest expense
(1,180
)
(667
)
(669
)
Other income (expense)
72
(3,704
)
6
Total other (expense) income
(1,108
)
(4,371
)
(663
)
INCOME (LOSS) BEFORE INCOME TAXES
51,375
37,089
(40,929
)
INCOME TAX (EXPENSE) BENEFIT
(12,118
)
(8,356
)
8,069
NET INCOME (LOSS)
$
39,257
$
28,733
$
(32,860
)
NET INCOME (LOSS) PER COMMON SHARE:
Basic
$
0.34
$
0.25
$
(0.32
)
Diluted
$
0.34
$
0.25
$
(0.32
)
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic
114,737
114,881
104,236
Diluted
114,796
115,331
104,236
NOTE: Certain reclassifications to loss on
disposal of assets and depreciation and amortization have been made
to the statement of operations and the statement of cash flows for
the periods prior to 2023 to conform to the current period
presentation. Adjusted EBITDA in the periods prior to 2023 does not
include the impact of expensing fluid ends.
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
data)
(Unaudited)
June 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted
cash
$
62,113
$
88,862
Accounts receivable - net of allowance for
credit losses of $202 and $419, respectively
251,104
215,925
Inventories
18,159
5,034
Prepaid expenses
8,607
8,643
Short-term investment, net
6,437
10,283
Other current assets
704
38
Total current assets
347,124
328,785
PROPERTY AND EQUIPMENT - net of
accumulated depreciation
1,001,109
922,735
OPERATING LEASE RIGHT-OF-USE ASSETS
5,672
3,147
OTHER NONCURRENT ASSETS:
Goodwill
23,624
23,624
Intangible assets - net of
amortization
53,480
56,345
Other noncurrent assets
2,370
1,150
Total other noncurrent assets
79,474
81,119
TOTAL ASSETS
$
1,433,379
$
1,335,786
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
218,147
$
234,299
Operating lease liabilities
1,125
854
Accrued and other current liabilities
57,022
49,027
Total current liabilities
276,294
284,180
DEFERRED INCOME TAXES
84,162
65,265
LONG-TERM DEBT
60,000
30,000
NONCURRENT OPERATING LEASE LIABILITIES
4,564
2,308
Total liabilities
425,020
381,753
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, 112,957,976 and 114,515,008 shares
issued, respectively
113
114
Additional paid-in capital
956,856
970,519
Retained earnings (accumulated
deficit)
51,390
(16,600
)
Total shareholders’ equity
1,008,359
954,033
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
1,433,379
$
1,335,786
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June
30,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
67,990
$
(21,043
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
103,687
78,973
Impairment expense
—
57,454
Deferred income tax expense
18,897
(4,321
)
Amortization of deferred debt issuance
costs
140
655
Stock-based compensation
7,294
14,822
Loss on disposal of assets
25,145
22,947
Unrealized loss on short-term
investment
3,846
—
Changes in operating assets and
liabilities:
Accounts receivable
(35,178
)
(53,878
)
Other current assets
(983
)
561
Inventories
(6,792
)
457
Prepaid expenses
(144
)
3,343
Accounts payable
(3,160
)
(426
)
Accrued and other current liabilities
5,769
3,764
Accrued interest
503
—
Net cash provided by operating
activities
187,014
103,308
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(223,775
)
(144,519
)
Proceeds from sale of assets
2,044
2,951
Net cash used in investing activities
(221,731
)
(141,568
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings
30,000
—
Payment of debt issuance costs
(1,179
)
(824
)
Proceeds from exercise of equity
awards
—
741
Tax withholdings paid for net settlement
of equity awards
(3,383
)
(3,786
)
Share repurchases
(17,470
)
—
Net cash provided by (used in) financing
activities
7,968
(3,869
)
NET DECREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
(26,749
)
(42,129
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
- Beginning of period
88,862
111,918
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
- End of period
$
62,113
$
69,789
Reportable Segment Information
Three Months Ended
June 30, 2023
March 31, 2023
(in thousands)
Completion Services
All Other
Total
Completion Services
All Other
Total
Service revenue
$
435,249
$
—
$
435,249
$
423,570
$
—
$
423,570
Adjusted EBITDA
$
112,813
$
—
$
112,813
$
119,165
$
—
$
119,165
Depreciation and amortization
$
52,889
$
—
$
52,889
$
50,798
$
—
$
50,798
Capital expenditures
$
115,233
$
—
$
115,233
$
97,170
$
—
$
97,170
Non-GAAP Financial Measures
Adjusted EBITDA and Free Cash Flow are not financial measures
presented in accordance with GAAP. We define EBITDA as net income
(loss) less (i) depreciation and amortization, (ii) interest
expense and (iii) income tax expense (benefit). We define Adjusted
EBITDA as EBITDA, plus (i) loss (gain) on disposal of assets, (ii)
stock-based compensation, (iii) other expense (income), (iv) other
general and administrative expense (net) and (v) retention bonus
and severance expense. We define Free Cash Flow as net cash
provided by operating activities less net cash used in investing
activities.
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, 2023
March 31, 2023
(in thousands)
Completion Services
All Other
Total
Completion Services
All Other
Total
Net income
$
39,257
$
—
$
39,257
$
28,733
$
—
$
28,733
Depreciation and amortization
52,889
—
52,889
50,798
—
50,798
Interest expense
1,180
—
1,180
667
—
667
Income tax expense
12,118
—
12,118
8,356
—
8,356
Loss on disposal of assets
3,065
—
3,065
22,080
—
22,080
Stock-based compensation
3,758
—
3,758
3,536
—
3,536
Other expense (income) (1)
(72
)
—
(72
)
3,704
—
3,704
Other general and administrative expense,
(net) (2)
263
—
263
946
—
946
Retention bonus and severance expense
355
—
355
345
—
345
Adjusted EBITDA
$
112,813
$
—
$
112,813
$
119,165
$
—
$
119,165
(1)
Includes unrealized loss on short-term investment of $0.1
million and $3.8 million for the three months ended June 30, 2023
and March 31, 2023, respectively.
(2)
Other general and administrative expense, (net of reimbursement
from insurance carriers) primarily relates to nonrecurring
professional fees paid to external consultants in connection with
the Company's audit committee review, SEC investigation,
shareholder litigation, legal settlement to a vendor and other
legal matters, net of insurance recoveries. During the three months
ended June 30, 2023 and March 31, 2023, we received approximately
$0 and $0.3 million, respectively, from our insurance carriers in
connection with the SEC investigation and shareholder
litigation.
Reconciliation of Cash from Operating Activities to Free Cash
Flow
Three Months Ended
(in thousands)
June 30, 2023
March 31, 2023
Cash from Operating Activities
$
113,954
$
73,060
Cash used in Investing Activities
(107,981
)
(113,750
)
Free Cash Flow
$
5,973
$
(40,690
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802695797/en/
Investor Contacts:
David Schorlemer Chief Financial Officer
david.schorlemer@propetroservices.com 432-227-0864
Matt Augustine Director, Corporate Development and Investor
Relations matt.augustine@propetroservices.com 432-848-0871
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