ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE:
PUMP) today announced financial and operational results for the
third quarter of 2023.
Third Quarter 2023 Results and Highlights
- Total revenue of $424 million.
- Net Income was $35 million ($0.31 per diluted share), a 5th
consecutive quarter of net income.
- Adjusted EBITDA(1) of $108 million, or 25% of revenue.
- Capital expenditures of $59 million.
- Published our first ProPetro ProEnergy ProPeople
Sustainability Report for 2023.
- Successfully commissioned our first FORCESM
electric-powered hydraulic fracturing fleet.
- Effective frac fleet utilization was 15.5 fleets compared to
15.9 fleets in the prior quarter.
- Repurchased and retired 1.9 million shares during the quarter
with total repurchases of 4.2 million shares representing
approximately 4% of outstanding shares since plan inception in May
2023.
- Net cash provided by operating activities was approximately
$118 million with Free Cash Flow(2) of approximately $27
million.
(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, "We are pleased
to build on our momentum with yet another quarter of strong
financial results. Thanks to solid execution by the ProPetro team,
we continue to execute on our strategic priorities. We are excited
to have deployed our new and innovative FORCESM
electric-powered hydraulic fracturing fleet offering. The hard work
and dedication of the ProPetro team and our partners and customers
were critical in making this a success. The FORCESM
electric-powered fleets along with our Tier IV DGB dual-fuel fleets
are part of our strategy to transition our equipment to more
desirable assets delivering premium value to our customers while
lowering emissions through industry-leading natural gas
substitution. This first FORCESM fleet deployment was a
major milestone for the Company and I cannot be more pleased with
how our team has rallied to optimize this deployment and begin
preparation for our next FORCESM deployment later this
month."
Mr. Sledge continued, "Financial performance remained strong
during the third quarter despite some market pressures. We believe
our financial results were more durable due to our bifurcated
premium completion services coupled with our next-generation
equipment, located primarily in the prolific and resilient Permian
Basin. Our investments in new technologies, optimizing our
business, and commitment to a disciplined pricing and asset
deployment strategy resulted in another quarter of strong net
income. Our team is excited to continue to deliver our
differentiated services to our customers and we expect our strategy
to continue to generate improved financial returns for all our
stakeholders."
David Schorlemer, Chief Financial Officer, said, "The third
quarter was an example of the resilient business we're building at
ProPetro. We are focused on our strategy that is ideally-suited for
the continued industrialization of the oilfield. The Company
produced strong Free Cash Flow within the quarter. As we've
communicated over the last several quarters, our strategy, our
investments, the disciplined approach, and opportunistic
investments were designed to create opportunities to share value
with shareholders. By the end of this year, we will have invested
nearly $1 billion over the past two years in transitioning our
fleet and bringing state-of-the-art technologies and completion
services to ProPetro, while maintaining a strong balance sheet and
healthy liquidity. We believe our prudent strategic actions are
creating meaningful, long-term value and position us to deliver for
our customers and shareholders through the market cycle.
Accordingly, we have now retired approximately 4% of our
outstanding shares since the initial share repurchase authorization
in May of 2023. With a strong balance sheet and clear line of sight
to continued free cash flow generation, we are well-positioned to
deliver improved shareholder value creation."
Third Quarter 2023 Financial Summary
Revenue was $424 million, compared to $435 million for the
second quarter of 2023. The 2.6% decrease in revenue was
attributable to slightly decreased utilization, pricing impacts,
and job mix in our hydraulic fracturing and wireline businesses
with our cementing business recording record revenues during the
quarter.
Cost of services, excluding depreciation and amortization of
approximately $52 million relating to cost of services, decreased
to $292 million from $298 million during the second quarter of
2023. The 1.8% decrease was attributable to the decreased
operational activity levels across our hydraulic fracturing and
wireline operating segments.
General and administrative expense of $29 million was unchanged
from $29 million in the second quarter of 2023. G&A expense
excluding nonrecurring and noncash items (stock-based compensation
and other items) of $5 million, was $24 million, or 5.6% of
revenue.
Net income totaled $35 million, or $0.31 per diluted share,
compared to net income of $39 million, or $0.34 per diluted share,
for the second quarter of 2023.
Adjusted EBITDA decreased to $108 million from $113 million for
the second quarter of 2023. The decrease in Adjusted EBITDA was
primarily attributable to slightly lower activity and pricing
during the quarter.
Net cash provided by operating activities was $118 million as
compared to $114 million in the prior quarter. Free Cash Flow was
approximately $27 million as compared to Free Cash Flow of
approximately $6 million in the prior quarter.
Share Repurchase Program
In May 2023, the Company announced a $100 million share
repurchase program. During the quarter, the Company repurchased and
retired 1.9 million shares for $19 million. Since inception, the
Company has acquired and retired 4.2 million shares representing
approximately 4% of its outstanding shares as of the date of plan
inception.
Liquidity and Capital Spending
As of September 30, 2023, total cash was $54 million and our
borrowings under the ABL Credit Facility were $45 million. Total
liquidity at the end of the third quarter of 2023 was $180 million
including cash and $126 million of available capacity under the ABL
Credit Facility.
Capital expenditures incurred during the third quarter of 2023
were $59 million, the majority of which related to maintenance
capital expenditures and the last deliveries of the Company's Tier
IV DGB dual-fuel conversions. Net cash used in investing activities
during the third quarter of 2023 was $91 million.
Guidance
The Company expects full-year 2023 incurred capital expenditures
to be slightly above $300 million as compared to $365 million of
incurred capital expenditures in 2022. Frac fleet effective
utilization is expected to be between 13 to 14 fleets during the
fourth quarter.
Outlook
Mr. Sledge added, "Looking ahead, we are on track to deploy our
second FORCESM electric frac fleet in 2023, with deployment
of our third and fourth fleets planned for the first half of 2024.
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, "As we approach the end of 2023, we
continue to deliver for our customers and advance our strategy to
enhance value for our company and shareholders. Despite the recent
market slowdown, demand for our next generation offerings has not
waned. Our strategy is designed to generate durable returns in the
current market environment and through the cycle. As our dedicated
blue-chip customers seek reliable completion services at
competitive costs, ProPetro is uniquely positioned to provide
quality service, a young, next generation equipment offering and
operational density in the Permian. This differentiation continues
to insulate ProPetro from some of the market inconsistency seen in
other basins and in the spot market. As we continue to optimize our
operations and industrialize our business, modernize our fleet, and
seek opportunistic transactions in line with our commitment to
disciplined capital deployment, we are confident in ProPetro’s
ability to generate enhanced shareholder returns for years to
come."
Conference Call Information
The Company will host a conference call at 8:00 AM Central Time
on Wednesday, November 1, 2023, to discuss financial and operating
results for the third 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 9513361. 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, our fleet conversion strategy and our share repurchase
program. 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 conflict in the Israel-Gaza region and 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
September 30, 2023
June 30, 2023
September 30, 2022
REVENUE - Service revenue
$
423,804
$
435,249
$
333,014
COSTS AND EXPENSES
Cost of services (exclusive of
depreciation and amortization)
292,490
297,791
224,118
General and administrative (inclusive of
stock-based compensation)
28,597
29,021
28,190
Depreciation and amortization
53,769
52,889
41,600
Loss on disposal of assets
4,265
3,065
25,453
Total costs and expenses
379,121
382,766
319,361
OPERATING INCOME
44,683
52,483
13,653
OTHER (EXPENSE) INCOME:
Interest expense
(1,169
)
(1,180
)
(237
)
Other income (expense)
1,883
72
(616
)
Total other (expense) income
714
(1,108
)
(853
)
INCOME BEFORE INCOME TAXES
45,397
51,375
12,800
INCOME TAX EXPENSE
(10,644
)
(12,118
)
(2,768
)
NET INCOME
$
34,753
$
39,257
$
10,032
NET INCOME PER COMMON SHARE:
Basic
$
0.31
$
0.34
$
0.10
Diluted
$
0.31
$
0.34
$
0.10
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING:
Basic
112,286
114,737
104,372
Diluted
112,698
114,796
105,070
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)
September 30, 2023
December 31, 2022
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted
cash
$
54,330
$
88,862
Accounts receivable - net of allowance for
credit losses of $202 and $419, respectively
260,757
215,925
Inventories
15,887
5,034
Prepaid expenses
8,753
8,643
Short-term investment, net
8,163
10,283
Other current assets
2,109
38
Total current assets
349,999
328,785
PROPERTY AND EQUIPMENT - net of
accumulated depreciation
991,593
922,735
OPERATING LEASE RIGHT-OF-USE ASSETS
26,447
3,147
FINANCE LEASE RIGHT-OF-USE ASSETS
26,268
—
OTHER NONCURRENT ASSETS:
Goodwill
23,624
23,624
Intangible assets - net of
amortization
52,047
56,345
Other noncurrent assets
2,244
1,150
Total other noncurrent assets
77,915
81,119
TOTAL ASSETS
$
1,472,222
$
1,335,786
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
194,569
$
234,299
Accrued and other current liabilities
65,305
49,027
Operating lease liabilities
5,449
854
Finance lease liabilities
8,498
—
Total current liabilities
273,821
284,180
DEFERRED INCOME TAXES
94,018
65,265
LONG-TERM DEBT
45,000
30,000
NONCURRENT OPERATING LEASE LIABILITIES
14,199
2,308
NONCURRENT FINANCE LEASE LIABILITIES
17,857
—
Total liabilities
444,895
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, 111,091,503 and 114,515,008 shares
issued, respectively
111
114
Additional paid-in capital
941,073
970,519
Retained earnings (accumulated
deficit)
86,143
(16,600
)
Total shareholders’ equity
1,027,327
954,033
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
1,472,222
$
1,335,786
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended September
30,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
102,743
$
(11,012
)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization
157,456
120,573
Impairment expense
—
57,454
Deferred income tax expense
28,753
(1,926
)
Amortization of deferred debt issuance
costs
250
720
Stock-based compensation
10,604
18,128
Loss on disposal of assets
29,410
48,401
Unrealized loss on short-term
investment
2,120
3,349
Non cash income from settlement with
equipment manufacturer
—
(2,668
)
Changes in operating assets and
liabilities:
Accounts receivable
(44,832
)
(82,374
)
Other current assets
(2,584
)
(29,647
)
Inventories
(4,520
)
6
Prepaid expenses
(275
)
2,847
Accounts payable
9,584
7,117
Accrued and other current liabilities
16,004
43,983
Accrued interest
358
—
Net cash provided by operating
activities
305,071
174,951
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(320,747
)
(247,164
)
Proceeds from sale of assets
7,976
7,207
Net cash used in investing activities
(312,771
)
(239,957
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings
30,000
—
Repayments of borrowings
(15,000
)
—
Payments on finance lease obligations
(889
)
—
Payment of debt issuance costs
(1,179
)
(824
)
Proceeds from exercise of equity
awards
—
963
Tax withholdings paid for net settlement
of equity awards
(3,506
)
(3,843
)
Share repurchases
(36,258
)
—
Net cash used in financing activities
(26,832
)
(3,704
)
NET DECREASE IN CASH, CASH EQUIVALENTS AND
RESTRICTED CASH
(34,532
)
(68,710
)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
- Beginning of period
88,862
111,918
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
- End of period
$
54,330
$
43,208
Reportable Segment Information
Three Months Ended
September 30, 2023
June 30, 2023
(in thousands)
Completion Services
All Other
Total
Completion Services
All Other
Total
Service revenue
$
423,804
$
—
$
423,804
$
435,249
$
—
$
435,249
Adjusted EBITDA
$
107,714
$
—
$
107,714
$
112,813
$
—
$
112,813
Depreciation and amortization
$
53,769
$
—
$
53,769
$
52,889
$
—
$
52,889
Capital expenditures
$
59,081
$
—
$
59,081
$
115,233
$
—
$
115,233
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) plus (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
September 30, 2023
June 30, 2023
(in thousands)
Completion Services
All Other
Total
Completion Services
All Other
Total
Net income
$
34,753
$
—
$
34,753
$
39,257
$
—
$
39,257
Depreciation and amortization
53,769
—
53,769
52,889
—
52,889
Interest expense
1,169
—
1,169
1,180
—
1,180
Income tax expense
10,644
—
10,644
12,118
—
12,118
Loss on disposal of assets
4,265
—
4,265
3,065
—
3,065
Stock-based compensation
3,310
—
3,310
3,758
—
3,758
Other income(1)
(1,883
)
—
(1,883
)
(72
)
—
(72
)
Other general and administrative expense,
(net) (2)
450
—
450
263
—
263
Retention bonus and severance expense
1,237
—
1,237
355
—
355
Adjusted EBITDA
$
107,714
$
—
$
107,714
$
112,813
$
—
$
112,813
(1)
Includes unrealized gain on short-term
investment of $1.8 million and unrealized loss on short-term
investment of $0.1 million for the three months ended September 30,
2023 and June 30, 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 September 30, 2023 and June 30, 2023, we
received approximately $0.1 million and $0, 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)
September 30, 2023
June 30, 2023
Cash from Operating Activities
$
118,057
$
113,954
Cash used in Investing Activities
(91,040
)
(107,981
)
Free Cash Flow
$
27,017
$
5,973
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101227567/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 432-219-7620
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