pump-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38035

______________________________

ProPetro Holding Corp.

(Exact name of registrant as specified in its charter)

______________________________


Delaware						26-3685382
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

303 W. Wall Street, Suite 102 Midland, Texas 79701

(Address of principal executive offices) (Zip Code)

(432) 688-0012

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PUMP	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of the registrant’s common shares, par value $0.001 per share, outstanding at April 26, 2024, was 107,039,149.

PROPETRO HOLDING CORP.

TABLE OF CONTENTS


		Page
	Cautionary Note Regarding Forward-Looking Statements	ii

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations for the three months ended March 3 1 , 202 4 and 202 3	2
	Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 3 1 , 202 4 and 202 3	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 4 and 202 3	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	37
	Signatures	38

-i-

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Form 10-Q") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Form 10-Q are forward-looking statements. Forward-looking statements are all statements other than statements of historical fact, and given our expectations or forecasts of future events as of the effective date of this Form 10-Q. Words such as "may," "could," "plan," "project," "budget," "predict," "pursue," "target," "seek," "objective," "believe," "expect," "anticipate," "intend," "estimate," "will," "should" and similar expressions are generally used to identify forward-looking statements. These statements include, but are not limited to statements about our business strategy, industry, future profitability, future capital expenditures, our fleet conversion strategy and our share repurchase program. Such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those implied or projected by the forward-looking statements. Factors that could cause our actual results to differ materially from those contemplated by such forward-looking statements include:

•changes in general economic and geopolitical conditions, including as a result of 2024 presidential election, higher interest rates, the rate of inflation and a potential economic recession;

•central bank policy actions, bank failures and associated liquidity risks and other factors;

•the severity and duration of any world events and armed conflict, including the Russian-Ukraine war, conflicts in the Israel-Gaza region and continued hostilities in the Middle East, including rising tensions with Iran, and associated repercussions to supply and demand for oil and gas and the economy generally;

•the actions taken by the members of the Organization of the Petroleum Exporting Countries ("OPEC") and Russia (together with OPEC and other allied producing countries, "OPEC+") with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;

•actions taken by the current government, such as executive orders or new regulations, including climate-related regulations, that may negatively impact the future production of oil and natural gas in the United States and may adversely affect our future operations;

•the level of production and resulting market prices for crude oil, natural gas and other hydrocarbons;

•the effects of existing and future laws and governmental regulations (or the interpretation thereof) on us, our suppliers and our customers;

•cost increases and supply chain constraints related to our services, including any delays and/or supply chain disruptions due to increased hostilities in the Middle East;

•competitive conditions in our industry;

•our ability to attract and retain employees;

•changes in the long-term supply of, and demand for, oil and natural gas;

•actions taken by our customers, suppliers, competitors and third-party operators and the possible loss of customers or work to our competitors;

•technological changes, including lower emissions oilfield service equipment and similar advancements;

•changes in the availability and cost of capital;

•our ability to successfully implement our business plan, including execution of potential mergers and acquisitions;

•large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

•the effects of consolidation on our customers or competitors;

•the price and availability of debt and equity financing (including higher interest rates) for us and our customers;

•our ability to complete growth projects on time and on budget;

•increases in tax rates or types of taxes enacted that specifically impact exploration and production and related operations resulting in changes in the amount of taxes owed by us;

-ii-

•regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services;

•new or expanded regulations that materially limit our customers’ access to federal and state lands for oil and gas development, thereby reducing demand for our services in the affected areas;

•growing demand for electric vehicles that result in reduced demand for gasoline and therefore the demand for our services;

•our ability to successfully implement technological developments and enhancements, including our new Tier IV DGB dual-fuel and FORCESM electric-powered hydraulic fracturing equipment, and other lower-emissions equipment we may acquire or that may be sought by our customers;

•the projected timing, purchase price and number of shares purchased under our share repurchase program, the sources of funds under the repurchase program and the impacts of the repurchase program;

•operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, such as fires, which risks may be self-insured, or may not be fully covered under our insurance programs;

•exposure to cyber-security events which could cause operational disruptions or reputational harm;

•acts of terrorism, war or political or civil unrest in the United States or elsewhere; and

•the effects of current and future litigation.

Whether actual results and developments will conform with our expectations and predictions contained in forward-looking statements is subject to a number of risks and uncertainties which could cause actual results to differ materially from such expectations and predictions, including, without limitation, in addition to those specified in the text surrounding such statements, the risks described under Part II, Item 1A, "Risk Factors" in this Form 10-Q and elsewhere throughout this report, the risks described under Part I, Item 1A, "Risk Factors" in our Form 10-K for the year ended December 31, 2023 (the "Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") and elsewhere throughout that report, and other risks, many of which are beyond our control.

Readers are cautioned not to place undue reliance on our forward-looking statements, which are made as of the date of this Form 10-Q. We do not undertake, and expressly disclaim, any duty to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. Investors are also advised to carefully review and consider the various risks and other disclosures discussed in our SEC reports, including the risk factors described in the Form 10-K.

-iii-

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	March 31, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	46,458	$	33,354
Accounts receivable - net of allowance for credit losses of $236 and $236, respectively	273,709		237,012
Inventories	19,447		17,705
Prepaid expenses	13,124		14,640
Short-term investment, net	7,143		7,745
Other current assets	155		353
Total current assets	360,036		310,809
PROPERTY AND EQUIPMENT - net of accumulated depreciation	947,138		967,116
OPERATING LEASE RIGHT-OF-USE ASSETS	109,362		78,583
FINANCE LEASE RIGHT-OF-USE ASSETS	42,923		47,449
OTHER NONCURRENT ASSETS:
Goodwill	23,624		23,624
Intangible assets - net of amortization	49,183		50,615
Other noncurrent assets	1,994		2,116
Total other noncurrent assets	74,801		76,355
TOTAL ASSETS	$	1,534,260	$	1,480,312

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	189,216	$	161,441
Accrued and other current liabilities	70,855		75,616
Operating lease liabilities	26,534		17,029
Finance lease liabilities	17,379		17,063
Total current liabilities	303,984		271,149
DEFERRED INCOME TAXES	101,045		93,105
LONG-TERM DEBT	45,000		45,000
NONCURRENT OPERATING LEASE LIABILITIES	56,481		38,600
NONCURRENT FINANCE LEASE LIABILITIES	26,416		30,886
OTHER LONG-TERM LIABILITIES	3,180		3,180
Total liabilities	536,106		481,920
COMMITMENTS AND CONTINGENCIES (Note 13)
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, 106,891,337 and 109,483,281 shares issued, respectively	107		109
Additional paid-in capital	909,083		929,249
Retained earnings	88,964		69,034
Total shareholders’ equity	998,154		998,392
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,534,260	$	1,480,312

See notes to condensed consolidated financial statements.

-1-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
REVENUE - Service revenue	$	405,843	$	423,570
COSTS AND EXPENSES
Cost of services (exclusive of depreciation and amortization)	288,641		280,486
General and administrative expenses (inclusive of stock-based compensation)	28,226		28,746
Depreciation and amortization	52,206		38,271
Loss on disposal of assets	6,458		34,607
Total costs and expenses	375,531		382,110
OPERATING INCOME	30,312		41,460
OTHER (EXPENSE) INCOME:
Interest expense	(2,029)		(667)
Other income (expense), net	1,405		(3,704)
Total other (expense) income, net	(624)		(4,371)
INCOME BEFORE INCOME TAXES	29,688		37,089
INCOME TAX EXPENSE	(9,758)		(8,356)
NET INCOME	$	19,930	$	28,733

NET INCOME PER COMMON SHARE:
Basic	$	0.18	$	0.25
Diluted	$	0.18	$	0.25

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic	108,540		114,881
Diluted	108,989		115,331

See notes to condensed consolidated financial statements.

-2-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


	Three Months Ended March 31, 2024
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total
BALANCE - January 1, 2024	109,483	$	109	$	929,249	$	69,034	$	998,392
Stock-based compensation cost	—	—		3,742		—		3,742
Issuance of equity awards, net	376	1		(1)		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(1,209)		—		(1,209)
Share repurchases	(2,968)	(3)		(22,505)		—		(22,508)
Excise tax on share repurchases	—	—		(193)		—		(193)
Net income	—	—		—		19,930		19,930
BALANCE - March 31, 2024	106,891	$	107	$	909,083	$	88,964	$	998,154


	Three Months Ended March 31, 2023
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Total
BALANCE - January 1, 2023	114,515	$	114	$	970,519	$	(16,600)	$	954,033
Stock-based compensation cost	—	—		3,536		—		3,536
Issuance of equity awards, net	656	1		(1)		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(3,379)		—		(3,379)
Net income	—	—		—		28,733		28,733
BALANCE - March 31, 2023	115,171	$	115	$	970,675	$	12,133	$	982,923

See notes to condensed consolidated financial statements.

-3-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	19,930	$	28,733
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	52,206		38,271
Deferred income tax expense	7,940		7,807
Amortization of deferred debt issuance costs	108		64
Stock-based compensation	3,742		3,536
Loss on disposal of assets	6,458		34,607
Unrealized loss on short-term investment	602		3,794
Changes in operating assets and liabilities:
Accounts receivable	(36,697)		(74,199)
Other current assets	430		(468)
Inventories	(1,742)		(6,366)
Prepaid expenses	1,530		(548)
Accounts payable	21,191		29,823
Accrued and other current liabilities	(876)		8,006
Net cash provided by operating activities	74,822		73,060
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(34,585)		(114,839)
Proceeds from sale of assets	738		1,089
Net cash used in investing activities	(33,847)		(113,750)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on finance lease obligations	(4,154)		—
Tax withholdings paid for net settlement of equity awards	(1,209)		(3,379)
Share repurchases	(22,508)		—
Net cash used in financing activities	(27,871)		(3,379)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	13,104		(44,069)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - Beginning of period	33,354		88,862
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - End of period	$	46,458	$	44,793

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in accounts payable and accrued liabilities	$	26,859	$	64,784

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets:


	Three Months Ended March 31,
	2024		2023
Summary of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	46,458	$	26,498
Restricted cash	—		18,295
Total cash, cash equivalents and restricted cash — End of period	$	46,458	$	44,793

See notes to condensed consolidated financial statements.

-4-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

The accompanying condensed consolidated financial statements of ProPetro Holding Corp. and its subsidiaries (the "Company," "we," "us" or "our") have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission ("SEC") for interim financial information and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. Those adjustments (which consisted of normal recurring accruals) that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made. Results of operations for such interim periods are not necessarily indicative of the results of operations for a full year due to changes in market conditions and other factors. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in our Form 10-K filed with the SEC (our "Form 10-K").

Revenue Recognition

The Company’s services are sold based upon contracts with customers. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Hydraulic fracturing is an oil well completion technique, which is part of the overall well completion process. It is a well-stimulation technique intended to optimize hydrocarbon flow paths during the completion phase of shale wellbores. The process involves the injection of water, sand and chemicals under high pressure into shale formations. Our hydraulic fracturing contracts with our customers have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output, unit-of-work performed method, which is based on the agreed fixed transaction price and actual stages completed. We believe that recognizing revenue based on actual stages completed accurately depicts how our hydraulic fracturing services are transferred to our customers over time. In addition, certain of our hydraulic fracturing equipment may be entitled to reservation fee charges if a customer were to reserve committed hydraulic fracturing equipment. The Company recognizes revenue related to reservation fee charges on a daily basis as the performance obligations are met.

Acidizing, which is part of our hydraulic fracturing operating segment, involves a well-stimulation technique where acid or similar chemicals are injected under pressure into formations to form or expand fissures. Our acidizing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service or sale of the acid or chemical when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize acidizing revenue at a point-in-time, upon completion of the performance obligation.

Our cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole. Our cementing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize cementing revenue at a point-in-time, upon completion of the performance obligation.

Wireline services (including pumpdown) are oil well completion techniques, which are part of the well completion process. Our wireline services utilize equipment with a drum of wireline to deploy perforating guns in the well to perforate the casing, cement, and formation. Once the well is perforated, the well can be fractured. Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy perforating guns attached to wireline through the lateral section of a well. Our wireline contracts with our customers have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output, unit-of-work performed method, which is based on the agreed fixed transaction price and actual stages completed. We believe that recognizing revenue based on actual stages completed accurately depicts how our wireline services are transferred to our customers over time. In addition, certain of our wireline equipment is entitled to daily equipment charges while the equipment is on the customer’s locations. The Company recognizes revenue related to daily equipment charges on a daily basis as the performance obligations are met.

The transaction price for each performance obligation for all our completion services is fixed per our contracts with our customers.

-5-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Cash and Customer Cash Advances

Our restricted cash relates to cash advances received from a customer in connection with our contract with the customer to provide FORCESM electric-powered hydraulic fracturing equipment and services. The restricted cash was used to pay for contractually agreed upon expenditures. We had no restricted cash as of March 31, 2024 and December 31, 2023.

The cash advances from the customer will be credited towards the customer’s invoice as our revenue performance obligations are met over the contract period. The cash advances received represent contract liabilities in connection with the performance of certain completion services. The cash advance (contract liability) balances, which are included in accrued and other current liabilities in our condensed consolidated balance sheets, were $15.9 million and $19.2 million as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, we recognized revenue of $1.7 million and $1.0 million from the cash advance amount outstanding at the beginning of the period.

Accounts Receivable

Accounts receivable are stated at the amount billed and billable to customers. At March 31, 2024 and December 31, 2023, accrued revenue (unbilled receivable) included as part of our accounts receivable was $63.1 million and $55.4 million, respectively. At March 31, 2024, the transaction price allocated to the remaining performance obligation for our partially completed hydraulic fracturing and wireline operations was $22.9 million, which is expected to be completed and recognized as revenue within one month following the current period balance sheet date.

Allowance for Credit Losses

As of March 31, 2024, the Company had $0.2 million allowance for credit losses. Our allowance for credit losses is based on the evaluation of both our historic collection experience and the economic outlook for the oil and gas industry. We evaluated the historic loss experience on our accounts receivable and also separately considered customers with receivable balances that may be negatively impacted by current or future economic developments and market conditions. While the Company has not experienced significant credit losses in the past and has not yet seen material adverse changes to the payment patterns of its customers, the Company cannot predict with any certainty the degree to which the impacts of depressed economic activities, including the potential impact of periodically adjusted borrowing base limits, level of hedged production, or unforeseen well shut-downs may affect the ability of its

SEC Form 10-Q filed by ProPetro Holding Corp.