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ProPetro Reports Financial Results for the First Quarter of 2022

ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE: PUMP) today announced financial and operational results for the first quarter of 2022.

First Quarter 2022 and Recent Highlights

  • Total revenue for the quarter increased 15% to $283 million compared to $246 million for the fourth quarter of 2021.
  • Net income for the quarter was $12 million, or $0.11 per diluted share, compared to net loss of $20 million, or $0.20 per diluted share, for the fourth quarter of 2021.
  • Adjusted EBITDA(1) for the quarter increased 81% to $67 million or 24% of revenues compared to $37 million for the fourth quarter of 2021.
  • Effective utilization for the first quarter improved 9.6% to 13.7 fleets compared to 12.5 fleets for the fourth quarter of 2021 without expanding marketed fleet count.
  • Net cash provided by operating activities for the quarter of $25 million as compared to $45 million for the fourth quarter of 2021.
  • Negative Free Cash Flow(2) for the quarter was approximately $39 million as compared to positive Free Cash Flow of approximately $26 million for the fourth quarter of 2021.
  • Achieved a Company record of over 600 monthly pumping hours on a single Simul-Frac fleet in March.

(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, “Despite operational headwinds mainly attributable to sand-related issues in the first quarter, our team achieved healthy margin expansion and a high utilization rate without expanding our marketed fleet count from the previous quarter. We attribute this success to the hard work and effort our team put into executing on our returns-focused strategy to take advantage of improved market conditions and increased demand for our services, all bolstered by first-in-class service at the wellsite. We expect this trend to continue as we take deliveries and deploy more of our Tier IV Dynamic Gas Blending ("DGB" or "dual-fuel") conversions in the coming weeks and months. That said, we anticipate the balance of the year to be challenging as managing input costs, supply chain pressures, human capital, and operational risks will only become more difficult as the pressure pumping market tightens further."

David Schorlemer, Chief Financial Officer, commented, "We are encouraged with the significant improvement in our margins during the first quarter. However, we remain committed to our strict fleet deployment strategy and focus on our pursuit of margin-over-market share. Remaining focused on capital-efficient growth through pricing improvements and efficient operations, while continuing to make strategic investments to transition our pressure pumping assets to lower-emissions and natural gas-powered equipment, is the foundation of the Company's returns-focused strategy."

First Quarter 2022 Financial Summary

Revenue for the first quarter of 2022 was $283 million, compared to revenue of $246 million for the fourth quarter of 2021. The 15% increase was attributable to our increased effectively utilized fleet count of 13.7 fleets, from 12.5 fleets in the fourth quarter of 2021 and improved pricing across our fleets in the first quarter of 2022.

Cost of services, excluding depreciation and amortization of approximately $32 million, for the first quarter of 2022 increased to $197 million from $187 million during the fourth quarter of 2021. The 5% increase was attributable to the increased operational activity levels in the first quarter of 2022.

General and administrative expense of $32 million for the first quarter of 2022 increased from $24 million in the fourth quarter of 2021. General and administrative expense, exclusive of a net expense of $13 million relating to a non-recurring net legal expense of approximately $2 million and non-cash items consisting of stock-based compensation of approximately $11 million, was $19 million, or 7% of revenue, for the first quarter of 2022 compared to 9% of revenue for the fourth quarter of 2021. The decrease in our general and administrative expense as a percentage of revenue was driven by higher revenue in the first quarter and benefits from our cost optimization initiatives.

Net income for the first quarter of 2022 totaled $12 million, or $0.11 per diluted share, compared to net loss of $20 million, or $0.20 per diluted share, for the fourth quarter of 2021. Net income benefitted from a non-recurring state tax refund of approximately $11 million.

Adjusted EBITDA increased to $67 million for the first quarter of 2022 from $37 million for the fourth quarter of 2021. The increase in Adjusted EBITDA was primarily attributable to increased activity, fleet repositioning and improved pricing across our fleet.

Liquidity and Capital Spending

As of March 31, 2022, total cash was $71 million and the Company remained debt free. Total liquidity at the end of the first quarter of 2022 was $127 million including cash and $56 million of available capacity under the Company’s revolving credit facility.

Capital expenditures incurred during the first quarter of 2022 were $72 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 first quarter of 2022 was $64 million.

Outlook

Mr. Sledge concluded, "Our team is encouraged by the step change in performance during the first quarter. However, the operational and logistical headwinds we experienced validate our belief that operating margins in pressure pumping do not reflect levels needed to justify the additional risk ProPetro assumes in marketing and deploying any additional horsepower. This is especially true in a market that is currently near sold-out levels and where operating margins should continue to expand. As a result, we continue to concentrate efforts on optimizing the full-cycle cash-on-cash return profiles of our currently operating fleets and do not expect to market additional capacity in the second quarter.

As previously mentioned, we will continue to strategically convert many of our conventional diesel assets into more marketable natural gas-powered equipment that will be placed with E&P’s that have core acreage positions and sizeable drilling inventories. Above all else, we are most focused on operating our business and collaborating with customers in a manner that allows us to significantly expand our earnings power and create value for all stakeholders in the ProPetro value chain. This will be accomplished through intense operational and financial discipline that we believe mimics the actions exhibited by many of our upstream partners and customers over the past few years.”

Conference Call Information

The Company will host a conference call at 8:00 AM Central Time on Wednesday, May 4, 2022, to discuss financial and operating results for the first 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 5730343.

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

 

 

March 31, 2022

 

December 31, 2021

 

March 31, 2021

REVENUE - Service revenue

 

$

282,680

 

 

$

246,070

 

 

$

161,458

 

COSTS AND EXPENSES

 

 

 

 

 

 

Cost of services (exclusive of depreciation and amortization)

 

 

197,271

 

 

 

187,361

 

 

 

123,378

 

General and administrative (inclusive of stock-based compensation)

 

 

31,707

 

 

 

23,843

 

 

 

20,201

 

Depreciation and amortization

 

 

31,854

 

 

 

33,124

 

 

 

33,478

 

Loss on disposal of assets

 

 

16,117

 

 

 

24,145

 

 

 

13,052

 

Total costs and expenses

 

 

276,949

 

 

 

268,473

 

 

 

190,109

 

OPERATING INCOME (LOSS)

 

 

5,731

 

 

 

(22,403

)

 

 

(28,651

)

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

Interest expense

 

 

(134

)

 

 

(137

)

 

 

(176

)

Other income (expense)

 

 

10,357

 

 

 

(305

)

 

 

1,789

 

Total other income (expense)

 

 

10,223

 

 

 

(442

)

 

 

1,613

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

15,954

 

 

 

(22,845

)

 

 

(27,038

)

INCOME TAX (EXPENSE) BENEFIT

 

 

(4,137

)

 

 

2,613

 

 

 

6,663

 

NET INCOME (LOSS)

 

$

11,817

 

 

$

(20,232

)

 

$

(20,375

)

 

 

 

 

 

 

 

NET INCOME (LOSS) PER COMMON SHARE:

 

 

 

 

 

 

Basic

 

$

0.11

 

 

$

(0.20

)

 

$

(0.20

)

Diluted

 

$

0.11

 

 

$

(0.20

)

 

$

(0.20

)

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

 

 

 

 

 

 

Basic

 

 

103,683

 

 

 

103,390

 

 

 

101,550

 

Diluted

 

 

105,384

 

 

 

103,390

 

 

 

101,550

 

 

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)

 

 

 

March 31, 2022

 

December 31, 2021

ASSETS

 

 

 

 

CURRENT ASSETS:

 

 

 

 

Cash and cash equivalents

 

$

70,768

 

 

$

111,918

 

Accounts receivable - net of allowance for credit losses of $217 and $217, respectively

 

 

172,180

 

 

 

128,148

 

Inventories

 

 

2,297

 

 

 

3,949

 

Prepaid expenses

 

 

5,092

 

 

 

6,752

 

Other current assets

 

 

491

 

 

 

297

 

Total current assets

 

 

250,828

 

 

 

251,064

 

PROPERTY AND EQUIPMENT - net of accumulated depreciation

 

 

831,625

 

 

 

808,494

 

OPERATING LEASE RIGHT-OF-USE ASSETS

 

 

909

 

 

 

409

 

OTHER NONCURRENT ASSETS:

 

 

 

 

Other noncurrent assets

 

 

1,089

 

 

 

1,269

 

Total other noncurrent assets

 

 

1,089

 

 

 

1,269

 

TOTAL ASSETS

 

$

1,084,451

 

 

$

1,061,236

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

Accounts payable

 

$

151,668

 

 

$

152,649

 

Operating lease liabilities

 

 

685

 

 

 

369

 

Accrued and other current liabilities

 

 

19,738

 

 

 

20,767

 

Total current liabilities

 

 

172,091

 

 

 

173,785

 

DEFERRED INCOME TAXES

 

 

64,878

 

 

 

61,052

 

NONCURRENT OPERATING LEASE LIABILITIES

 

 

270

 

 

 

97

 

Total liabilities

 

 

237,239

 

 

 

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, 103,999,626 and 103,437,177 shares issued, respectively

 

 

104

 

 

 

103

 

Additional paid-in capital

 

 

853,921

 

 

 

844,829

 

Accumulated deficit

 

 

(6,813

)

 

 

(18,630

)

Total shareholders’ equity

 

 

847,212

 

 

 

826,302

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

 

$

1,084,451

 

 

$

1,061,236

 

 

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

2022

 

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

Net income (loss)

 

$

11,817

 

 

$

(20,375

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

Depreciation and amortization

 

 

31,854

 

 

 

33,478

 

Deferred income tax expense (benefit)

 

 

3,826

 

 

 

(6,663

)

Amortization of deferred debt issuance costs

 

 

134

 

 

 

134

 

Stock-based compensation

 

 

11,364

 

 

 

2,487

 

Loss on disposal of assets

 

 

16,117

 

 

 

13,052

 

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

 

(44,032

)

 

 

(25,698

)

Other current assets

 

 

156

 

 

 

325

 

Inventories

 

 

1,653

 

 

 

401

 

Prepaid expenses

 

 

1,707

 

 

 

3,383

 

Accounts payable

 

 

(10,035

)

 

 

18,579

 

Accrued and other current liabilities

 

 

609

 

 

 

(2,095

)

Net cash provided by operating activities

 

 

25,170

 

 

 

17,008

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

Capital expenditures

 

 

(64,323

)

 

 

(22,494

)

Proceeds from sale of assets

 

 

275

 

 

 

224

 

Net cash used in investing activities

 

 

(64,048

)

 

 

(22,270

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Repayments of insurance financing

 

 

 

 

 

(2,037

)

Proceeds from exercise of equity awards

 

 

419

 

 

 

 

Tax withholdings paid for net settlement of equity awards

 

 

(2,691

)

 

 

(5,614

)

Net cash used in financing activities

 

 

(2,272

)

 

 

(7,651

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

(41,150

)

 

 

(12,913

)

CASH AND CASH EQUIVALENTS - Beginning of period

 

 

111,918

 

 

 

68,772

 

CASH AND CASH EQUIVALENTS - End of period

 

$

70,768

 

 

$

55,859

 

Reportable Segment Information

 

Three Months Ended

 

March 31, 2022

 

December 31, 2021

(in thousands)

Pressure

Pumping

 

All Other

 

Total

 

Pressure

Pumping

 

All Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

Service revenue

$

277,112

 

$

5,568

 

 

$

282,680

 

$

240,349

 

$

5,721

 

 

$

246,070

Adjusted EBITDA

$

76,995

 

$

(10,462

)

 

$

66,533

 

$

49,016

 

$

(11,815

)

 

$

37,201

Depreciation and amortization

$

30,930

 

$

924

 

 

$

31,854

 

$

32,171

 

$

953

 

 

$

33,124

Capital expenditures

$

71,602

 

$

126

 

 

$

71,728

 

$

48,374

 

$

480

 

 

$

48,854

 

 

 

 

 

 

 

 

 

 

 

 

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 Loss to Adjusted EBITDA

 

 

Three Months Ended

 

 

March 31, 2022

 

December 31, 2021

(in thousands)

 

Pressure

Pumping

 

All Other

 

Total

 

Pressure

Pumping

 

All Other

 

Total

Net income (loss)

 

$

29,370

 

$

(17,553

)

 

$

11,817

 

 

$

(7,296

)

 

$

(12,936

)

 

$

(20,232

)

Depreciation and amortization

 

 

30,930

 

 

924

 

 

 

31,854

 

 

 

32,171

 

 

 

953

 

 

 

33,124

 

Interest expense

 

 

 

 

134

 

 

 

134

 

 

 

 

 

 

137

 

 

 

137

 

Income tax expense (benefit)

 

 

 

 

4,137

 

 

 

4,137

 

 

 

 

 

 

(2,613

)

 

 

(2,613

)

Loss (gain) on disposal of assets

 

 

16,421

 

 

(304

)

 

 

16,117

 

 

 

24,111

 

 

 

34

 

 

 

24,145

 

Stock-based compensation

 

 

 

 

11,364

 

 

 

11,364

 

 

 

 

 

 

3,114

 

 

 

3,114

 

Other expense (income)(2)

 

 

 

 

(10,357

)

 

 

(10,357

)

 

 

 

 

 

305

 

 

 

305

 

Other general and administrative expense, net(1)

 

 

274

 

 

1,193

 

 

 

1,467

 

 

 

 

 

 

(800

)

 

 

(800

)

Severance expense

 

 

 

 

 

 

 

 

 

 

30

 

 

 

(10

)

 

 

20

 

Adjusted EBITDA

 

$

76,995

 

$

(10,462

)

 

$

66,533

 

 

$

49,016

 

 

$

(11,816

)

 

$

37,200

 

(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 March 31, 2022 and December 31, 2021, we received approximately $1.0 million and $1.7 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 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)

 

March 31, 2022

 

December 31, 2021

 

 

 

 

 

Cash from Operating Activities

 

$

25,170

 

 

$

45,455

 

Cash used in Investing Activities

 

 

(64,048

)

 

 

(18,743

)

Free Cash Flow

 

$

(38,878

)

 

$

26,712

 

 

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