Financial Data and Key Metrics Changes - In Q1 2023, the company generated $424 million in revenue, a 21% increase from $349 million in Q4 2022, driven by increased utilization and improved net pricing across service lines [13][15] - Net income reached $29 million or $0.25 per diluted share, the highest in over three years, compared to $13 million or $0.12 per diluted share in the prior quarter [15] - Adjusted EBITDA was $119 million, representing over 28% of revenue, with margins expanding by approximately 400 basis points sequentially [15][36] Business Line Data and Key Metrics Changes - Effective frac fleet utilization was 15.5 fleets in Q1 2023, at the top end of prior guidance, with expectations for steady utilization through Q2 2023 [7][37] - Cost of services, excluding depreciation and amortization, increased to $280 million from $243 million in Q4 2022, driven by higher activity levels and the full quarter effect of Silvertip [38] Market Data and Key Metrics Changes - The company noted ongoing equipment attrition and supply chain constraints, which contribute to a strong market that values next-generation service offerings [5] - The company is focused on the Permian Basin, where over 99% of its business is concentrated, providing insulation from broader North American rig count declines [25] Company Strategy and Development Direction - The company is transitioning its fleet to electric and natural gas-powered equipment, with plans to have two-thirds of its frac fleet using next-generation equipment by the end of the year [12][20] - The acquisition of Silvertip has exceeded expectations, delivering operational synergies and record revenues [11][33] - The company aims to create a more industrialized and predictable service space, reducing operating costs and enhancing competitiveness in the Permian Basin [35][44] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term structural under supply of hydrocarbons, despite near-term headwinds such as natural gas price weakness [12][20] - The company is committed to capital discipline and has developed commercial architecture to support its fleet transition strategy [18][40] Other Important Information - The company incurred $97 million in capital expenditures during the quarter, with a reaffirmation of its CapEx guidance for 2023 between $250 million and $300 million [16][40] - Total liquidity at the end of Q1 2023 was $149 million, including cash and available capacity under the ABL credit facility [17] Q&A Session Summary Question: Thoughts on North America rig count decline and insulation from it - Management believes they are well insulated due to their focus on the Permian Basin and relationships with blue-chip operators, which have consistent activity outlooks [25] Question: Customer conversations regarding pricing dislocation - Minimal pressure on pricing was observed, as most customers operate large, complex operations and do not engage in the spot market [26] Question: Insights on customer psychology amid macro headwinds - Customers are not skittish, with many having low operating costs and strong acreage positions, which helps maintain consistent activity [57] Question: Details on fleet retirements and disposal of assets - The company confirmed that retired equipment will not return to the market and will be scrapped [70] Question: CapEx guidance and accounting changes - The guidance remains unchanged despite accounting changes, with expectations for loss on disposal to decrease [74]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________ FORM 10-K ______________________________ ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Midland, Texas 79701 (Address of principal executive offices) Registrant's telephone number, including area code: (432) 688-0012 | Title of eac ...

Financial Data and Key Metrics Changes - Revenue for the full-year 2022 was $1.3 billion, a 46% increase year-over-year [7] - Adjusted EBITDA increased 134% year-over-year to $317 million, driven by improved pricing and cost management [7] - Fourth quarter net income was $13 million or $0.12 per diluted share, compared to $10 million or $0.10 per diluted share in the prior quarter [8] - Total cash as of December 31, 2022, was $89 million, with total liquidity of $155 million [10] Business Line Data and Key Metrics Changes - The fourth quarter generated $349 million of revenue, a 5% increase from the third quarter, attributed to the acquisition of Silvertip [28] - Silvertip posted $20 million of revenue for January, marking the highest monthly total in its history [9] - Cost of services for the fourth quarter was $243 million, up from $224 million in the third quarter, driven by the Silvertip acquisition and cost inflation [121] Market Data and Key Metrics Changes - The company noted that the Permian Basin remains structurally undersupplied, particularly for next-generation hydraulic fracturing services [106][118] - The transition to natural gas and electric capabilities is expected to provide a competitive advantage in the market [32][95] Company Strategy and Development Direction - The company is focused on transitioning two-thirds of its fleet to natural gas-burning and electric capabilities by the end of 2023 [32] - A disciplined approach to capital deployment is being pursued to enable shareholder returns and strategic acquisitions [125] - The company plans to issue its first sustainability report in 2023, highlighting its commitment to reduced emissions and community efforts [25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about valuation improvement across the oilfield services space and the company's long-term role in energy production [12] - The company anticipates meaningful positive free cash flow in the second half of 2023, supported by a front-loaded CapEx program [10] - Management acknowledged the challenges posed by inflation and supply chain constraints but emphasized the company's operational efficiency [96][100] Other Important Information - The company completed the acquisition of Silvertip Completion Services, enhancing its position as a leading completions-focused oilfield services company [24] - The company is transitioning to a more capital-light asset profile while reducing maintenance CapEx [123] Q&A Session Summary Question: What is the current pricing dynamic in the market? - Management indicated that pricing is in a healthy spot and remains conservative, with expectations for meaningful returns to free cash flow if execution continues [20] Question: Is the fleet movement largely completed? - Management confirmed that the repositioning of the fleet is mostly complete, with operational efficiency maintained [39][47] Question: What is the timeline for the deployment of electric fleets? - The sixth DGB unit is currently operational, with the seventh expected in April-May and the first two electric fleets in July-August [52] Question: What are the expectations for shareholder returns? - The company is shifting focus towards shareholder returns and strategic transactions as the transition story winds down [78] Question: How is the company addressing fleet attrition? - Management noted that the new fleets will primarily replace aging legacy equipment, with a focus on maintaining operational efficiency [131]

Forward-Looking Statements © 2023 ProPetro Holding Corp. All Rights Reserved. 2 Net income (loss) Loss on disposal of assets Severance expense Non-GAAP Reconciliations © 2023 ProPetro Holding Corp. All Rights Reserved. 4 Snapshot $1.3 billion Headquartered in Midland, Texas 6 Booming global economy CURRENT INDUSTRY DYNAMICS Capital markets largely avoiding oil and gas - private equity groups are chasing "transition energy" and debt markets are effectively closed 0 10 20 30 40 50 1990 2000 2010 2020 2030 204 ...

[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited condensed consolidated financial information, management's discussion, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents ProPetro Holding Corp.'s unaudited condensed consolidated financial statements for interim periods, including balance sheets, statements of operations, shareholders' equity, and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets present the company's financial position, detailing assets, liabilities, and shareholders' equity as of September 30, 2022, and December 31, 2021 Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------- | :----------- | :----------- | | Total Assets | $1,143,606 | $1,061,236 | | Total Liabilities | $313,068 | $234,934 | | Total Shareholders' Equity | $830,538 | $826,302 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations detail financial performance, including revenue, costs, and net income (loss) for the three and nine months ended September 30, 2022 and 2021 Three Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue - Service revenue | $333,014 | $250,099 | $82,915 | 33.2% | | Total costs and expenses | $319,361 | $255,993 | $63,368 | 24.8% | | Operating income (loss) | $13,653 | $(5,894) | $19,547 | -331.6% | | Net income (loss) | $10,032 | $(5,067) | $15,099 | -298.0% | | Basic EPS | $0.10 | $(0.05) | $0.15 | -300.0% | | Diluted EPS | $0.10 | $(0.05) | $0.15 | -300.0% | Nine Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue - Service revenue | $930,776 | $628,444 | $302,332 | 48.1% | | Total costs and expenses | $951,661 | $674,737 | $276,924 | 41.0% | | Operating income (loss) | $(20,885) | $(46,293) | $25,408 | -54.9% | | Net income (loss) | $(11,012) | $(33,953) | $22,941 | -67.6% | | Basic EPS | $(0.11) | $(0.33) | $0.22 | -66.7% | | Diluted EPS | $(0.11) | $(0.33) | $0.22 | -66.7% | [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This statement outlines changes in shareholders' equity for the nine months ended September 30, 2022 and 2021, reflecting net income/loss, stock-based compensation, and equity award activities Shareholders' Equity Highlights (in thousands) | Metric | Sep 30, 2022 | Jan 1, 2022 | | :-------------------------- | :----------- | :---------- | | Total Shareholders' Equity | $830,538 | $826,302 | | Stock-based compensation cost (9 months) | $18,128 | N/A | | Net income (loss) (9 months) | $(11,012) | N/A | Shareholders' Equity Highlights (in thousands) | Metric | Sep 30, 2021 | Jan 1, 2021 | | :-------------------------- | :----------- | :---------- | | Total Shareholders' Equity | $842,815 | $870,771 | | Stock-based compensation cost (9 months) | $8,405 | N/A | | Net income (loss) (9 months) | $(33,953) | N/A | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows present inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Nine Months Ended September 30 (in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Net cash provided by operating activities | $174,951 | $109,259 | $65,692 | 60.1% | | Net cash used in investing activities | $(239,957) | $(85,549) | $(154,408) | 180.5% | | Net cash used in financing activities | $(3,704) | $(7,881) | $4,177 | -53.0% | | Net increase (decrease) in cash and cash equivalents | $(68,710) | $15,829 | $(84,559) | -534.2% | | Cash and cash equivalents - End of period | $43,208 | $84,601 | $(41,393) | -48.9% | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the financial statements, covering accounting policies, fair value, debt, segments, stock-based compensation, related-party transactions, leases, commitments, and subsequent events [Note 1 - Basis of Presentation](index=9&type=section&id=Note%201%20-%20Basis%20of%20Presentation) This note clarifies the basis of presentation for interim financial statements, outlining revenue recognition policies for pressure pumping services and the recent shutdown of coiled tubing operations - The Company recognizes revenue for hydraulic fracturing services over time using a progress output, unit-of-work performed method, based on agreed fixed transaction price and actual stages completed[26](index=26&type=chunk) - Acidizing and cementing services revenue is recognized at a point-in-time upon completion of the contracted service[27](index=27&type=chunk)[28](index=28&type=chunk) - Coiled tubing operations were shut down effective September 1, 2022, and all coiled tubing assets were disposed of[30](index=30&type=chunk) Accounts Receivable and Credit Losses (in thousands) | Metric | Sep 30, 2022 | Dec 31, 2021 | | :-------------------------------- | :----------- | :----------- | | Accrued revenue (unbilled receivable) | $37,100 | $19,400 | | Allowance for credit losses | $217 | $217 | | Provision for credit losses (9 months ended Sep 30, 2022) | $0 | N/A | [Note 2 - Recently Issued Accounting Standards](index=10&type=section&id=Note%202%20-%20Recently%20Issued%20Accounting%20Standards) This note details the adoption of ASU No. 2020-04, Reference Rate Reform, effective January 1, 2022, which did not materially affect the financial statements - Adopted ASU No. 2020-04, Reference Rate Reform, effective **January 1, 2022**, to address the transition away from LIBOR[35](index=35&type=chunk) - The adoption of this guidance did not materially affect the Company's condensed consolidated financial statements[35](index=35&type=chunk) [Note 3 - Fair Value Measurement](index=10&type=section&id=Note%203%20-%20Fair%20Value%20Measurement) This note defines fair value, outlines the three-level hierarchy for measurements, and details assets measured at fair value, including an impairment expense for DuraStim® equipment - Fair value measurements are categorized into a three-level hierarchy: **Level 1** (quoted prices in active markets), **Level 2** (significant observable inputs), and **Level 3** (significant unobservable inputs)[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) Assets Measured at Fair Value (in thousands) | Asset | Sep 30, 2022 Fair Value | Level | Total Gains (Losses) | | :---------------------- | :---------------------- | :---- | :------------------- | | Short-term investment | $8,503 | 1 | $(3,349) | | Equipment inventory (nonrecurring) | $2,700 | 3 | N/A | - Recorded an impairment expense of approximately **$57.5 million** for the nine months ended September 30, 2022, related to DuraStim® hydraulic fracturing pumps that did not meet specifications[43](index=43&type=chunk) [Note 4 - Long-Term Debt](index=12&type=section&id=Note%204%20-%20Long-Term%20Debt) This note describes the amendment of the ABL Credit Facility, which reduced borrowing capacity, extended maturity, and changed the interest rate benchmark from LIBOR to SOFR - The ABL Credit Facility was amended and restated on **April 13, 2022**[45](index=45&type=chunk) ABL Credit Facility Changes | Feature | Previous (2018 Amendment) | Amended (April 13, 2022) | | :-------------------- | :------------------------ | :----------------------- | | Borrowing Capacity | $300.0 million | $150.0 million | | Maturity Date | December 19, 2023 | April 13, 2027 | | Borrowing Base | 85% of eligible A/R | 85%-90% of eligible A/R | | Interest Rate Basis | LIBOR or base rate | SOFR or base rate | | Borrowing Base (Sep 30, 2022) | N/A | ~$116.4 million | | Borrowings (Sep 30, 2022) | $0 | $0 | [Note 5 - Reportable Segment Information](index=12&type=section&id=Note%205%20-%20Reportable%20Segment%20Information) This note details the company's operating segments, aggregated into one reportable segment (pressure pumping), discusses coiled tubing asset divestiture, and reconciles segment financial information to consolidated statements - The Company has one reportable segment, **'Pressure Pumping,'** comprising hydraulic fracturing (inclusive of acidizing) and cementing operating segments[47](index=47&type=chunk)[50](index=50&type=chunk) - Coiled tubing assets were disposed of on **September 1, 2022**, resulting in a loss of approximately **$13.8 million**[48](index=48&type=chunk) Adjusted EBITDA by Segment (in thousands) | Segment | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Pressure Pumping | $102,550 | $53,975 | $265,835 | $132,673 | | All Other | $(12,550) | $(11,877) | $(33,355) | $(34,866) | | Total | $90,000 | $42,098 | $232,480 | $97,807 | - Hydraulic fracturing revenue approximated **91.7%** and **92.7%** of pressure pumping revenue during the three and nine months ended September 30, 2022, respectively[51](index=51&type=chunk) [Note 6 - Net Income (Loss) Per Share](index=16&type=section&id=Note%206%20-%20Net%20Income%20%28Loss%29%20Per%20Share) This note provides the calculation of basic and diluted net income (loss) per common share and lists anti-dilutive securities excluded from diluted EPS calculations Net Income (Loss) Per Common Share | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.10 | $(0.05) | $(0.11) | $(0.33) | | Diluted EPS | $0.10 | $(0.05) | $(0.11) | $(0.33) | Anti-Dilutive Securities Excluded from Diluted EPS (in thousands) | Type | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock options | 488 | 962 | 488 | 962 | | Restricted stock units | 615 | 1,435 | 1,189 | 1,435 | | Performance stock units | — | 1,586 | 1,758 | 1,586 | | Total | 1,103 | 3,983 | 3,435 | 3,983 | [Note 7 - Stock-Based Compensation](index=17&type=section&id=Note%207%20-%20Stock-Based%20Compensation) This note details stock-based compensation plans, including activity for stock options, RSUs, and PSUs during the nine months ended September 30, 2022, and associated expenses - No new stock option grants were made during the nine months ended September 30, 2022. **488 thousand** stock options were outstanding at September 30, 2022, with a weighted average exercise price of **$14.00**[65](index=65&type=chunk)[66](index=66&type=chunk) - **680,946** Restricted Stock Units (RSUs) were granted during the nine months ended September 30, 2022, with total unrecognized compensation expense of approximately **$9.1 million**[68](index=68&type=chunk) - **327,939** Performance Share Units (PSUs) were granted during the nine months ended September 30, 2022, with vesting based on total shareholder return relative to a peer group[70](index=70&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Nine Months Ended Sep 30 | $18,128 | $8,405 | - Total unrecognized stock-based compensation expense as of September 30, 2022, was approximately **$18.7 million**, expected to be recognized over approximately **1.8 years**[74](index=74&type=chunk) [Note 8 - Related-Party Transactions](index=19&type=section&id=Note%208%20-%20Related-Party%20Transactions) This note describes related-party transactions, including lease agreements with a director-affiliated entity and an amended pressure pumping services agreement with Pioneer Natural Resources USA, Inc - The Company rents five operations and maintenance yards from an entity in which a director has an equity interest, with annual rent expenses ranging from **$0.03 million** to **$0.2 million** per yard[75](index=75&type=chunk) - An amended and restated pressure pumping services agreement with Pioneer Natural Resources USA, Inc. (Pioneer) became effective **January 1, 2022**, reducing contracted fleets to **six** from **eight** and replacing idle fees with equipment reservation fees[76](index=76&type=chunk) Revenue from Pioneer (in millions) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $100.2 | $147.3 | | Nine Months Ended Sep 30 | $338.9 | $364.3 | - As of September 30, 2022, total accounts receivable due from Pioneer was approximately **$53.5 million**[78](index=78&type=chunk) [Note 9 - Leases](index=20&type=section&id=Note%209%20-%20Leases) This note details the company's operating leases, including real estate, maintenance facility, and an electric fleet lease, along with a maturity analysis of lease liabilities - The Company has a Real Estate Lease (commenced **April 1, 2013**) with a remaining lease term of approximately **0.5 years** and a weighted average discount rate of **6.7%** as of September 30, 2022[80](index=80&type=chunk)[81](index=81&type=chunk) - A Maintenance Facility Lease (commenced **March 14, 2022**) has a remaining lease term of approximately **1.4 years** and a weighted average discount rate of **3.4%** as of September 30, 2022[82](index=82&type=chunk)[83](index=83&type=chunk) - Entered into a three-year Electric Fleet Lease for two fleets (**60,000 HHP** per fleet) in **August 2022**, with lease payments expected to commence in the **second half of 2023** as assets are still being manufactured[84](index=84&type=chunk) Maturity Analysis of Lease Liabilities (in thousands) as of September 30, 2022 | Year | Totals | | :--- | :----- | | 2022 | $181 | | 2023 | $398 | | 2024 | $50 | | Total undiscounted future lease payments | $629 | | Present value of future lease payments | $614 | Short-Term Lease Expense (in millions) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Nine Months Ended Sep 30 | $0.6 | $0.4 | [Note 10 - Commitments and Contingencies](index=21&type=section&id=Note%2010%20-%20Commitments%20and%20Contingencies) This note outlines commitments for fixed assets, consumables, and services, including investments in DGB and electric fracturing equipment, and legal contingencies such as the Logan Lawsuit settlement - Contractual commitment to purchase and convert additional Tier IV DGB equipment totaling approximately **$43.0 million**[90](index=90&type=chunk) - Estimated contractual commitment for the Electric Fleet Lease is approximately **$49.3 million**, including the option to purchase equipment at the end of the lease[90](index=90&type=chunk) - Agreed to a proposed settlement of the Logan Lawsuit on **August 11, 2022**, with the Company's insurers paying **$30.0 million** into a settlement fund[95](index=95&type=chunk)[98](index=98&type=chunk) - Received a net tax refund of **$10.7 million** in **March 2022** from the Texas Comptroller of Public Accounts for sales, excise, and use tax for the period **July 1, 2015, through December 31, 2018**[103](index=103&type=chunk) [Note 11 - Subsequent Event](index=23&type=section&id=Note%2011%20-%20Subsequent%20Event) This note discloses the subsequent acquisition of Silvertip Completion Services Operating, LLC on November 1, 2022, for common stock and cash consideration - On **November 1, 2022**, the Company entered into a purchase and sale agreement to acquire **100%** of the equity interest of Silvertip Completion Services Operating, LLC[105](index=105&type=chunk) - The total consideration paid for the Silvertip Acquisition consisted of **10.1 million shares** of the Company's common stock and **$30.0 million** in cash, plus other closing and transaction costs[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's discussion and analysis of financial condition and results of operations, covering business overview, industry trends, key performance indicators, and detailed financial analysis [Overview](index=24&type=section&id=Overview) ProPetro Holding Corp. is a Permian Basin oilfield services company specializing in hydraulic fracturing, actively transitioning to lower emissions equipment while navigating industry competition and capital intensity - ProPetro Holding Corp. is an oilfield services company providing hydraulic fracturing and complementary services primarily in the **Permian Basin**[109](index=109&type=chunk) - Total available hydraulic horsepower (HHP) as of September 30, 2022, was **1,315,000 HHP**, comprising **215,000 HHP** of Tier IV Dynamic Gas Blending (DGB) equipment and **1,100,000 HHP** of conventional Tier II equipment[110](index=110&type=chunk) - The company is committed to converting and purchasing an additional **187,500 HHP** of Tier IV DGB equipment and entered a three-year Electric Fleet Lease for two **60,000 HHP** fleets[110](index=110&type=chunk) - A **$57.5 million** impairment expense was recorded in **Q2 2022** for DuraStim® electric powered hydraulic fracturing equipment that did not meet specifications[111](index=111&type=chunk) - The coiled tubing operations were disposed of on **September 1, 2022**, resulting in a **$13.8 million** loss on sale[117](index=117&type=chunk) [Commodity Price and Other Economic Conditions](index=25&type=section&id=Commodity%20Price%20and%20Other%20Economic%20Conditions) This section discusses oil and gas industry volatility driven by geopolitical events and inflation, leading to increased crude oil prices, demand for services, pricing increases, and challenges in transitioning to lower emissions equipment - The Russia-Ukraine war and associated sanctions contributed to significant increases and volatility in oil and natural gas prices[119](index=119&type=chunk) - Global average crude oil prices exceeded **$98 per barrel** in **2022**, the highest in ten years, driven by underinvestment and increased demand[121](index=121&type=chunk) - Permian Basin rig count increased from approximately **179** at the beginning of **2021** to approximately **344** at the end of **September 2022**, leading to increased demand and improved pricing for pressure pumping services[121](index=121&type=chunk) - The industry is transitioning to lower emissions equipment, which is capital intensive and an increasingly important factor in service provider selection[122](index=122&type=chunk)[123](index=123&type=chunk) - The company typically experiences declines in operating and financial results in the **fourth quarter** due to the holiday season, inclement winter weather, and exhaustion of customer annual budgets[125](index=125&type=chunk) [How We Evaluate Our Operations](index=26&type=section&id=How%20We%20Evaluate%20Our%20Operations) Management evaluates operations using Adjusted EBITDA and Adjusted EBITDA margin, non-GAAP measures adjusted for non-recurring items, to consistently assess financial performance across periods - Management uses **Adjusted EBITDA** and **Adjusted EBITDA margin** as important indicators of performance[126](index=126&type=chunk) - Adjusted EBITDA is defined as EBITDA, plus loss/(gain) on disposal of assets, stock-based compensation, and other unusual or nonrecurring (income)/expenses such as impairment charges, severance, and legal settlements[127](index=127&type=chunk) Adjusted EBITDA and Margin (Total Company, in thousands, except percentages) | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Adjusted EBITDA | $90,000 | $42,098 | $232,480 | $97,807 | | Adjusted EBITDA Margin | 27.0% | 16.8% | 25.0% | 15.6% | [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of financial results for the three and nine months ended September 30, 2022, versus 2021, covering key income statement components [Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021](index=30&type=section&id=Three%20Months%20Ended%20September%2030%2C%202022%20Compared%20to%20the%20Three%20Months%20Ended%20September%2030%2C%202021) For the three months ended September 30, 2022, revenues significantly increased due to higher demand and improved pricing, leading to substantial net income and Adjusted EBITDA growth Key Financial Changes (3 Months Ended Sep 30, in thousands, except percentages) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue | $333,014 | $250,099 | $82,915 | 33.2% | | Pressure Pumping Revenue | $330,780 | $245,641 | $85,139 | 34.7% | | Cost of Services | $224,118 | $188,690 | $35,428 | 18.8% | | G&A Expenses | $28,190 | $21,348 | $6,842 | 32.0% | | Depreciation and Amortization | $30,417 | $33,531 | $(3,114) | (9.3)% | | Loss on Disposal of Assets | $36,636 | $12,424 | $24,212 | 194.9% | | Net Income (Loss) | $10,032 | $(5,067) | $15,099 | 298.0% | - The increase in revenue was primarily attributable to significantly increased activity levels and improved pricing for pressure pumping services, with effectively utilized fleet count rising to approximately **14.8 active fleets** in **2022** from **13.8** in **2021**[139](index=139&type=chunk) - Cost of services as a percentage of pressure pumping segment revenues decreased to **66.6%** in **2022** from **75.3%** in **2021**, reflecting increased operational efficiencies and improved pricing[141](index=141&type=chunk) - General and administrative expenses increased due to non-recurring legal fees and settlement expenses (**$5.3 million**), consulting fees (**$2.2 million**), and severance expense (**$1.1 million**)[142](index=142&type=chunk) [Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021](index=32&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202022%20Compared%20to%20the%20Nine%20Months%20Ended%20September%2030%2C%202021) For the nine months ended September 30, 2022, the company saw substantial revenue growth and reduced net loss, despite a large impairment expense for DuraStim® assets and increased asset disposal losses Key Financial Changes (9 Months Ended Sep 30, in thousands, except percentages) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Revenue | $930,776 | $628,444 | $302,332 | 48.1% | | Pressure Pumping Revenue | $917,336 | $617,293 | $300,043 | 48.6% | | Cost of Services | $640,202 | $474,905 | $165,297 | 34.8% | | G&A Expenses | $85,031 | $59,079 | $25,952 | 43.9% | | Depreciation and Amortization | $93,734 | $100,253 | $(6,519) | (6.5)% | | Impairment Expense | $57,454 | $0 | $57,454 | 100.0% | | Loss on Disposal of Assets | $75,240 | $40,500 | $34,740 | 85.8% | | Other Income | $(9,749) | $(1,178) | $8,571 | 727.6% | | Net Loss | $(11,012) | $(33,953) | $(22,941) | (67.6)% | - Revenue increase was primarily due to significant increases in customer activity levels, resulting in higher demand for pressure pumping services and improved pricing, with effectively utilized fleet count rising to approximately **14.4 active fleets** in **2022** from **12.4** in **2021**[152](index=152&type=chunk) - General and administrative expenses increased due to higher non-recurring legal expenses (**$12.8 million**), stock-based compensation expense (**$9.7 million**, including acceleration for a former executive), and consulting and professional fees (**$4.5 million**)[155](index=155&type=chunk) - Other income increased significantly due to a **$10.7 million** net tax refund and **$2.7 million** non-cash income from equipment warranty settlement, partially offset by a **$3.3 million** unrealized loss on short-term investment[160](index=160&type=chunk)[161](index=161&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by cash, operating cash flows, and an amended ABL Credit Facility, with future capital investments and economic slowdowns posing potential risks - Liquidity is provided by existing cash balances, operating cash flows, and borrowings under the ABL Credit Facility[163](index=163&type=chunk) Liquidity Position (in millions) | Metric | Sep 30, 2022 | Oct 31, 2022 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $43.2 | $88.3 | | Availability under ABL Credit Facility | $111.3 | $97.3 | | Total Liquidity | $154.5 | $185.6 | | Borrowings under ABL Credit Facility | $0 | $30.0 | - The ABL Credit Facility was amended on **April 13, 2022**, decreasing borrowing capacity to **$150.0 million** and extending the maturity date to **April 13, 2027**[171](index=171&type=chunk) - Future liquidity could decline with additional capital investments, especially for lower emissions equipment, and potential negative impacts from increasing interest rates or economic slowdowns[166](index=166&type=chunk)[167](index=167&type=chunk) [Future Sources and Use of Cash and Contractual Obligations](index=35&type=section&id=Future%20Sources%20and%20Use%20of%20Cash%20and%20Contractual%20Obligations) Future cash use will primarily be for capital expenditures, including DGB conversions and an Electric Fleet Lease, funded by existing cash, operating cash flows, and the ABL Credit Facility Capital Expenditures (in millions) | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $115.1 | $53.2 | - Future capital expenditures are projected for maintenance, conversion to lower emissions pressure pumping equipment (Tier IV DGB), strategic purchases, and other ancillary equipment[175](index=175&type=chunk) - Contractual commitment of approximately **$43.0 million** for additional Tier IV DGB equipment and an estimated contractual commitment of **$49.3 million** for the Electric Fleet Lease (including purchase option)[177](index=177&type=chunk) - Capital expenditures are anticipated to be funded by existing cash, cash flows from operations, and borrowings under the ABL Credit Facility[176](index=176&type=chunk) - On **November 1, 2022**, the company acquired Silvertip Completion Services Operating, LLC for **10.1 million shares** and **$30.0 million** cash[178](index=178&type=chunk) [Cash and Cash Flows](index=35&type=section&id=Cash%20and%20Cash%20Flows) This section analyzes cash flow activities, showing increased operating cash but substantially higher investing cash use for lower emissions equipment, resulting in a net decrease in cash Cash Flows (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :----- | :----- | :--------- | :--------- | | Net cash provided by operating activities | $174,951 | $109,259 | $65,692 | 60.1% | | Net cash used in investing activities | $(239,957) | $(85,549) | $(154,408) | 180.5% | | Net cash used in financing activities | $(3,704) | $(7,881) | $4,177 | -53.0% | | Net increase (decrease) in cash and cash equivalents | $(68,710) | $15,829 | $(84,559) | -534.2% | - The increase in net cash provided by operating activities was primarily due to increased activity levels and improved pricing, driven by higher crude oil prices, and a net sales tax refund[181](index=181&type=chunk) - The increase in net cash used in investing activities was primarily attributable to investments in lower emissions Tier IV DGB equipment and increased costs to rebuild Tier II equipment[182](index=182&type=chunk) [Off-Balance Sheet Arrangements](index=36&type=section&id=Off-Balance%20Sheet%20Arrangements) As of September 30, 2022, the company reported no off-balance sheet arrangements - The Company had no off-balance sheet arrangements as of **September 30, 2022**[184](index=184&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No material changes occurred in critical accounting policies and estimates during the nine months ended September 30, 2022, as referenced in the previous Form 10-K - There have been no material changes to the methodology applied for critical accounting policies and estimates during the nine months ended **September 30, 2022**[185](index=185&type=chunk) [Recently Issued Accounting Standards](index=36&type=section&id=Recently%20Issued%20Accounting%20Standards) This section incorporates by reference the disclosure on recently issued accounting standards from Note 2 of the Condensed Consolidated Financial Statements - Disclosure concerning recently issued accounting standards is incorporated by reference to **Note 2** of the Condensed Consolidated Financial Statements[186](index=186&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As of September 30, 2022, no material changes in market risk were reported compared to the company's previous Form 10-K disclosures - As of **September 30, 2022**, there have been no material changes in market risk from the information provided in the company's Form 10-K[187](index=187&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The principal executive and financial officers concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2022 - The principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level as of **September 30, 2022**[190](index=190&type=chunk) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes occurred in the company's internal control over financial reporting during the quarter ended September 30, 2022 - There were no changes in the system of internal control over financial reporting during the quarter ended **September 30, 2022**, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[191](index=191&type=chunk) [PART II – OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part provides other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 of the Condensed Consolidated Financial Statements for detailed information on legal proceedings, including the Logan Lawsuit settlement - For further information on legal proceedings, refer to **Note 10 – Commitments and Contingencies** in the Notes to Condensed Consolidated Financial Statements[194](index=194&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section highlights a new risk factor related to the Inflation Reduction Act of 2022, which could accelerate the low-carbon transition and impose methane emissions costs on customers - The **Inflation Reduction Act of 2022 (IRA 2022)** is a new risk factor that could accelerate the transition to a low-carbon economy[196](index=196&type=chunk) - The IRA 2022 imposes a federal fee on methane emissions, starting at **$900 per ton** in **2024**, increasing to **$1,200** in **2025**, and **$1,500** for **2026** and each year after, which could increase customer operating costs and reduce demand for services[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities and use of proceeds were reported[197](index=197&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[197](index=197&type=chunk) [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are not applicable[198](index=198&type=chunk) [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) The company reported no other information for the period - No other information was reported[199](index=199&type=chunk) [Item 6. Exhibits](index=39&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed or furnished with the Form 10-Q, including corporate governance documents, certifications, and XBRL data files - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, Certificate of Designations, Certifications of Principal Executive and Financial Officers (**31.1, 31.2, 32.1, 32.2**), and XBRL Taxonomy Extension Documents[202](index=202&type=chunk)

Financial Data and Key Metrics Changes - The company generated $333 million in revenue for Q3 2022, a 6% increase from $315 million in Q2 2022, driven by net pricing gains and strong cementing performance [25][30] - Adjusted EBITDA for the quarter was $90 million, representing an 18% sequential increase from $76 million in Q2 2022, with adjusted EBITDA margins expanding by almost 300 basis points to over 27% of revenue [30][32] - The company reported a net income of $10 million or $0.10 per diluted share, compared to a net loss of $33 million in the previous quarter [28] Business Line Data and Key Metrics Changes - The cementing business achieved its highest revenue quarter ever, with 100% sequential adjusted EBITDA growth [7] - The company maintained effective fleet utilization at 14.8 fleets, which was flat compared to the previous quarter [26] - Incremental adjusted EBITDA margins were nearly 80% for the total company, reflecting disciplined returns-based strategy [7][30] Market Data and Key Metrics Changes - The crude oil market is structurally undersupplied, a trend expected to continue for the next few years due to lagging global investment in new production [10] - The company anticipates steady to flat activity levels through the end of 2022 and into early 2023, influenced by E&Ps maintaining disciplined capital spending [10][11] - The market for efficient hydraulic fracturing fleets remains tight due to ongoing equipment attrition, with evidence of medium and smaller players struggling to maintain service quality [31] Company Strategy and Development Direction - The company is focused on optimizing operations, transitioning to next-generation equipment, and pursuing strategic transactions to enhance competitiveness and shareholder value [13][17] - The acquisition of Silvertip Completion Services is aimed at creating a leading completions-focused oilfield services company, expected to increase adjusted EBITDA by approximately $65 million to $75 million in 2023 [19][21] - The company plans to reduce capital spending through enhanced operational efficiencies and innovative technologies while maintaining a strong liquidity position [20][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term upcycle of the energy industry, driven by severe undersupply of crude oil and natural gas [16] - The company is optimistic about pricing momentum in the market and has secured contracts with major customers for 2023 [12][39] - Management highlighted the importance of maintaining a disciplined approach to capital allocation and operational efficiency to enhance free cash flow generation [20][39] Other Important Information - The company completed the acquisition of Silvertip for a total consideration of $150 million, which included cash, stock, and the payoff of assumed debt [21][24] - Total liquidity at the end of Q3 2022 was $155 million, which is expected to exceed $200 million post-acquisition [36] Q&A Session Summary Question: Potential for price uplift on Pioneer assets - Management indicated that a significant portion of incremental margins in Q3 was due to pricing progression, with expectations for continued pricing increases into 2023 [45][46] Question: Insights into overall market supply - Management noted that over 80% of the market's capacity is concentrated in a few major players, which are better positioned to sustain activity compared to smaller competitors [48] Question: Synergies from the Silvertip acquisition - Management clarified that the expected EBITDA from Silvertip is standalone and not modeled for synergies, although there is potential for collaboration and cross-selling [54][56] Question: CapEx for next year - Management confirmed that capital expenditures are expected to decrease in 2023, with a favorable lease agreement for electric frac fleets minimizing capital investment [62][63] Question: Demand for electric wireline - Management indicated that while demand for electric wireline is lower than for frac equipment, there is still a significant focus on transitioning to electrified offerings [89]

PROPETRO® Client to confirm use of this image again Q3 2022 Investor Presentation November 1, 2022 Forward-Looking Statements Except for historical information contained herein, the statements and information in this presentation, including the oral statements made in connection herewith, 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 eve ...

Cautionary Note Regarding Forward-Looking Statements [Forward-Looking Statements Disclosure](index=3&type=section&id=Forward-Looking%20Statements%20Disclosure) This section outlines the company's forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially - All statements in this Form 10-Q that are not historical facts are considered **forward-looking statements**, indicating expectations or forecasts of future events[9](index=9&type=chunk) - Key factors that could cause actual results to differ materially include the severity and duration of current world health events and armed conflicts, actions by **OPEC+**, and actions by the **Biden Administration** impacting oil and natural gas production[10](index=10&type=chunk) - Other significant risks include changes in general economic and geopolitical conditions, laws/regulations, cost increases and **supply chain constraints**, and technological changes[10](index=10&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and the company disclaims any duty to update or revise them, except as required by applicable securities laws[12](index=12&type=chunk) PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and detailed notes for the periods ended June 30, 2022, and December 31, 2021 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities slightly increased from December 31, 2021, to June 30, 2022, while shareholders' equity experienced a minor decrease | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Total Assets | $1,067,623 | $1,061,236 | | Total Liabilities | $250,587 | $234,934 | | Total Shareholders' Equity | $817,036 | $826,302 | - **Cash and cash equivalents decreased** from $111.9 million at December 31, 2021, to **$69.8 million** at June 30, 2022[16](index=16&type=chunk) - **Accounts receivable (net) increased** from $128.1 million to **$182.0 million**, indicating higher sales or slower collections[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company's net loss widened significantly for the three and six months ended June 30, 2022, compared to the prior year, due to a large impairment expense | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $315,083 | $216,887 | $597,763 | $378,345 | | Net Income (Loss) | $(32,860) | $(8,511) | $(21,043) | $(28,886) | | Basic EPS | $(0.32) | $(0.08) | $(0.20) | $(0.28) | - Revenue increased significantly, with a **45.3% increase** for the three months and a **58.0% increase** for the six months ended June 30, 2022, compared to 2021[18](index=18&type=chunk) - An **impairment expense of $57.5 million** was recorded for the three and six months ended June 30, 2022, contributing to the increased net loss[18](index=18&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity decreased from $826.3 million to $817.0 million during the first six months of 2022, driven by the net loss incurred | Metric (in thousands) | January 1, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Shareholders' Equity | $826,302 | $817,036 | | Accumulated Deficit | $(18,630) | $(39,673) | - **Stock-based compensation cost** contributed **$14.8 million** to additional paid-in capital during the six months ended June 30, 2022[20](index=20&type=chunk) - The **accumulated deficit increased** significantly from $(18.6) million at January 1, 2022, to **$(39.7) million** at June 30, 2022, reflecting the net losses[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated substantially more cash in the first half of 2022, while investing activities saw a significant increase in cash used for capital expenditures | Metric (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $103,308 | $61,480 | | Net cash used in investing activities | $(141,568) | $(50,920) | | Net cash used in financing activities | $(3,869) | $(6,631) | | Cash and cash equivalents - End of period | $69,789 | $72,701 | - The increase in cash from operating activities was driven by **higher activity levels** and a net tax refund, partially offset by timing of receivables and vendor payments[22](index=22&type=chunk) - **Capital expenditures significantly increased** to **$144.5 million** in 2022 from $52.2 million in 2021, leading to higher cash used in investing activities[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential details on accounting policies, financial instruments, debt, and other items, offering context to the financial statements [Note 1 - Basis of Presentation](index=9&type=section&id=Note%201%20-%20Basis%20of%20Presentation) The financial statements are prepared per SEC and GAAP requirements, with revenue recognized from pressure pumping and coiled tubing operations - The company's primary revenue-generating activities are aggregated into one reportable segment, **'Pressure Pumping'**, which includes hydraulic fracturing and cementing services[25](index=25&type=chunk)[26](index=26&type=chunk) - Hydraulic fracturing revenue is recognized over time, while acidizing and cementing revenues are recognized at a point-in-time upon service completion[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) - **Accrued revenue** within accounts receivable increased from **$19.4 million** at December 31, 2021, to **$43.2 million** at June 30, 2022[32](index=32&type=chunk) Allowance for Credit Losses (in thousands) | Metric | January 1, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Balance - Allowance for Credit Losses | $217 | $217 | [Note 2 - Recently Issued Accounting Standards](index=10&type=section&id=Note%202%20-%20Recently%20Issued%20Accounting%20Standards) The company adopted ASU No 2020-04 for Reference Rate Reform, which did not materially affect the condensed consolidated financial statements - The company adopted **ASU No 2020-04, Reference Rate Reform**, effective January 1, 2022, providing guidance for the transition away from LIBOR[36](index=36&type=chunk) - The adoption of this guidance **did not materially affect** the Company's condensed consolidated financial statements[36](index=36&type=chunk) [Note 3 - Fair Value Measurement](index=10&type=section&id=Note%203%20-%20Fair%20Value%20Measurement) A significant nonrecurring impairment expense of $57.5 million was recorded for DuraStim® hydraulic fracturing pumps due to commercialization uncertainty - Fair value is defined as the exit price in an orderly transaction, with a hierarchy (Level 1, 2, 3) based on the observability of inputs[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) - The estimated fair value of the company's financial instruments **approximated their carrying values** at June 30, 2022, and December 31, 2021[42](index=42&type=chunk) Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) | Asset | Balance (June 30, 2022) | Total Gains (Losses) | | :--- | :--- | :--- | | Property and equipment, net | $11,341 | $(57,454) | - An **impairment expense of approximately $57.5 million** was recorded for DuraStim® hydraulic fracturing pumps in Q2 2022 due to performance issues and market conditions[43](index=43&type=chunk) [Note 4 - Long-Term Debt](index=13&type=section&id=Note%204%20-%20Long-Term%20Debt) The company amended its ABL Credit Facility, reducing borrowing capacity to $150.0 million and extending maturity to April 2027, with no outstanding borrowings - Effective April 13, 2022, the ABL Credit Facility's borrowing capacity was **decreased to $150.0 million** and the maturity date extended to April 13, 2027[46](index=46&type=chunk) - The **Borrowing Base** as of June 30, 2022, was approximately **$120.5 million**, based on eligible accounts receivable[46](index=46&type=chunk) - Interest accrues based on **SOFR or the base rate**, plus an applicable margin ranging from 1.50% to 2.00% for SOFR loans and 0.50% to 1.00% for base rate loans[46](index=46&type=chunk) - There were **no borrowings outstanding** under the revolving credit facility as of June 30, 2022, and December 31, 2021[47](index=47&type=chunk) [Note 5 - Reportable Segment Information](index=13&type=section&id=Note%205%20-%20Reportable%20Segment%20Information) The company operates through one primary reportable segment, 'Pressure Pumping,' which saw a significant increase in Adjusted EBITDA - The company has one reportable segment, **'Pressure Pumping,'** comprising hydraulic fracturing and cementing operations[50](index=50&type=chunk) - Hydraulic fracturing revenue approximated **92.9% and 93.2%** of pressure pumping revenue for the three and six months ended June 30, 2022, respectively[51](index=51&type=chunk) Adjusted EBITDA by Segment (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Pressure Pumping Adjusted EBITDA | $86,291 | $46,826 | $163,285 | $78,697 | | All Other Adjusted EBITDA | $(10,344) | $(11,133) | $(20,805) | $(22,988) | | Total Adjusted EBITDA | $75,947 | $35,693 | $142,480 | $55,709 | - Total corporate administrative expense for the three and six months ended June 30, 2022, was **$7.7 million and $25.0 million**, respectively, up from the prior year[50](index=50&type=chunk) [Note 6 - Net Income (Loss) Per Share](index=18&type=section&id=Note%206%20-%20Net%20Income%20(Loss)%20Per%20Share) Basic and diluted net loss per share increased for the three-month period but decreased for the six-month period, with certain equity awards being anti-dilutive Net Income (Loss) Per Common Share | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $(0.32) | $(0.08) | $(0.20) | $(0.28) | | Diluted EPS | $(0.32) | $(0.08) | $(0.20) | $(0.28) | - **Weighted average common shares outstanding** for basic and diluted calculations were approximately **104.2 million** for the three months and **104.0 million** for the six months ended June 30, 2022[66](index=66&type=chunk) Anti-Dilutive Equity Awards (in thousands) | Award Type | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Stock options | 587 | 995 | 587 | 995 | | Restricted stock units | 1,207 | 1,380 | 1,207 | 1,380 | | Performance stock units | 1,788 | 1,489 | 1,788 | 1,489 | | Total | 3,582 | 3,864 | 3,582 | 3,864 | [Note 7 - Stock-Based Compensation](index=19&type=section&id=Note%207%20-%20Stock-Based%20Compensation) Total stock-based compensation expense increased significantly to $14.8 million for the first half of 2022, partly due to accelerated vesting for a former officer - **No new stock option grants** were made during the six months ended June 30, 2022[69](index=69&type=chunk) - **631,233 RSUs were granted**, with unrecognized compensation expense of **$10.6 million** to be recognized over approximately 2.0 years[71](index=71&type=chunk)[72](index=72&type=chunk) - **327,939 PSUs were granted**, and an incremental stock expense of **$3.7 million** was recorded due to PSU modifications for a former officer[74](index=74&type=chunk)[75](index=75&type=chunk) Total Stock-Based Compensation Expense (in thousands) | Period | Total Stock-Based Compensation Expense | | :--- | :--- | | Six Months Ended June 30, 2022 | $14,800 | [Note 8 - Related-Party Transactions](index=22&type=section&id=Note%208%20-%20Related-Party%20Transactions) Revenue from Pioneer, a significant customer, totaled $238.7 million for the first six months of 2022 under an amended services agreement - The company rents five operations and maintenance yards from an entity in which a director has an equity interest[81](index=81&type=chunk) - An amended agreement with Pioneer effective January 1, 2022, **reduced contracted fleets from eight to six** and replaced idle fees with equipment reservation fees[82](index=82&type=chunk) Revenue from Pioneer (in millions) | Period | Revenue from Pioneer | | :--- | :--- | | Three Months Ended June 30, 2022 | $115.2 | | Three Months Ended June 30, 2021 | $130.7 | | Six Months Ended June 30, 2022 | $238.7 | | Six Months Ended June 30, 2021 | $217.0 | - **Accounts receivable due from Pioneer** increased from $62.1 million at December 31, 2021, to **$69.0 million** at June 30, 2022[84](index=84&type=chunk) [Note 9 - Leases](index=23&type=section&id=Note%209%20-%20Leases) The company has operating leases for real estate, with total undiscounted future lease payments of $0.8 million - The company has a ten-year Real Estate Lease and a two-year Maintenance Facility Lease, both classified as **operating leases**[87](index=87&type=chunk)[89](index=89&type=chunk) - Total operating lease right-of-use asset cost was approximately **$1.9 million** at June 30, 2022, with accumulated amortization of $1.1 million[91](index=91&type=chunk) Maturity Analysis of Lease Liabilities (in thousands) | Year | Totals | | :--- | :--- | | 2022 | $360 | | 2023 | $398 | | 2024 | $50 | | Total undiscounted future lease payments | $808 | | Present value of future lease payments | $785 | - **Short-term lease expense** for the six months ended June 30, 2022, was approximately **$0.4 million**[94](index=94&type=chunk) [Note 10 - Commitments and Contingencies](index=24&type=section&id=Note%2010%20-%20Commitments%20and%20Contingencies) The company has a $43.0 million commitment for new equipment and is involved in ongoing litigation, with outcomes currently not estimable - Total remaining lease commitments for short-term leases and lodging were approximately **$2.5 million** at June 30, 2022[95](index=95&type=chunk) - In August 2022, the company entered into a contractual arrangement to purchase and convert additional Tier IV DGB equipment for approximately **$43.0 million**[95](index=95&type=chunk) - The company is a defendant in the **Logan Lawsuit**, a class action alleging violations of the Exchange Act and Securities Act, with the outcome not yet estimable[98](index=98&type=chunk)[99](index=99&type=chunk)[103](index=103&type=chunk) - A **$10.7 million net tax refund** was received in March 2022 from the Texas Comptroller for sales, excise, and use tax[107](index=107&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial performance, highlighting significant revenue growth offset by increased costs and a substantial impairment charge [Overview](index=27&type=section&id=Overview) ProPetro is a Permian Basin-focused oilfield services company transitioning to lower emissions equipment but recorded a $57.5 million impairment on its DuraStim® assets - ProPetro is a Midland, Texas-based oilfield services company providing **hydraulic fracturing** and other complementary services, primarily in the **Permian Basin**[112](index=112&type=chunk) - Total available HHP as of June 30, 2022, was **1,315,000 HHP**, including 197,500 HHP of Tier IV Dynamic Gas Blending (DGB) equipment[113](index=113&type=chunk) - The company recorded approximately **$57.5 million of impairment expense** on DuraStim® electric powered hydraulic fracturing equipment in Q2 2022[114](index=114&type=chunk) - An amended agreement with Pioneer **reduced contracted fleets from eight to six** and introduced equipment reservation fees, contributing to revenue[115](index=115&type=chunk) [Commodity Price and Other Economic Conditions](index=28&type=section&id=Commodity%20Price%20and%20Other%20Economic%20Conditions) Industry volatility, driven by global events, has increased crude oil prices and service demand but also brought cost inflation and supply chain tightness - The Russia-Ukraine war and COVID-19 pandemic have contributed to significant increases and volatility in oil and natural gas prices, with global average crude oil prices **exceeding $100 per barrel** in 2022[122](index=122&type=chunk)[124](index=124&type=chunk) - Increased crude oil prices led to a rise in Permian Basin rig count from approximately 179 to **349** at the end of June 2022, driving demand for oilfield services[124](index=124&type=chunk) - The company negotiated **pricing increases** with customers due to growing demand and significant cost inflation[124](index=124&type=chunk) - The industry is transitioning to **lower emissions operating environments**, requiring significant capital investment in new technologies[125](index=125&type=chunk) [How We Evaluate Our Operations](index=29&type=section&id=How%20We%20Evaluate%20Our%20Operations) Management evaluates performance using non-GAAP measures Adjusted EBITDA and Adjusted EBITDA margin to provide a consistent basis for comparison - Management uses **Adjusted EBITDA** and **Adjusted EBITDA margin** as key performance indicators[128](index=128&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for items like loss/(gain) on asset disposals, stock-based compensation, and other **unusual or nonrecurring expenses**[129](index=129&type=chunk) - Adjusted EBITDA and Adjusted EBITDA margin are **non-GAAP measures** used to assess financial performance by removing the effects of capital structure and nonrecurring items[130](index=130&type=chunk)[131](index=131&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Revenue grew significantly, but this was offset by rising costs and a $57.5 million impairment expense, leading to a widened net loss for the quarter [Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021](index=33&type=section&id=Three%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202021) Revenue increased 45.3% to $315.1 million, but a $57.5 million impairment expense contributed to a widened net loss of $(32.9) million Key Financials (Three Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $315,083 | $216,887 | $98,196 | 45.3% | | Cost of services | $218,813 | $162,837 | $55,976 | 34.4% | | General and administrative | $25,135 | $17,529 | $7,606 | 43.4% | | Impairment expense | $57,454 | $0 | $57,454 | 100.0% | | Loss on disposal of assets | $22,485 | $15,025 | $7,460 | 49.7% | | Net loss | $(32,860) | $(8,511) | $24,349 | 286.1% | | Adjusted EBITDA | $75,947 | $35,693 | $40,254 | 112.8% | | Adjusted EBITDA Margin | 24.1% | 16.5% | 7.6% | 46.1% | - Effectively utilized fleet count increased to approximately **14.8 active fleets** in Q2 2022 from 13.1 in Q2 2021[142](index=142&type=chunk) - Pressure pumping cost of services as a percentage of revenue **decreased to 69.0%** in Q2 2022 from 74.7% in Q2 2021, reflecting improved operational efficiencies[144](index=144&type=chunk) - General and administrative expenses increased primarily due to **$5.1 million in non-recurring legal fees** and $0.5 million in stock-based compensation[145](index=145&type=chunk) [Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021](index=34&type=section&id=Six%20Months%20Ended%20June%2030%2C%202022%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202021) Revenue surged 58.0% to $597.8 million, and a $10.7 million tax refund helped reduce the net loss to $(21.0) million despite a large impairment charge Key Financials (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $597,763 | $378,345 | $219,418 | 58.0% | | Cost of services | $416,083 | $286,215 | $129,868 | 45.4% | | General and administrative | $56,842 | $37,731 | $19,111 | 50.7% | | Impairment expense | $57,454 | $0 | $57,454 | 100.0% | | Loss on disposal of assets | $38,603 | $28,076 | $10,527 | 37.5% | | Other income | $(10,364) | $(1,487) | $8,877 | 597.0% | | Net loss | $(21,043) | $(28,886) | $(7,843) | (27.2)% | | Adjusted EBITDA | $142,480 | $55,709 | $86,771 | 155.8% | | Adjusted EBITDA Margin | 23.8% | 14.7% | 9.1% | 61.9% | - Effectively utilized fleet count increased to approximately **14.3 active fleets** in H1 2022 from 11.7 in H1 2021[154](index=154&type=chunk) - General and administrative expenses increased due to a **$9.4 million rise in stock-based compensation** and **$7.5 million in non-recurring legal fees**[158](index=158&type=chunk) - Other income increased significantly due to a **$10.7 million net tax refund** from the Texas Comptroller[163](index=163&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) Total liquidity was $185.3 million as of June 30, 2022, comprising cash and availability under its amended ABL Credit Facility - Liquidity is provided by existing cash balances, operating cash flows, and borrowings under the **ABL Credit Facility**[167](index=167&type=chunk) Liquidity Position (as of June 30, 2022, in millions) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $69.8 | | ABL Credit Facility availability | $115.5 | | Total Liquidity | $185.3 | - The ABL Credit Facility was amended on April 13, 2022, **decreasing borrowing capacity to $150.0 million** and extending maturity to April 13, 2027[173](index=173&type=chunk) - The **Borrowing Base** as of June 30, 2022, was approximately **$120.5 million**, and there were no borrowings under the facility[173](index=173&type=chunk)[174](index=174&type=chunk) [Future Sources and Use of Cash and Contractual Obligations](index=38&type=section&id=Future%20Sources%20and%20Use%20of%20Cash%20and%20Contractual%20Obligations) Future cash will primarily fund capital expenditures for maintenance and DGB conversions, with a $43.0 million commitment for new equipment in August 2022 - **Capital expenditures incurred were $89.1 million** during the three months ended June 30, 2022, compared to $30.8 million in the prior year[175](index=175&type=chunk) - Future capital expenditures are projected for maintenance, costs to convert existing equipment to **lower emissions (Tier IV DGB)**, and strategic purchases[176](index=176&type=chunk) - The company expects to fund capital expenditures through existing cash, cash flows from operations, and, if needed, borrowings under its **ABL Credit Facility**[177](index=177&type=chunk) - In August 2022, the company committed to purchase and convert additional Tier IV DGB equipment with a total cost of approximately **$43.0 million**[178](index=178&type=chunk) [Cash and Cash Flows](index=38&type=section&id=Cash%20and%20Cash%20Flows) Operating cash flow increased to $103.3 million, while cash used in investing rose significantly due to investments in lower emissions equipment Historical Cash Flows (Six Months Ended June 30, in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $103,308 | $61,480 | | Net cash used in investing activities | $(141,568) | $(50,920) | | Net cash used in financing activities | $(3,869) | $(6,631) | - The **$41.8 million increase in net cash from operating activities** was primarily due to increased activity levels, higher crude oil prices, and a net tax refund[180](index=180&type=chunk) - The increase in net cash used in investing activities was primarily attributable to investment in **lower emissions Tier IV DGB equipment**[181](index=181&type=chunk) - The decrease in net cash used in financing activities was mainly due to a reduction in net settlement of equity awards and no repayments of insurance financing in 2022[182](index=182&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) As of June 30, 2022, the company had no off-balance sheet arrangements - The company had **no off-balance sheet arrangements** as of June 30, 2022[183](index=183&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes to the company's critical accounting policies and estimates during the first half of 2022 - **No material changes** occurred in the methodology for critical accounting policies and estimates during the six months ended June 30, 2022[184](index=184&type=chunk) [Recently Issued Accounting Standards](index=39&type=section&id=Recently%20Issued%20Accounting%20Standards) Disclosure concerning recently issued accounting standards is incorporated by reference to Note 2 of the financial statements - Information on recently issued accounting standards is incorporated by reference to **Note 2** of the Condensed Consolidated Financial Statements[185](index=185&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in market risk from the information previously provided in the company's Form 10-K - **No material changes in market risk** have occurred as of June 30, 2022, compared to the disclosures in the Form 10-K[186](index=186&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated and deemed **effective** at the reasonable assurance level as of June 30, 2022[189](index=189&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2022[190](index=190&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 10 in the financial statements for detailed information on legal proceedings - Details regarding legal proceedings are provided in **Note 10 – Commitments and Contingencies** of the Condensed Consolidated Financial Statements[193](index=193&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Form 10-K - **No material changes** to the risk factors disclosed in the company's Form 10-K have occurred[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report - **No unregistered sales** of equity securities or use of proceeds to report[195](index=195&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report - **No defaults** upon senior securities to report[196](index=196&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine Safety Disclosures are **not applicable** to the company[197](index=197&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - **No other information** to report[198](index=198&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, credit agreements, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, Certificate of Designations of Series B Preferred Stock, and the Restatement Agreement for the **ABL Credit Facility**[201](index=201&type=chunk) - **Certifications** from the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350 are filed/furnished[201](index=201&type=chunk) - **XBRL Instance Document** and Taxonomy Extension Schema, Calculation, Label, Presentation, and Definition Linkbase Documents are included[201](index=201&type=chunk) Signatures [Report Signatures](index=43&type=section&id=Report%20Signatures) The report was duly signed on behalf of the registrant by its principal officers on August 4, 2022 - The report was signed on **August 4, 2022**[205](index=205&type=chunk) - Signatories include **Samuel D. Sledge** (Chief Executive Officer and Director), **David S. Schorlemer** (Chief Financial Officer), and **Elo Omavuezi** (Chief Accounting Officer)[205](index=205&type=chunk)

ProPetro Holding Corp. (NYSE:PUMP) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET Company Participants Matt Augustine - Investor Relations Sam Sledge - Chief Executive Officer David Schorlemer - Chief Financial Officer Adam Munoz - President & Chief Operating Officer Conference Call Participants Scott Gruber - Citigroup Arun Jayaram - JPMorgan Waqar Syed - ATB Capital Markets Stephen Gengaro - Stifel Derek Podhaizer - Barclays Operator Good morning, and welcome to the ProPetro Holding Corporatio ...

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, 2022 or ☐ 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. (432) 688-0012 (Registrant's telephone number, including area code) Securities ...