Cautionary Note Regarding Forward-Looking Statements This section outlines the company's forward-looking statements, covering business strategy, financial performance, and capital plans, while highlighting key risk factors and disclaiming any duty to update - Forward-looking statements cover business strategy, industry, future profitability, capital expenditures, fleet conversion, new power generation business, and share repurchase program9 - Key risk factors include changes in general economic and geopolitical conditions (e.g., interest rates, inflation, recession, trade policy), central bank actions, world events and armed conflicts (e.g., Russian-Ukraine war, Israel-Gaza), OPEC+ oil production levels, and governmental actions impacting oil and gas production9 - Readers are cautioned not to place undue reliance on forward-looking statements and the company disclaims any duty to update them, except as required by law11 PART I – FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, shareholders' equity, and cash flows, along with comprehensive notes detailing accounting policies, acquisitions, fair value measurements, debt, segment information, and other financial disclosures Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time, reflecting its financial position | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :----------------------------- | | Total Current Assets | $345,294 | $292,221 | | Total Assets | $1,246,199 | $1,223,645 | | Total Current Liabilities | $239,093 | $222,266 | | Total Liabilities | $419,710 | $407,372 | | Total Shareholders' Equity | $826,489 | $816,273 | - Cash and cash equivalents increased by $12,949 thousand (25.67%) from $50,443 thousand at December 31, 2024, to $63,392 thousand at March 31, 202514 - Accounts receivable (net) increased by $44,716 thousand (22.81%) from $195,994 thousand at December 31, 2024, to $240,710 thousand at March 31, 202514 Condensed Consolidated Statements of Operations This statement details the company's revenues, costs, and expenses over specific periods, culminating in net income and earnings per share | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Service Revenue | $359,416 | $405,843 | | Total Costs and Expenses | $349,915 | $375,531 | | Operating Income | $9,501 | $30,312 | | Income Before Income Taxes | $10,714 | $29,688 | | Net Income | $9,602 | $19,930 | | Basic Net Income Per Common Share | $0.09 | $0.18 | | Diluted Net Income Per Common Share | $0.09 | $0.18 | - Loss on disposal of assets increased significantly from $4 thousand in Q1 2024 to $9,746 thousand in Q1 2025, contributing to the decline in operating income16 - Income tax expense decreased substantially from $9,758 thousand in Q1 2024 to $1,112 thousand in Q1 2025, reflecting the lower pre-tax income16 Condensed Consolidated Statements of Shareholders' Equity This statement tracks changes in the company's equity accounts, including net income, stock-based compensation, and share repurchases, over specific periods | Metric | January 1, 2025 (in thousands) | March 31, 2025 (in thousands) | | :-------------------------- | :----------------------------- | :---------------------------- | | Total Shareholders' Equity | $816,273 | $826,489 | | Net Income | N/A | $9,602 | | Stock-based compensation | N/A | $3,337 | | Tax withholdings paid for net settlement of equity awards | N/A | $(2,723) | - For the three months ended March 31, 2024, share repurchases amounted to $22,508 thousand, significantly impacting total shareholders' equity, whereas no share repurchases occurred in the same period of 202518 - Accumulated deficit improved from $(68,825) thousand at January 1, 2025, to $(59,223) thousand at March 31, 2025, due to net income18 Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities, showing the overall change in cash and cash equivalents | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $54,689 | $74,822 | | Net cash used in investing activities | $(32,836) | $(33,847) | | Net cash used in financing activities | $(8,904) | $(27,871) | | Net increase in cash and cash equivalents | $12,949 | $13,104 | | Cash and cash equivalents - End of period | $63,392 | $46,458 | - Capital expenditures were $40,913 thousand in Q1 2025, an increase from $34,585 thousand in Q1 202421 - Share repurchases, which were $22,508 thousand in Q1 2024, were $0 in Q1 2025, leading to the significant decrease in net cash used in financing activities21 Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements, covering accounting policies, acquisitions, and other disclosures Note 1 - Basis of Presentation This note describes the basis of financial statement preparation, revenue recognition policies, accounts receivable, contract liabilities, and significant accounting estimates like depreciation and income taxes - Revenue for hydraulic fracturing and wireline services is recognized over time using a progress output, unit-of-work performed method based on actual stages completed2630 - Revenue for acidizing and cementing services is recognized at a point-in-time upon completion of the contracted service2729 | Accounts Receivable Component | March 31, 2025 (in millions) | December 31, 2024 (in millions) | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :---------------------------- | :--------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Billed to customers (net) | $193.4 | $181.6 | $210.8 | $164.0 | | Accrued revenue (unbilled) | $47.3 | $47.2 | $63.1 | $55.4 | - The company had no allowance for credit losses as of March 31, 2025, and evaluates credit losses based on historical experience and the oil and gas industry outlook35 - Contract liabilities from customer cash advances for FORCE electric-powered hydraulic fracturing equipment and services were $9.3 million as of March 31, 2025, down from $11.8 million at December 31, 202438 - A change in accounting estimate effective October 1, 2024, shortened the useful lives of Tier II diesel-only hydraulic fracturing pumping units to no longer than the end of 2027, resulting in a $1.8 million decrease in net income for Q1 202539 | Depreciation and Amortization | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Related to cost of services | $46,304 | $57,228 | | Related to general and administrative expenses | $2,377 | $1,432 | | Total | $48,681 | $58,660 | - Total income tax expense for Q1 2025 was $1.1 million (10.4% effective tax rate), significantly lower than $9.8 million (32.9% effective tax rate) in Q1 2024, primarily due to differences in the impact of nondeductible expenses, state taxes, and valuation allowances on pre-tax loss42 Note 2 - Recently Issued Accounting Standards This note outlines the adoption and expected impact of new accounting standards updates on segment reporting, income tax disclosures, and expense disaggregation - ASU 2023-07 (Segment Reporting) was adopted for the fiscal year ended December 31, 2024, requiring enhanced disclosures on significant segment expenses and CODM's use of profit/loss measures45 - ASU 2023-09 (Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, and is not expected to have a material impact46 - ASU 2024-03 and ASU 2025-01 (Expense Disaggregation Disclosures) are effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027; the company is assessing their impact47 Note 3 - AquaProp Acquisition This note details the acquisition of AquaProp, LLC, including the consideration paid, recognized goodwill, and changes in the estimated fair value of contingent consideration - Acquisition of AquaProp, LLC completed on May 31, 2024, expanding operations into wet sand service business48 | Consideration Component | Amount (in thousands) | | :---------------------- | :-------------------- | | Cash | $21,216 | | Deferred cash | $3,664 | | Contingent consideration | $10,900 | | Total Consideration | $35,780 | - Goodwill of $920 thousand was recognized, attributable to the acquired workforce and significant synergies, and assigned to the hydraulic fracturing operating segment57 - The estimated fair value of contingent consideration payable decreased by $0.3 million from December 31, 2024, to $8.0 million at March 31, 2025, due to updated projections54 Note 4 - Fair Value Measurements This note explains the fair value hierarchy for financial instruments and assets, detailing measurements for short-term investments and contingent consideration, and reporting on impairment assessments - Fair value hierarchy categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than active market prices), and Level 3 (unobservable inputs)5960 | Asset/Liability | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Level | | :-------------------------------------- | :----------------------------- | :----------------------------- | :---- | | Short-term investment | $8,032 | $7,849 | 1 | | Business acquisition contingent consideration payable | $8,000 | $8,300 | 3 | - The estimated fair value of the contingent consideration payable decreased by $0.3 million from December 31, 2024, to $8.0 million at March 31, 2025, included in general and administrative expenses64 - No impairment of property and equipment was recorded during the three months ended March 31, 2025 and 202469 - Goodwill impairment of $23.6 million was recognized in the wireline operating segment as of December 31, 202470 Note 5 - Intangible Assets This note provides details on the company's intangible assets, including their categories, amortization periods, net carrying values, and associated amortization expense - Intangible assets include customer relationships (6-10 years amortization), trademark/trade names (10-15 years), favorable contracts (30 months-5 years), and internally developed software (29 months)72 | Intangible Asset Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------ | :----------------------------- | :----------------------------- | | Trademark/trade names | $12,100 | $12,100 | | Customer relationships | $65,100 | $65,100 | | Favorable contracts | $2,210 | $2,210 | | Internally developed software | $81 | $60 | | Total acquired | $79,491 | $79,470 | | Accumulated amortization | $(16,927) | $(14,565) | | Intangible assets — net | $62,564 | $64,905 | - Amortization expense for Q1 2025 was $2.4 million, compared to $1.4 million for Q1 202472 - The average amortization period for remaining intangible assets is approximately 7.0 years75 Note 6 - Long-Term Debt This note describes the company's long-term debt, specifically the ABL Credit Facility, its borrowing capacity, outstanding amounts, and weighted average interest rates - ABL Credit Facility has a total borrowing capacity of $225.0 million, extended to June 2, 202877 - Borrowing Base as of March 31, 2025, was approximately $187.5 million78 - Outstanding borrowings under the ABL Credit Facility were $45.0 million at March 31, 2025, with $134.0 million available for borrowing80 - Weighted average interest rate on outstanding borrowings under the ABL Credit Facility was 6.58% for the three months ended March 31, 202579 Note 7 - Reportable Segment Information This note presents financial data for the company's operating segments, including hydraulic fracturing, wireline, cementing, and power generation services, along with key performance metrics like Adjusted EBITDA - The company has four operating segments: hydraulic fracturing (including acidizing and wet sand solutions), wireline, cementing, and power generation services (PROPWR)81 - Cementing became a reportable segment in Q4 2024, previously included in "All Other." Power generation services are currently in "All Other" as they have not begun revenue-generating activities82 - Adjusted EBITDA is the primary metric used by management to evaluate segment performance and allocate resources83 | Segment (Q1 2025) | Service Revenue (in thousands) | Adjusted EBITDA (in thousands) | Capital Expenditures (in thousands) | Total Assets (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | :---------------------------------- | :-------------------------- | | Hydraulic Fracturing | $269,399 | $68,340 | $16,338 | $955,862 | | Wireline | $53,442 | $10,473 | $2,184 | $157,147 | | Cementing | $36,633 | $8,066 | $1,831 | $69,735 | | All Other | $0 | $(710) | $18,300 | $23,281 | | Total | $359,416 | $72,686 | $38,653 | $1,246,199 | | Segment (Q1 2024) | Service Revenue (in thousands) | Adjusted EBITDA (in thousands) | Capital Expenditures (in thousands) | Total Assets (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | :---------------------------------- | :-------------------------- | | Hydraulic Fracturing | $309,300 | $86,119 | $35,988 | $961,485 | | Wireline | $60,805 | $16,786 | $2,386 | $156,349 | | Cementing | $35,738 | $4,861 | $1,466 | $73,935 | | All Other | $0 | $0 | $0 | $0 | | Total | $405,843 | $93,395 | $39,840 | $1,223,645 | - Hydraulic Fracturing revenue decreased by 12.9% YoY, while Cementing revenue increased by 2.5% YoY86 Note 8 - Net Income Per Share This note details the calculation of basic and diluted net income per common share, including the impact of dilutive securities like performance share units and restricted stock units | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | | Net income relevant to common stockholders (in thousands) | $9,602 | $19,930 | | Basic income per common share | $0.09 | $0.18 | | Diluted income per common share | $0.09 | $0.18 | | Weighted average common shares outstanding (Basic, in thousands) | 103,319 | 108,540 | | Weighted average common shares outstanding (Diluted, in thousands) | 105,118 | 108,989 | - Dilutive effects of performance share units (564 thousand) and restricted stock units (1,235 thousand) were included in diluted EPS calculation for Q1 202593 - Stock options, RSUs, and PSUs totaling 338 thousand shares were anti-dilutive and excluded from diluted EPS calculation for Q1 202593 Note 9 - Share Repurchase Program This note provides information on the company's share repurchase program, including its authorized amount, extension, and the absence of repurchases during the current period - Share repurchase program increased by an additional $100 million to a total of $200 million and extended to May 31, 202594 - No share repurchases were made during the three months ended March 31, 202595 - As of March 31, 2025, $89.2 million remained authorized for future repurchases96 - The company expects to fund repurchases using cash on hand and expected free cash flow94 Note 10 - Stock-Based Compensation This note outlines the company's stock-based compensation plans, including grants of restricted stock units and performance share units, and the associated compensation expense and unrecognized amounts - No new stock option grants or exercises occurred in Q1 2025; 12 thousand options expired9798 - 1,314,846 RSUs were granted in Q1 2025, generally vesting ratably over three years for employees/officers and one year for directors100 - 536,774 PSUs were granted in Q1 2025, with vesting based on total shareholder return relative to a peer group over a three-year period103 | Stock Award Type | Total Stock-Based Compensation Expense (Q1 2025, in thousands) | Total Stock-Based Compensation Expense (Q1 2024, in thousands) | Unrecognized Stock-Based Compensation Expense (March 31, 2025, in thousands) | Weighted Average Recognition Period (March 31, 2025) | | :--------------- | :------------------------------------------------------------- | :------------------------------------------------------------- | :----------------------------------------------------------------------------- | :----------------------------------- | | All Stock Awards | $3,300 | $3,700 | $30,900 | 1.9 years | Note 11 - Related-Party Transactions This note discloses transactions with related parties, including lease agreements, services provided to major customers like ExxonMobil, and the sale of a business to an entity owned by a former employee - The company rents three yards from an entity in which a director has an equity interest105 - ProPetro provides hydraulic fracturing, wireline, and pumpdown services to ExxonMobil (including XTO Energy Inc.), with revenue of $73.0 million from ExxonMobil in Q1 2025108 - Accounts receivable from ExxonMobil (including Pioneer and XTO) totaled $49.4 million as of March 31, 2025109 - On November 1, 2024, the company sold its Vernal, Utah cementing business to Big 4 Services LLC, owned by a former employee, receiving a $13.0 million promissory note110 Note 12 - Leases This note details the company's operating and finance leases, including right-of-use assets, lease costs, weighted average lease terms, and future undiscounted lease payments - Operating leases include five FORCE electric-powered hydraulic fracturing equipment fleets, facilities, and office space, with remaining terms of 0.5 to 3.7 years111 - A three-year finance lease exists for certain power generation equipment114 | Lease Type | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Operating lease right-of-use assets - net | $129,587 | $132,294 | | Finance lease right-of-use assets - net | $25,863 | $30,713 | | Lease Cost Component | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating lease cost | $15,731 | $9,036 | | Finance lease cost | $5,373 | $5,340 | | Variable lease cost | $904 | $627 | | Short-term lease cost | $237 | $199 | - Weighted average remaining lease term for operating leases is 2.3 years (2.4 years at Dec 31, 2024) and for finance leases is 1.4 years (1.6 years at Dec 31, 2024)121 | Year | Operating Leases (Undiscounted, in thousands) | Finance Leases (Undiscounted, in thousands) | | :--- | :-------------------------------------------- | :------------------------------------------ | | 2025 | $36,028 | $15,687 | | 2026 | $47,309 | $13,462 | | 2027 | $21,431 | $0 | | 2028 | $2,936 | $0 | | 2029 | $0 | $0 | | Total Undiscounted | $107,704 | $29,149 | Note 13 - Commitments and Contingencies This note outlines the company's significant contractual commitments for equipment purchases and leases, as well as contingencies related to tax audits and self-insurance liabilities - Commitments for mobile natural gas-fueled power generation equipment for PROPWR business line total $205.7 million, expected for delivery from Q2 2025 through Q2 2026125 - Total estimated contractual commitment for Electric Fleet Leases is approximately $112.8 million, and for the Power Equipment Lease is approximately $29.1 million126 - The company has a remaining take-or-pay commitment of $0.4 million under a sand purchase agreement expiring December 31, 2025126 - Accrued $6.0 million for an estimated settlement expense related to a Texas Comptroller audit of motor vehicle and fuel taxes (July 2015-December 2020)132 - Accrued $0.8 million for an estimated settlement expense related to a Texas Comptroller audit of gross receipt taxes (up to four-year period)133 - The company is self-insured up to $10 million per occurrence for certain fire and/or explosion losses at wellsites without qualified fire suppression measures131 Note 14 - Variable Interest Entity This note discusses the company's involvement with Big 4 Services LLC, identified as a Variable Interest Entity, and clarifies that ProPetro is not its primary beneficiary - The company sold its Vernal, Utah cementing business to Big 4 Services LLC, receiving a $13.0 million promissory note135 - Big 4 is identified as a Variable Interest Entity (VIE) due to insufficient equity, and the promissory note represents subordinated financial support135 - ProPetro is not the primary beneficiary of Big 4, as it does not have the power to direct activities that most significantly impact Big 4's economic performance135 - The carrying value of the note receivable (including interest) was $12.7 million at March 31, 2025, with a maximum exposure to loss limited to this amount135 Note 15 - Subsequent Events This note discloses significant events occurring after the balance sheet date, specifically the PROPWR Loan Agreement for financing power generation equipment purchases - On April 2, 2025, the company entered into the PROPWR Loan Agreement to finance the purchase of mobile natural gas-fueled power generation equipment for up to $103.7 million136 - Interim loans under the PROPWR Loan Agreement accrue interest at SOFR + 3.85% margin and will convert to term loans with a fixed rate based on the three-year U.S. Treasury rate + 3.70% margin, payable over five years136 - The company incurred $8.5 million in interim loans in April 2025 and expects to incur additional loans through early 2026136 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, operational highlights, market conditions, and future outlook. It details revenue and cost trends by segment, liquidity, capital expenditure plans, and the impact of strategic initiatives like the AquaProp acquisition and the PROPWR business line Overview This section provides a high-level summary of ProPetro's business, its service offerings, operational capacity, recent strategic transactions, and new business initiatives - ProPetro is a leading integrated energy service company providing hydraulic fracturing, wireline, cementing, and power generation services, primarily in the Permian Basin139 - Hydraulic fracturing operations accounted for approximately 74.9% of total revenues as of March 31, 2025140 - Total available hydraulic horsepower (HHP) as of March 31, 2025, was 1,312,000 HHP, comprising 445,000 HHP Tier IV DGB dual-fuel, 312,000 HHP FORCE electric-powered, and 555,000 HHP conventional Tier II equipment140 - A new subsidiary, PROPWR, was formed in Q4 2024 to provide power generation services, with equipment ordered but no revenue-generating activities yet140 - On November 1, 2024, the Vernal, Utah cementing business was sold, resulting in an $8.2 million gain on disposal141 - On May 31, 2024, the company acquired AquaProp, LLC, expanding into wet sand solutions142 Pioneer Pressure Pumping Acquisition This section details the historical acquisition of pressure pumping assets from Pioneer and the subsequent sub-agreement with ExxonMobil for hydraulic fracturing services - In 2018, ProPetro acquired pressure pumping assets from Pioneer, which later merged with ExxonMobil in May 2024148 - A sub-agreement was entered into with XTO Energy Inc. (ExxonMobil subsidiary) on April 22, 2024, to provide hydraulic fracturing, wireline, and pumpdown services with two committed FORCE electric-powered fleets, with an option for a third149 Commodity Price and Other Economic Conditions This section discusses the impact of geopolitical events, crude oil price volatility, rig count trends, and seasonal factors on the company's operations and financial performance - Geopolitical events (Middle East, Russian-Ukraine war) and OPEC+ actions contribute to crude oil price volatility151 - WTI crude oil price declined to approximately $68 per barrel in March 2025, further declining in April 2025, due to tariff policies, anticipated global supply increase, and recession concerns152 - Rig count decreased to 297 at the end of March 2025, reducing demand for completion services and pressuring pricing152 - The company is transitioning its equipment to a lower emissions profile, expecting to increase lower emissions equipment from 70% in 2024 to approximately 75% by the end of 2025154 - Seasonal tendencies typically lead to declines in operating and financial results in November and December due to holidays, winter weather, and budget exhaustion155 How We Evaluate Our Operations This section explains the key financial and operational metrics used by management to assess the company's performance, particularly Adjusted EBITDA and Adjusted EBITDA margin - Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization, plus loss/(gain) on disposal of assets, stock-based compensation, other expense/(income), other unusual or nonrecurring items, and retention bonuses/severance157 - Adjusted EBITDA margin is Adjusted EBITDA as a percentage of revenues157 | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Net Income | $9,602 | $19,930 | | Adjusted EBITDA | $72,686 | $93,395 | | Segment (Q1 2025) | Service Revenue (in thousands) | Adjusted EBITDA (in thousands) | Adjusted EBITDA Margin | | :---------------- | :----------------------------- | :----------------------------- | :--------------------- | | Hydraulic Fracturing | $269,399 | $68,340 | 25.4% | | Wireline | $53,442 | $10,473 | 19.6% | | Cementing | $36,633 | $8,066 | 22.0% | | All Other | $0 | $(710) | N/A | | Total | $359,416 | $72,686 | 20.2% | | Segment (Q1 2024) | Service Revenue (in thousands) | Adjusted EBITDA (in thousands) | Adjusted EBITDA Margin | | :---------------- | :----------------------------- | :----------------------------- | :--------------------- | | Hydraulic Fracturing | $309,300 | $86,119 | 27.8% | | Wireline | $60,805 | $16,786 | 27.6% | | Cementing | $35,738 | $4,861 | 13.6% | | All Other | $0 | $0 | N/A | | Total | $405,843 | $93,395 | 23.0% | Results of Operations This section analyzes the company's financial performance for the period, detailing changes in total revenue, net income, and segment-specific revenue and expense trends - Total revenue decreased by $46.4 million (11.4%) to $359.4 million in Q1 2025 compared to Q1 2024167 - Net income decreased by $10.3 million (51.8%) to $9.6 million in Q1 2025 compared to Q1 2024167 - Hydraulic Fracturing revenue decreased by $39.9 million (12.9%) to $269.4 million, primarily due to decreased customer pricing, partially offset by $21.4 million from AquaProp operations169 - Wireline revenue decreased by $7.4 million (12.1%) to $53.4 million, primarily due to decreased customer activity and pricing170 - Cementing revenue increased by $0.9 million (2.5%) to $36.6 million, driven by synergies from the Par Five Energy Services LLC acquisition, partially offset by the sale of the Vernal, Utah business171 - Loss on Disposal of Assets increased significantly by $9.7 million to $9.7 million, primarily from the sale of certain Tier II hydraulic fracturing equipment178 - Income Taxes decreased by $8.6 million (88.6%) to $1.1 million, with the effective tax rate falling from 32.9% to 10.4%181 Liquidity and Capital Resources This section discusses the company's sources of liquidity, including cash balances, operating cash flows, and credit facilities, along with its share repurchase program and dependence on market conditions - Liquidity sources include existing cash balances, operating cash flows, and borrowings under the ABL Credit Facility183 - Total liquidity as of March 31, 2025, was approximately $197.4 million, comprising $63.4 million in cash and cash equivalents and $134.0 million available under the ABL Credit Facility184 - $89.2 million remained authorized for future share repurchases under the program as of March 31, 2025, with no repurchases made in Q1 2025185 - Future cash flows are highly dependent on customer drilling, completion, and production activity, which in turn depends on oil and natural gas prices186 Capital Requirements, Future Sources and Use of Cash and Contractual Obligations This section outlines the company's capital expenditure plans, funding strategies, and significant contractual commitments for equipment purchases and leases - Capital expenditures incurred were $38.7 million in Q1 2025, primarily for maintenance and down payments on PROPWR mobile natural gas-fueled power generation equipment187 - Projected capital expenditures for 2025 are $295 million to $345 million, including $125 million to $175 million for completion services and $170 million for PROPWR188 - The company plans to purchase $224.0 million in natural gas-fueled power generation equipment for PROPWR, with $103.7 million to be financed188 - Capital expenditures will be funded by existing cash, cash flows from operations, and borrowings under the ABL Credit Facility, with PROPWR equipment financed via the PROPWR Loan Agreement189 - Contractual commitments include $0.4 million for a sand purchase agreement, $112.8 million for Electric Fleet Leases, and $29.1 million for the Power Equipment Lease190 Cash and Cash Flows This section provides a detailed analysis of cash flows from operating, investing, and financing activities, explaining the drivers behind changes in cash balances | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash provided by operating activities | $54,689 | $74,822 | | Net cash used in investing activities | $(32,836) | $(33,847) | | Net cash used in financing activities | $(8,904) | $(27,871) | - The decrease in operating cash flow was primarily due to lower net income adjusted for noncash expenses and timing of receivable collections and vendor payments193 - Capital expenditures increased by $6.3 million in Q1 2025, including $18.3 million for PROPWR equipment, partially offset by a $7.0 million increase in proceeds from asset sales194 | Capital Expenditures by Segment | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Hydraulic Fracturing | $16,338 | $35,988 | | Wireline | $2,184 | $2,386 | | Cementing | $1,831 | $1,466 | | All Other (Power Generation) | $18,300 | $0 | | Total | $38,653 | $39,840 | - The significant decrease in net cash used in financing activities was primarily due to a $22.5 million decrease in share repurchases196 Credit Facility and Other Financing Arrangements This section describes the company's ABL Credit Facility and the new PROPWR Loan Agreement, outlining borrowing capacities and financing terms - The ABL Credit Facility has a borrowing capacity of $225.0 million, maturing June 2, 2028199 - The Borrowing Base was approximately $187.5 million as of March 31, 2025200 - A new PROPWR Loan Agreement was entered into on April 2, 2025, to finance $103.7 million for mobile natural gas-fueled power generation equipment202 Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - No off-balance sheet arrangements existed as of March 31, 2025203 Critical Accounting Policies and Estimates This section states that there were no material changes to the company's critical accounting policies and estimates during the reporting period - No material changes to critical accounting policies and estimates occurred during the three months ended March 31, 2025204 Recently Issued Accounting Standards This section refers to Note 2 for information regarding recently issued accounting standards - Information on recently issued accounting standards is incorporated by reference to Note 2205 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in market risk from the information provided in the company's Form 10-K as of March 31, 2025 - No material changes in market risk were reported as of March 31, 2025, compared to the Form 10-K206 Item 4. Controls and Procedures The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025208 - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025209 PART II – OTHER INFORMATION This part covers legal proceedings, risk factors, equity security sales, defaults, mine safety disclosures, other information, and a list of exhibits Item 1. Legal Proceedings Information on legal proceedings is incorporated by reference to Note 13 – Commitments and Contingencies in the Notes to Condensed Consolidated Financial Statements - Legal proceedings information is referenced to Note 13 – Commitments and Contingencies212 Item 1A. Risk Factors No material changes to risk factors were reported, except for new disclosures regarding the potential adverse effects of changes in U.S. trade policy and tariffs on business and results of operations - No material changes to risk factors were reported, except for new disclosures on the adverse effects of changes in U.S. trade policy and tariffs213214 - Imposition or increase in tariffs on steel or other materials could raise input costs and maintenance costs, potentially affecting returns if not passed to customers215 - Further tariffs or retaliatory trade measures could increase supply chain costs or reduce customer demand, with uncertain ultimate impact216 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the company's $200 million share repurchase program during Q1 2025, leaving $89.2 million authorized for future repurchases - No shares were repurchased during the three months ended March 31, 2025217 - $89.2 million remained authorized for future repurchases under the program as of March 31, 2025217 - The share repurchase program was increased by $100 million to a total of $200 million and extended to May 31, 2025217 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported220 Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable221 Item 5. Other Information A director adopted a Rule 10b5-1 trading arrangement on March 12, 2025, for the potential sale of up to 21,116 common shares between June 11, 2025, and September 12, 2025 - G. Larry Lawrence, a Board member, adopted a Rule 10b5-1 trading arrangement on March 12, 2025222 - The plan allows for the sale of a maximum of 21,116 common shares between June 11, 2025, and September 12, 2025222 Item 6. Exhibits This section lists all exhibits filed or furnished with the Form 10-Q, including corporate documents, agreements, certifications, and XBRL interactive data files - The section lists various exhibits, including corporate governance documents (Certificate of Incorporation, Bylaws), agreements (Retention Bonus Agreement, Separation and Release Agreement, Master Loan and Security Agreement), certifications (CEO/CFO certifications), and XBRL interactive data files224
ProPetro (PUMP) - 2025 Q1 - Quarterly Report