ProFrac (US:ACDC)2022-06-23 16:00IPO and Acquisitions - The company completed its IPO on May 12, 2022, raising net proceeds of $303.9 million from the sale of 16,000,000 shares at $18.00 per share, with an additional 2,228,153 shares sold through an over-allotment option[213]. - The acquisition of FTS International, Inc. was completed on March 4, 2022, for a total purchase price of $405.7 million, consisting of $332.8 million in cash and $72.9 million in equity interests[216]. - ProFrac II LLC agreed to acquire the SP Companies for $90 million in cash, with the closing expected to occur shortly after all conditions are met[216]. - The merger with U.S. Well Services, Inc. is anticipated to be completed in Q4 2022, with total stock consideration estimated at approximately $270 million based on the closing price of $21.49 per share[221]. Business Segments and Operations - The company operates three business segments: stimulation services, manufacturing, and proppant production, with installed capacity of 34 conventional fleets, 31 of which were active as of March 31, 2022[225]. - The company has invested in over 140 dual fuel kits for Tier IV engines to enhance its low carbon emission solutions[227]. - The company has experienced improved operational results due to increased fleet utilization and higher prices for products and services, despite facing supply chain disruptions and inflationary pressures[229]. - The company is upgrading five to ten engines per month from Tier II to Tier IV DGB to reduce carbon emissions and improve profitability[230]. - Approximately 84% of the manufacturing segment's revenue for Q1 2022 was intersegment revenue, indicating strong internal demand[233]. - The proppant production segment saw a significant increase in intersegment revenue from 29% in Q1 2021 to 69% in Q1 2022, reflecting enhanced operational integration[235]. Financial Performance - Total revenues increased by $195.4 million, or 130.6%, to $344.98 million for the three months ended March 31, 2022, compared to $149.59 million for the same period in 2021[252]. - Revenues from stimulation services rose by $192.5 million, or 134%, to $336.2 million, driven by increased customer activity and contributions from the FTSI acquisition[253]. - Adjusted EBITDA for the three months ended March 31, 2022, was $91.48 million, a significant increase from $17.69 million in the same period of 2021[252]. - Adjusted EBITDA for Stimulation services increased by $60.6 million to $73.6 million for Q1 2022, compared to $13.0 million in Q1 2021, driven by higher active fleets and increased pricing[268]. - Adjusted EBITDA for Manufacturing rose by $7.7 million to $10.0 million for Q1 2022, up from $2.3 million in Q1 2021, primarily due to increased product volume for oil field services customers[269]. - Adjusted EBITDA for Proppant production increased by $5.5 million to $7.9 million for Q1 2022, compared to $2.4 million in Q1 2021, attributed to higher proppant production and pricing in the Permian basin[270]. Costs and Expenses - Cost of revenues, exclusive of depreciation, increased by $114.29 million, or 96.6%, to $232.6 million, primarily due to higher activity levels and input cost inflation[258]. - Selling, general, and administrative expenses increased by $20.3 million, or 148%, to $34.1 million, largely due to higher personnel costs and expenses related to the FTSI acquisition[263]. - Interest expense rose by $3.2 million, or 53.3%, to $9.3 million, attributed to increased debt balances and higher average interest rates[264]. - The company recorded a loss on extinguishment of debt amounting to $8.3 million due to refinancing transactions during the quarter[265]. Market Conditions - The average oil price per barrel increased to $94.45, up from $57.79 in the previous year, reflecting market trends[252]. - The average natural gas price per thousand cubic feet rose to $4.84, compared to $3.70 in the same period last year[252]. Capital Expenditures and Debt - The company expects to incur approximately $2.5 million in non-recurring costs related to its transition to a publicly traded corporation[247]. - The 2022 capital expenditure budget is estimated to be between $240 million and $290 million, with $65 million to $70 million allocated for constructing three electric-powered fleets[280]. - As of March 31, 2022, the New ABL Credit Facility had $100.0 million in lender commitments, with $70.7 million borrowed and $20.1 million remaining availability[287]. - The New Term Loan Credit Facility has an aggregate principal amount of $450.0 million, with approximately $450.0 million outstanding as of March 31, 2022[295]. - The New Term Loan Credit Facility has an interest rate of 8.50% for SOFR Rate Loans and 7.50% for Base Rate Loans until October 1, 2022, with a three-tier pricing grid thereafter[296]. - The applicable margin for SOFR Rate Loans ranges from 6.50% to 8.00%, and for Base Rate Loans, it ranges from 5.50% to 7.00%, depending on the Total Net Leverage Ratio[297]. - The New Term Loan Credit Facility requires maintaining a Total Net Leverage Ratio of no more than 2.00:1.00 for the fiscal quarter ending June 30, 2022, and no more than 1.25 for each fiscal quarter ending March 31, 2023, and thereafter[304]. - The New Term Loan Credit Facility mandates a minimum liquidity of $30.0 million at all times[305]. - Capital expenditures for the three months ended March 31, 2022, were $41.5 million, up from $17.4 million in the same period in 2021, with expectations for further increases in 2022 and 2023[325]. - The New Term Loan Credit Facility is subject to quarterly amortization beginning June 2022, with excess cash flow payments reducing the required amortization[299]. - The New Term Loan Credit Facility includes a quarterly mandatory prepayment starting from the calendar quarter ending September 30, 2022, based on the Applicable ECF Percentage, which ranges from 50% to 25% of Excess Cash Flow[300]. - ProFrac II LLC entered into a $30.0 million loan agreement with First Financial Bank, with $26.4 million outstanding as of March 31, 2022[308]. - The Equify Bridge Note of $45.8 million was fully paid in June 2022 with net proceeds from the IPO[315]. - The New Term Loan Credit Facility is secured by a lien on substantially all assets of the guarantors, including equipment, real estate, and intellectual property[298]. Risk Management and Accounting - The company evaluates its critical accounting policies and estimates based on historical experience and current conditions, which may lead to actual results differing from estimates[327]. - The company assesses its ownership and interests in variable interest entities (VIE) to determine consolidation in financial statements[329]. - The company faces market risk primarily related to fluctuations in long-term debt fair value due to interest rate changes, with no engagement in speculative transactions[330]. - Material costs for the company include inventory for pressure pumping services and manufacturing, with volatility in prices due to supply and demand dynamics[331]. - A 1% increase in interest rates would result in an annual increase in interest expense of approximately $5.2 million based on outstanding debt as of March 31, 2022[332]. - The company manages credit risk through credit evaluations and maintaining an allowance for doubtful accounts related to trade account receivables[333].