Disclosures & Non-GAAP Measures This section provides essential disclaimers regarding forward-looking statements and defines non-GAAP financial measures used in the report Forward-Looking Statements ProPetro's forward-looking statements are subject to risks and uncertainties, including macroeconomic and geopolitical factors, potentially causing material differences in actual results - Forward-looking statements are subject to risks and uncertainties, including macroeconomic uncertainty, geopolitical conflicts (Israel-Gaza, Ukraine war), inflation, central bank policies, and bank failures, which may cause actual results to differ materially4 - The company's forward-looking statements cover hydrocarbon production, business strategy, financial results, fleet utilization, technology performance, capital expenditures, and share repurchase programs3 Non-GAAP Reconciliations ProPetro defines Adjusted EBITDA and Free Cash Flow as non-GAAP measures, with a reconciliation table provided, adjusting net income for specific items and calculating cash flow from operations less investing activities - Adjusted EBITDA is defined as net income (loss) adjusted for interest, taxes, depreciation, amortization, loss/gain on disposal of assets, stock-based compensation, other (income) expense, other general and administrative expenses, and retention bonus and severance expense6 - Free Cash Flow is defined as net cash provided by operating activities less net cash used in investing activities6 Non-GAAP Reconciliations (Three Months Ended) | (in thousands) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Net income (loss) | $19,930 | ($17,109) | | Depreciation and amortization | 52,206 | 56,137 | | Interest expense | 2,029 | 2,292 | | Income tax expense (benefit) | 9,758 | (1,250) | | Loss on disposal of assets | 6,458 | 10,898 | | Stock-based compensation | 3,742 | 3,846 | | Other (income) expense, net | (1,405) | 7,784 | | Other general and administrative expenses, net | 59 | 1,310 | | Retention bonus and severance expense | 618 | 360 | | Adjusted EBITDA | $93,395 | $64,268 | Company Overview & Investment Thesis This section presents ProPetro's core investment rationale, company snapshot, and premium completions services, highlighting its market position and financial performance Investment Thesis ProPetro's investment thesis centers on increasing free cash flows via reduced capital expenditures and M&A, utilizing its refreshed assets, new technology, and superior field performance for top customers - The investment thesis focuses on increasing free cash flows from reduced capital expenditures and targeted M&A9 - ProPetro boasts a refreshed asset base, new technology, diversified service offerings, and superior field performance for leading customers in top hydrocarbon basins9 Company Snapshot ProPetro, a premium Permian Basin oilfield services leader, specializes in hydraulic fracturing, cementing, and wireline, reporting $406 million revenue, $20 million net income, and $93 million Adjusted EBITDA in 1Q24 - ProPetro is a premium oilfield services leader in the Permian Basin, providing Hydraulic Fracturing, Cementing, and Wireline services11 1Q24 Key Financials | Metric | Amount | | :--- | :--- | | 1Q24 Revenue | $406 million | | 1Q24 Net Income | $20 million | | 1Q24 Adjusted EBITDA | $93 million | Premium Completions Services ProPetro's premium completions services primarily consist of Hydraulic Fracturing, which is estimated to be the largest revenue contributor in 2024, complemented by Cementing and Wireline services - ProPetro's 2024 estimated revenue mix is dominated by Hydraulic Fracturing, supported by Cementing and Wireline services13 First Quarter 2024 Performance & Strategic Initiatives This section details ProPetro's strong 1Q24 financial performance, strategic highlights including new contracts and share repurchases, and its capital allocation strategy focused on fleet transformation and acquisitions Recent Highlights & Strategic Pillars ProPetro saw strong 1Q24 improvements, securing ExxonMobil contracts, expanding share repurchases, and focusing on fleet transition, M&A, and optimization for durable earnings and free cash flow - 1Q24 saw sequential improvements: Revenues +17%, Adjusted EBITDA +45%, with increasing free cash flows14 - Secured three-year contracts with ExxonMobil for two FORCE™ electric hydraulic fracturing fleets and Silvertip wireline services14 - Repurchased and retired 8.8 million shares since May 2023, representing ~90% of shares issued for the Silvertip acquisition, and increased the share repurchase program to $200 million, extending it to May 202514 - Strategic pillars include fleet transition, opportunistic strategic transactions, optimization, strong financial foundation, and innovative technologies to generate durable earnings and free cash flow14 Financial Highlights ProPetro's 1Q24 showed strong sequential financial improvement, with revenue up 17% to $406 million, net income at $20 million, and Adjusted EBITDA up 45% to $93 million, driven by fleet reinitiations and strategy Financial Highlights: 1Q24 vs 4Q23 | (in millions except %'s and per share data) | 1Q24 | 4Q23 | Change | | :--- | :--- | :--- | :--- | | TOTAL REVENUE | $406 | $348 | +17% | | NET INCOME | $20 | ($17) | +$37 | | EARNINGS PER SHARE | $0.18 | ($0.16) | +$0.34 | | ADJUSTED EBITDA | $93 | $64 | +45% | - 1Q24 results benefited from customers reinitiating dedicated fleets and the realization of ProPetro's strategy, driving lower capital expenditures, growing free cash flow, and strong liquidity16 Capital Allocation Strategy ProPetro's capital allocation strategy focuses on high-grading investments, with over $1 billion invested in 2022-2023 for fleet transformation and acquisitions, alongside significant shareholder returns through an expanded share repurchase program - The capital allocation strategy aims to high-grade investments, with over $1 billion invested in 2022 and 2023 for fleet transformation and strategic acquisitions102021 - The strategy includes significant capital returns to shareholders through an expanded share repurchase program, reflecting conviction in the company's strategy163940 Investing in Our Future ProPetro invested over $1 billion in 2022-2023 via Capex and acquisitions, transforming its frac fleet to Next-Gen Tier IV DGB dual-fuel and FORCE™ electric technologies, and acquiring high EBITDA to free cash flow conversion businesses - Over $1 billion was invested in 2022 and 2023, including $365 million in 2022 Capex, $310 million in 2023 Capex, $180 million for 2023 Leased Electric Fleets, and $173 million for 2022 & 2023 Acquisitions21 - Investments focused on transforming the frac fleet to Next-Generation Tier IV DGB dual-fuel and FORCE™ electric, and acquiring businesses with high EBITDA to free cash flow conversion23 Fleet Transformation ProPetro is transforming its fleet to next-gen Tier IV DGB dual-fuel and FORCE™ electric technologies, aiming for a younger, more desirable fleet that leverages natural gas for cost savings and lower emissions, attracting premium customer payments - ProPetro is transforming its fleet to Next-Generation Tier IV DGB dual-fuel and FORCE™ electric, creating one of the youngest and most desirable fleets in the industry2423 - The fleet transformation aims for lower capital intensity, higher operating efficiency, and significant annual savings ($10 million to $20+ million) by utilizing natural gas3031 Next-Generation Dual-Fuel and Electric Fleets ProPetro's fleet transformation focuses on Tier IV DGB dual-fuel and electric technology, creating a younger, more desirable fleet that offers significant annual natural gas savings, lower capital intensity, and higher operating efficiency, attracting premium customers - The fleet transformation to Tier IV DGB dual-fuel and electric technology aims for one of the youngest and most desirable fleets in the industry24 - Using natural gas can result in annualized savings of $10 million to $20+ million due to diesel/natural gas cost differences30 - Customers are willing to pay a premium for fuel savings and lower emissions provided by these advanced fleets31 Tier IV DGB Dual-Fuel Fleet Performance ProPetro's seven Tier IV DGB dual-fuel fleets demonstrate strong performance, achieving 60-70% natural gas substitution rates for diesel, significantly reducing costs and emissions for customers - Seven Tier IV DGB fleets are delivering 60-70% natural gas substitution rates, reducing costs and emissions for customers32 FORCE™ Electric-powered Hydraulic Fracturing Fleet Update ProPetro operates three FORCE™ electric fleets, with a fourth deploying by June 2024, characterized by high reliability, proven performance, lower capital intensity, and significant fuel savings with nearly 100% diesel displacement, all supported by contracts - Three FORCE™ fleets are operating, with a fourth to be deployed by June 202434 - FORCE™ fleets offer high equipment reliability, proven performance, lower capital intensity, and significant fuel savings with ~100% diesel displacement34 - All deployments of FORCE™ fleets are supported by contracts34 Strategic Acquisitions ProPetro strategically acquired Silvertip Completion Services (2022) and Par Five Energy Services (2023), expanding complementary completions offerings, enhancing free cash flow, and reducing future capital spending - Acquired Silvertip Completion Services in November 2022 and Par Five Energy Services in December 20233537 - Acquisitions expanded complementary completions service offerings, enhanced free cash flow generation, and are expected to reduce future capital spending3638 Silvertip Completion Services Acquisition The $148 million acquisition of Silvertip Completion Services in November 2022 expanded ProPetro's Permian Basin wireline perforating and pumpdown services, adding 24 wireline units and 16 pumpdown spreads, enhancing free cash flow and reducing future capital spending - Acquired Silvertip Completion Services in November 2022 for $148 million, expanding wireline perforating and pumpdown services in the Permian Basin3536 - Silvertip added 24 wireline units and 16 pumpdown spreads, contributing to substantial free cash flow generation and reducing future capital spending36 Par Five Energy Services Acquisition ProPetro acquired Par Five Energy Services in December 2023, adding premier cementing services in the Delaware Basin, diversifying completions offerings, enhancing free cash flow, and including best-in-class cement lab and bulk plant facilities - Acquired Par Five Energy Services in December 2023, adding premier cementing services in the Delaware Basin3738 - Par Five operates 14 cementing spreads and includes best-in-class cement lab and bulk plant facilities, contributing to substantial free cash flow generation38 Capital Returns ProPetro increased its share repurchase program by $100 million to $200 million, extended to May 2025, having repurchased and retired 8.8 million shares at an average cost of $8.47 per share since inception, reflecting confidence in its strategy - Share repurchase program increased by $100 million to $200 million and extended to May 202540 - Repurchased and retired 8.8 million shares since inception through March 31, 2024, at an average cost per share of $8.4740 Industry Outlook & Market Positioning This section analyzes the oilfield services valuation, industry transformation towards an industrialized model, sustainable future outlook, global hydrocarbon macro environment, and ProPetro's strategic focus on the Permian Basin Oilfield Services Valuation ProPetro and its direct peers in the pressure pumping sector continue to be valued at a discount compared to other oilfield service companies, as evidenced by the Enterprise Value to 2024E EBITDA metric - ProPetro and its direct peers in the pressure pumping space are valued at a discount relative to other oilfield service companies, based on Enterprise Value to 2024E EBITDA43 Industry Transformation The oil services industry is transforming to an industrialized model, driven by improved capital discipline, increased industrial technology deployment, and a focus on cash flow generation, addressing historical overbuild and capital destruction for a sustainable operating model - The oil services industry is transforming to an industrialized model, characterized by improved capital discipline and increasing deployment of industrial technologies47 - This transformation addresses historical capital destruction and overbuild, leading to a greater focus on cash flow generation and a sustainable, capacity-constrained operating model4749 Sustainable Industry Future The industry shifted from pre-COVID booming global economy to current suppressed oil supply, rebounded demand, and strong balance sheets with capital discipline; hydrocarbons remain crucial for global prosperity and energy security, positioning ProPetro to capitalize on long-term trends - Current industry dynamics include suppressed oil supply, largely rebounded energy demand, strong balance sheets, and capital discipline, contrasting with pre-COVID booming global economy and robust capital markets50 - Hydrocarbons are expected to remain vital for global prosperity and energy security, despite increasing alternative energy, positioning ProPetro to leverage long-term industry fundamentals and its Permian Basin presence51 Global Hydrocarbon Macro Environment A bullish long-term hydrocarbon demand outlook and constrained supply from global underinvestment indicate a sustainable upcycle for durable earnings and consistent free cash flow, with petroleum and natural gas projected as most-used fuels in the U.S. through 2050, despite lagging global upstream capital expenditure - A bullish long-term demand outlook and constrained supply due to global underinvestment support a sustainable upcycle for durable earnings and consistent free cash flow52 - Petroleum and natural gas are projected to be the most-used fuels in the United States through 205053 - Global upstream E&P spending continues to lag demand, remaining below the 2010-2014 average55 Permian Basin Focus The Permian Basin, a global leader in oil and natural gas production with vast resources and high efficiency, is ProPetro's strategic focus, generating approximately 98% of its revenue and ensuring sustainable demand for its services - The Permian Basin leads the world in oil and natural gas production, renowned for its vast resources and high activity/production efficiency5761 - Approximately 98% of ProPetro's revenue comes from the Permian Basin, ensuring sustainable and resilient demand for its services61 Corporate Vision, Values & Governance This section outlines ProPetro's vision, premium service offerings, commitment to ESG, capital allocation framework, leadership team, and investor contacts Who We Are and Where We Are Going ProPetro is a customer-focused, team-driven company harnessing the Permian Basin's potential, transitioning to a young, efficient, capital-light fleet powered by natural gas and electricity to reduce emissions and invest in longer-life assets with disciplined capital allocation - ProPetro is customer-focused and team-driven, leveraging the Permian Basin's potential63 - The company is transitioning to a young, efficient, more capital-light fleet powered by natural gas and electricity, aiming to reduce emissions and invest in longer-life assets63 Unrivaled Premium Completions Services ProPetro offers unrivaled premium completions services, including Hydraulic Fracturing, Cementing, and Wireline, with Hydraulic Fracturing as the premier service line delivering industry-leading performance and customized treatments for complex jobs - ProPetro provides premium completions services, including Hydraulic Fracturing, Cementing, and Wireline64 - Hydraulic Fracturing is ProPetro's premier service line, delivering industry-leading performance, and the company offers customized treatments for complex jobs64 Commitment to ESG ProPetro demonstrates strong ESG commitment through optimized operations, fleet transition, and an accident-free workplace, including strategic investments in dual-fuel and electric fleets, minimizing idle time and spills, integrating cleaner-burning natural gas, and fostering a strong training and development culture - ProPetro is committed to ESG through optimized operations, fleet transition, and an accident-free workplace6569 - Key initiatives include strategic investments in dual-fuel and electric fleets, remote engineering, logistics, maintenance systems, minimizing idle time and spills, and integrating cleaner-burning natural gas to displace diesel66676872 - The company fosters a strong training and development culture and has a dedicated heavy haul driving team to reduce road hazards73 Capital Allocation Framework ProPetro's capital allocation framework aims to improve free cash flow and value distribution while maintaining a strong balance sheet, focusing on optimizing operations with relevant technologies, transitioning the fleet to natural gas and electric offerings, and pursuing disciplined growth through M&A - The capital allocation framework aims to improve free cash flow and value distribution while maintaining a strong balance sheet7475 - Key pillars include optimizing operations with relevant technologies, transitioning the fleet to natural gas and electric offerings, and disciplined growth through strategic M&A74 Our Leadership ProPetro's leadership team and Board of Directors are committed to shareholder value creation, comprising experienced professionals in key executive roles such as CEO Sam Sledge, President & COO Adam Muñoz, and CFO David Schorlemer, alongside independent directors - Company management includes Sam Sledge (CEO), Adam Muñoz (President & COO), David Schorlemer (CFO), Shelby Fietz (CCO), Celina Davila (CAO), and Jody Mitchell (General Counsel)77 - The Board of Directors includes Phillip A. Gobe (Chairman), Michele Vion (Independent Director, Compensation Committee Chair), Mary Ricciardello (Independent Director), and G. Larry Lawrence (Independent Director)77 Investor Contacts This section provides contact information for ProPetro's investor relations, including David Schorlemer (Chief Financial Officer) and Matt Augustine (Director, Corporate Development and Investor Relations), along with the corporate headquarters address and website - Investor relations contacts are David Schorlemer (CFO) and Matt Augustine (Director, Corporate Development and Investor Relations)79
ProPetro (PUMP) - 2024 Q1 - Quarterly Results