ProPetro (PUMP) - 2021 Q4 - Annual Report

Part I Business ProPetro is a Permian Basin-focused oilfield services company specializing in hydraulic fracturing and complementary services Hydraulic Horsepower (HHP) Fleet Composition as of Dec 31, 2021 | Equipment Type | HHP | | :--- | :--- | | Tier IV Dynamic Gas Blending (DGB) | 90,000 | | Conventional Tier II | 1,225,000 | | DuraStim® Electric | 108,000 | | Total Available HHP | 1,423,000 | - The company's operations are geographically concentrated in the Permian Basin, which accounted for approximately 98.7% of revenues in 2021[93] Customer Concentration by Revenue | Customer Group | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Top 5 Customers | 85.7% | 86.5% | 77.1% | - In 2021, Pioneer Natural Resources USA Inc. and Endeavor Energy Resources accounted for 54.2% and 14.6% of total revenue, respectively[48] - As of December 31, 2021, the company employed approximately 1,500 people, with none of the employees being unionized[79] Risk Factors The company faces risks from industry cyclicality, customer concentration, competition, and regulatory changes - The business is highly dependent on the cyclical oil and natural gas industry, with demand for services tied to E&P capital expenditures in the Permian Basin[85][86] - A significant risk is the ongoing Logan Lawsuit, a class action complaint alleging violations of securities laws, for which the outcome cannot be predicted[115][116][120] - The company has a high customer concentration; for the year ended December 31, 2021, one customer, Pioneer, accounted for 54.2% of revenue[125] - The company's ability to use its net operating loss (NOL) carryforwards may be limited; as of December 31, 2021, the company had approximately $408.0 million of federal NOLs[159] - The transition to lower-emissions equipment is capital intensive and presents a risk, as failure to adopt new technologies could adversely impact service demand[95] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[173] Properties The company's corporate headquarters is in Midland, Texas, with other owned and leased properties in the Permian Basin - Corporate headquarters is located at 1706 S. Midkiff, Midland, Texas 79701[174] Legal Proceedings Information regarding legal proceedings is incorporated by reference to Note 15 of the Consolidated Financial Statements - Details on legal proceedings are provided in Note 15 of the financial statements, which discusses the Logan Lawsuit and other contingencies[175] Mine Safety Disclosures The company reports no mine and safety disclosures - None[176] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under "PUMP" and it does not currently pay dividends - The company's common stock trades on the New York Stock Exchange under the symbol "PUMP"[179] - As of December 31, 2021, there were 103,437,177 shares of common stock outstanding[180] - The company does not anticipate declaring or paying any cash dividends in the foreseeable future, intending to retain earnings to finance business growth[181] Management's Discussion and Analysis of Financial Condition and Results of Operations Revenue increased 10.8% in 2021, but Adjusted EBITDA declined due to inflationary pressures and supply chain issues Financial Highlights: 2021 vs. 2020 | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue | $874.5M | $789.2M | +10.8% | | Cost of Services | $662.3M | $584.3M | +13.3% | | Net Loss | ($54.2M) | ($107.0M) | +49.4% | | Adjusted EBITDA | $135.0M | $141.5M | -4.6% | | Adjusted EBITDA Margin | 15.4% | 17.9% | -2.5% | - The average effectively utilized fleet count increased by 20% from approximately 10 active fleets in 2020 to 12 in 2021[204][229] - Capital expenditures for 2022 are projected to be between $250.0 million and $300.0 million, primarily for maintenance and conversion to lower-emissions equipment[256] - As of December 31, 2021, total liquidity was $169.3 million, consisting of $111.9 million in cash and $57.4 million available under the ABL Credit Facility, with no outstanding debt[242] Cash Flow Summary (in millions) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash from operating activities | $154.7 | $139.1 | | Net cash used in investing activities | ($104.3) | ($94.2) | | Net cash used in financing activities | ($7.3) | ($125.2) | Quantitative and Qualitative Disclosures About Market Risk The company is exposed to commodity price, interest rate, and customer credit risks but does not currently use derivatives - The company is exposed to commodity price risk for materials and fuel, and has historically passed a significant portion of this risk to customers[280] - The company is subject to interest rate risk on its ABL Credit Facility; a hypothetical 1% increase in interest rates would have had no impact on interest expense in 2021[281] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, which received an unqualified opinion from the auditor - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements and internal controls as of December 31, 2021[284][295] - The auditor identified related-party transactions as a critical audit matter due to the judgment required to ensure proper identification and disclosure[289][290] Consolidated Balance Sheet Highlights (As of Dec 31, in thousands) | Account | 2021 | 2020 | | :--- | :--- | :--- | | Total Current Assets | $251,064 | $167,720 | | Property and Equipment, Net | $808,494 | $880,479 | | Total Assets | $1,061,236 | $1,050,739 | | Total Current Liabilities | $173,785 | $104,168 | | Total Liabilities | $234,934 | $179,963 | | Total Shareholders' Equity | $826,302 | $870,771 | Consolidated Statement of Operations Highlights (Year Ended Dec 31, in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Revenue | $874,514 | $789,232 | $2,052,314 | | Operating (Loss) Income | ($68,696) | ($131,243) | $221,360 | | Net (Loss) Income | ($54,185) | ($107,020) | $163,010 | | Diluted (Loss) Income Per Share | ($0.53) | ($1.06) | $1.57 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants - None[446] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[448] - Management concluded that internal control over financial reporting was effective as of December 31, 2021[451] Other Information The company reports no other information - None[454] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[455] Part III Directors, Executive Officers and Corporate Governance Required information is incorporated by reference from the 2022 Annual Meeting Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for its 2022 Annual Meeting of Stockholders[458] Executive Compensation Required information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for its 2022 Annual Meeting of Stockholders[460] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Required information on security ownership is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for its 2022 Annual Meeting of Stockholders[461] Certain Relationships and Related Party Transactions, and Director Independence Required information on related party transactions is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for its 2022 Annual Meeting of Stockholders[462] Principal Accounting Fees and Services Required information on accounting fees is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for its 2022 Annual Meeting of Stockholders[463] Part IV Exhibits and Financial Statement Schedules This section lists the financial statements and exhibits filed with the report, with no financial statement schedules included - The financial statements from Item 8 are filed as part of this report[464] - No financial statement schedules were filed[465] Form 10-K Summary The company reports no Form 10-K summary - None[473]