ProPetro (PUMP) - 2022 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This part presents the unaudited condensed consolidated financial information, management's discussion, market risk disclosures, and controls and procedures Item 1. Financial Statements (Unaudited) 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 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 | $826,302 | Condensed Consolidated Statements of Operations The condensed consolidated statements of operations detail financial performance, including revenue, costs, and net income (loss) for the three and nine months ended September 30, 2022 and 2021 Three Months Ended September 30 (in thousands, except per share data) | Metric | 2022 | 2021 | Change ($) | 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 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) | $(33,953) | N/A | Condensed Consolidated Statements of Cash Flows The condensed consolidated statements of cash flows present inflows and outflows from operating, investing, and financing activities for the nine months ended September 30, 2022 and 2021 Nine Months Ended September 30 (in thousands) | Metric | 2022 | 2021 | Change ($) | 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 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 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] - Acidizing and cementing services revenue is recognized at a point-in-time upon completion of the contracted service[27][28] - Coiled tubing operations were shut down effective September 1, 2022, and all coiled tubing assets were disposed of[30] 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 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] - The adoption of this guidance did not materially affect the Company's condensed consolidated financial statements[35] Note 3 - Fair Value Measurement 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][38][39] 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] Note 4 - Long-Term Debt 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] 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 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][50] - Coiled tubing assets were disposed of on September 1, 2022, resulting in a loss of approximately $13.8 million[48] 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] Note 6 - Net Income (Loss) Per Share 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 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][66] - 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] - 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] 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] Note 8 - Related-Party Transactions 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] - 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] 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] Note 9 - Leases 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][81] - 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][83] - 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] 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 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] - 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] - 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][98] - 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] Note 11 - Subsequent Event 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] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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] - 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] - A $57.5 million impairment expense was recorded in Q2 2022 for DuraStim® electric powered hydraulic fracturing equipment that did not meet specifications[111] - The coiled tubing operations were disposed of on September 1, 2022, resulting in a $13.8 million loss on sale[117] Commodity Price and Other Economic Conditions 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] - Global average crude oil prices exceeded $98 per barrel in 2022, the highest in ten years, driven by underinvestment and increased demand[121] - 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] - The industry is transitioning to lower emissions equipment, which is capital intensive and an increasingly important factor in service provider selection[122][123] - 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] How We Evaluate Our Operations 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] - 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] 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 | $97,807 | | Adjusted EBITDA Margin | 27.0% | 16.8% | 25.0% | 15.6% | Results of Operations This section provides a detailed comparative analysis of financial results for the three and nine months ended September 30, 2022, versus 2021, covering key income statement components Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021 For the three months ended September 30, 2022, revenues significantly increased due to higher demand and improved pricing, leading to substantial net income and Adjusted EBITDA growth Key Financial Changes (3 Months Ended Sep 30, in thousands, except percentages) | Metric | 2022 | 2021 | Change ($) | 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] - 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] - 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 ($1.1 million)[142] Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021 For the nine months ended September 30, 2022, the company saw substantial revenue growth and reduced net loss, despite a large impairment expense for DuraStim® assets and increased asset disposal losses Key Financial Changes (9 Months Ended Sep 30, in thousands, except percentages) | Metric | 2022 | 2021 | Change ($) | 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] - 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] - 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][161] Liquidity and Capital Resources 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] 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] - 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][167] Future Sources and Use of Cash and Contractual Obligations 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] - 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] - Capital expenditures are anticipated to be funded by existing cash, cash flows from operations, and borrowings under the ABL Credit Facility[176] - On November 1, 2022, the company acquired Silvertip Completion Services Operating, LLC for 10.1 million shares and $30.0 million cash[178] Cash and Cash Flows This section analyzes cash flow activities, showing increased operating cash but substantially higher investing cash use for lower emissions equipment, resulting in a net decrease in cash Cash Flows (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | Change ($) | 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] - 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] Off-Balance Sheet Arrangements 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] Critical Accounting Policies and Estimates 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] Recently Issued Accounting Standards 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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 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] Changes in Internal Control over Financial Reporting 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] PART II – OTHER INFORMATION This part provides other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] - 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[197] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[198] Item 5. Other Information The company reported no other information for the period - No other information was reported[199] Item 6. Exhibits 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]