ProPetro (PUMP) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q1 2023 show significant year-over-year growth in revenue and net income, with total assets increasing to $1.39 billion Condensed Consolidated Balance Sheets As of March 31, 2023, total assets grew to $1.39 billion, driven by increases in accounts receivable and property & equipment, while total liabilities also rose to $411.2 million | Balance Sheet Item | March 31, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | Total Current Assets | 368,693 | 328,785 | | Cash, cash equivalents and restricted cash | 44,793 | 88,862 | | Accounts receivable - net | 290,125 | 215,925 | | Property and Equipment - net | 941,200 | 922,735 | | Total Assets | 1,394,151 | 1,335,786 | | Total Current Liabilities | 304,479 | 284,180 | | Accounts payable | 246,141 | 234,299 | | Long-Term Debt | 30,000 | 30,000 | | Total Liabilities | 411,228 | 381,753 | | Total Shareholders' Equity | 982,923 | 954,033 | Condensed Consolidated Statements of Operations For Q1 2023, revenue grew by 49.8% to $423.6 million, operating income surged to $41.5 million, and net income more than doubled to $28.7 million | Income Statement Item | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | | :--- | :--- | :--- | | Service Revenue | 423,570 | 282,680 | | Cost of services | 280,486 | 197,271 | | General and administrative | 28,746 | 31,707 | | Operating Income | 41,460 | 5,731 | | Net Income | 28,733 | 11,817 | | Diluted EPS | $0.25 | $0.11 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $73.1 million in Q1 2023, while cash used in investing activities rose to $113.8 million, resulting in a net decrease in cash of $44.1 million | Cash Flow Item | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 73,060 | 25,170 | | Net cash used in investing activities | (113,750) | (64,048) | | Capital expenditures | (114,839) | (64,323) | | Net cash used in financing activities | (3,379) | (2,272) | | Net decrease in cash | (44,069) | (41,150) | | Cash, cash equivalents and restricted cash - End of period | 44,793 | 70,768 | Notes to Condensed Consolidated Financial Statements Key notes detail changes in accounting estimates, the impact of the Silvertip acquisition, the company's single reportable segment, related-party transactions, and significant future commitments - Effective January 1, 2023, a change in accounting estimates for hydraulic fracturing equipment useful lives decreased Q1 2023 net income by $3.6 million, or $0.03 per share[42] - The company acquired Silvertip Completion Services on November 1, 2022, for $148.1 million, adding a wireline operating segment and $23.6 million of goodwill[44][49] - The company has one reportable segment, 'Completion Services,' with hydraulic fracturing accounting for 79.0% of segment revenue in Q1 2023[68][69] - Revenue from services provided to Pioneer was approximately $54.3 million in Q1 2023, a significant decrease from $123.5 million in Q1 2022[92] - Future commitments include $41.9 million for Tier IV DGB equipment, a $24.4 million sand purchase commitment, $99.2 million for electric fleet leases, and $59.6 million for a power equipment lease[112][113] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 2023 performance to increased customer activity, improved pricing, and the Silvertip acquisition, with revenue up 49.8% and Adjusted EBITDA growing 79.1% Overview ProPetro is a leading integrated oilfield services company focused on hydraulic fracturing and other completion services in the Permian Basin, with recent strategic shifts to enhance its integrated offerings - The company's operations are primarily focused in the Permian Basin, providing hydraulic fracturing, wireline, and cementing services[128] - As of March 31, 2023, the company had 1,355,000 hydraulic horsepower (HHP), 23 wireline units, and 26 cement units[129] - The company acquired wireline provider Silvertip on November 1, 2022, and disposed of its coiled tubing assets on September 1, 2022, to focus on integrated completion services[134][135] Results of Operations Q1 2023 revenues increased by 49.8% to $423.6 million, driven by higher activity and pricing, leading to a 143.1% increase in net income and a 79.1% rise in Adjusted EBITDA | Metric | Q1 2023 ($ thousands) | Q1 2022 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | 423,570 | 282,680 | 49.8% | | Cost of services | 280,486 | 197,271 | 42.2% | | General and administrative | 28,746 | 31,707 | (9.3)% | | Net income | 28,733 | 11,817 | 143.1% | | Adjusted EBITDA | 119,165 | 66,533 | 79.1% | | Adjusted EBITDA Margin | 28.1% | 23.5% | 19.6% | - The increase in revenue was primarily due to higher customer activity, improved pricing, and the addition of wireline operations, which contributed $62.6 million[163] - The effectively utilized fleet count rose to approximately 15.5 active fleets in Q1 2023 from 13.7 in Q1 2022[163] - General and administrative expenses decreased primarily due to a $7.8 million decrease in stock-based compensation expense[166] Liquidity and Capital Resources As of March 31, 2023, the company had total liquidity of $149.2 million, with capital expenditures of $97.2 million in Q1 2023, primarily for maintenance and lower-emissions equipment conversions - Total liquidity was $149.2 million as of March 31, 2023, consisting of $44.8 million in cash and $104.4 million of availability under the ABL Credit Facility[175] - Capital expenditures were $97.2 million for Q1 2023, compared to $71.7 million for Q1 2022, primarily for maintenance and lower-emissions equipment conversions[179] - The company has future contractual commitments of approximately $41.9 million for Tier IV DGB equipment, $99.2 million for electric fleet leases, and $59.6 million for a power equipment lease[182] - The ABL Credit Facility has a borrowing capacity of $150.0 million, maturing in April 2027, with $30.0 million outstanding as of March 31, 2023[189][191] Quantitative and Qualitative Disclosures About Market Risk As of March 31, 2023, there have been no material changes in the company's market risk from the information previously provided in its Form 10-K - There have been no material changes in market risk from the information provided in the company's Form 10-K[195] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[198] - No changes occurred during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[199] PART II – OTHER INFORMATION Legal Proceedings The company refers to Note 12 for details on legal proceedings, including the preliminarily approved settlement of the 'Logan Lawsuit,' funded by insurers - The company agreed to a proposed settlement of the Logan Lawsuit, a shareholder class action, which has been preliminarily approved by the court and is funded by the company's insurers[117] Risk Factors The company notes no material changes to its risk factors from the Form 10-K, except for a new risk concerning adverse developments in the financial services industry - A new risk factor was added concerning adverse developments in the financial services industry, such as liquidity problems, defaults, or non-performance by financial institutions[204] - The company highlights the risk of maintaining cash balances at third-party financial institutions in excess of FDIC standard insurance limits and the lack of guarantee for access to uninsured funds in the event of bank closures[205] 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 - None[209] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906[215]