ProPetro (US:PUMP)2023-05-04 05:57Financial Data and Key Metrics Changes - In Q1 2023, the company generated $424 million in revenue, a 21% increase from $349 million in Q4 2022, driven by increased utilization and improved net pricing across service lines [13][15] - Net income reached $29 million or $0.25 per diluted share, the highest in over three years, compared to $13 million or $0.12 per diluted share in the prior quarter [15] - Adjusted EBITDA was $119 million, representing over 28% of revenue, with margins expanding by approximately 400 basis points sequentially [15][36] Business Line Data and Key Metrics Changes - Effective frac fleet utilization was 15.5 fleets in Q1 2023, at the top end of prior guidance, with expectations for steady utilization through Q2 2023 [7][37] - Cost of services, excluding depreciation and amortization, increased to $280 million from $243 million in Q4 2022, driven by higher activity levels and the full quarter effect of Silvertip [38] Market Data and Key Metrics Changes - The company noted ongoing equipment attrition and supply chain constraints, which contribute to a strong market that values next-generation service offerings [5] - The company is focused on the Permian Basin, where over 99% of its business is concentrated, providing insulation from broader North American rig count declines [25] Company Strategy and Development Direction - The company is transitioning its fleet to electric and natural gas-powered equipment, with plans to have two-thirds of its frac fleet using next-generation equipment by the end of the year [12][20] - The acquisition of Silvertip has exceeded expectations, delivering operational synergies and record revenues [11][33] - The company aims to create a more industrialized and predictable service space, reducing operating costs and enhancing competitiveness in the Permian Basin [35][44] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the long-term structural under supply of hydrocarbons, despite near-term headwinds such as natural gas price weakness [12][20] - The company is committed to capital discipline and has developed commercial architecture to support its fleet transition strategy [18][40] Other Important Information - The company incurred $97 million in capital expenditures during the quarter, with a reaffirmation of its CapEx guidance for 2023 between $250 million and $300 million [16][40] - Total liquidity at the end of Q1 2023 was $149 million, including cash and available capacity under the ABL credit facility [17] Q&A Session Summary Question: Thoughts on North America rig count decline and insulation from it - Management believes they are well insulated due to their focus on the Permian Basin and relationships with blue-chip operators, which have consistent activity outlooks [25] Question: Customer conversations regarding pricing dislocation - Minimal pressure on pricing was observed, as most customers operate large, complex operations and do not engage in the spot market [26] Question: Insights on customer psychology amid macro headwinds - Customers are not skittish, with many having low operating costs and strong acreage positions, which helps maintain consistent activity [57] Question: Details on fleet retirements and disposal of assets - The company confirmed that retired equipment will not return to the market and will be scrapped [70] Question: CapEx guidance and accounting changes - The guidance remains unchanged despite accounting changes, with expectations for loss on disposal to decrease [74]