ProPetro Holding Corp. ("ProPetro" or "the Company") (NYSE:PUMP) today announced financial and operational results for the third quarter of 2023.

Third Quarter 2023 Results and Highlights

Total revenue of $424 million.
Net Income was $35 million ($0.31 per diluted share), a 5^th consecutive quarter of net income.
Adjusted EBITDA⁽¹⁾ of $108 million, or 25% of revenue.
Capital expenditures of $59 million.
Published our first ProPetro ProEnergy ProPeople Sustainability Report for 2023.
Successfully commissioned our first FORCE^SM electric-powered hydraulic fracturing fleet.
Effective frac fleet utilization was 15.5 fleets compared to 15.9 fleets in the prior quarter.
Repurchased and retired 1.9 million shares during the quarter with total repurchases of 4.2 million shares representing approximately 4% of outstanding shares since plan inception in May 2023.
Net cash provided by operating activities was approximately $118 million with Free Cash Flow⁽²⁾ of approximately $27 million.

⁽¹⁾ Adjusted EBITDA is a non-GAAP financial measure and is described and reconciled to net income (loss) in the table under "Non-GAAP Financial Measures."
⁽²⁾ Free Cash Flow is a non-GAAP financial measure and is described and reconciled to cash from operating activities in the table under "Non-GAAP Financial Measures."

Management Comments

Sam Sledge, Chief Executive Officer, commented, "We are pleased to build on our momentum with yet another quarter of strong financial results. Thanks to solid execution by the ProPetro team, we continue to execute on our strategic priorities. We are excited to have deployed our new and innovative FORCE^SM electric-powered hydraulic fracturing fleet offering. The hard work and dedication of the ProPetro team and our partners and customers were critical in making this a success. The FORCE^SM electric-powered fleets along with our Tier IV DGB dual-fuel fleets are part of our strategy to transition our equipment to more desirable assets delivering premium value to our customers while lowering emissions through industry-leading natural gas substitution. This first FORCE^SM fleet deployment was a major milestone for the Company and I cannot be more pleased with how our team has rallied to optimize this deployment and begin preparation for our next FORCE^SM deployment later this month."

Mr. Sledge continued, "Financial performance remained strong during the third quarter despite some market pressures. We believe our financial results were more durable due to our bifurcated premium completion services coupled with our next-generation equipment, located primarily in the prolific and resilient Permian Basin. Our investments in new technologies, optimizing our business, and commitment to a disciplined pricing and asset deployment strategy resulted in another quarter of strong net income. Our team is excited to continue to deliver our differentiated services to our customers and we expect our strategy to continue to generate improved financial returns for all our stakeholders."

David Schorlemer, Chief Financial Officer, said, "The third quarter was an example of the resilient business we're building at ProPetro. We are focused on our strategy that is ideally-suited for the continued industrialization of the oilfield. The Company produced strong Free Cash Flow within the quarter. As we've communicated over the last several quarters, our strategy, our investments, the disciplined approach, and opportunistic investments were designed to create opportunities to share value with shareholders. By the end of this year, we will have invested nearly $1 billion over the past two years in transitioning our fleet and bringing state-of-the-art technologies and completion services to ProPetro, while maintaining a strong balance sheet and healthy liquidity. We believe our prudent strategic actions are creating meaningful, long-term value and position us to deliver for our customers and shareholders through the market cycle. Accordingly, we have now retired approximately 4% of our outstanding shares since the initial share repurchase authorization in May of 2023. With a strong balance sheet and clear line of sight to continued free cash flow generation, we are well-positioned to deliver improved shareholder value creation."

Third Quarter 2023 Financial Summary

Revenue was $424 million, compared to $435 million for the second quarter of 2023. The 2.6% decrease in revenue was attributable to slightly decreased utilization, pricing impacts, and job mix in our hydraulic fracturing and wireline businesses with our cementing business recording record revenues during the quarter.

Cost of services, excluding depreciation and amortization of approximately $52 million relating to cost of services, decreased to $292 million from $298 million during the second quarter of 2023. The 1.8% decrease was attributable to the decreased operational activity levels across our hydraulic fracturing and wireline operating segments.

General and administrative expense of $29 million was unchanged from $29 million in the second quarter of 2023. G&A expense excluding nonrecurring and noncash items (stock-based compensation and other items) of $5 million, was $24 million, or 5.6% of revenue.

Net income totaled $35 million, or $0.31 per diluted share, compared to net income of $39 million, or $0.34 per diluted share, for the second quarter of 2023.

Adjusted EBITDA decreased to $108 million from $113 million for the second quarter of 2023. The decrease in Adjusted EBITDA was primarily attributable to slightly lower activity and pricing during the quarter.

Net cash provided by operating activities was $118 million as compared to $114 million in the prior quarter. Free Cash Flowwas approximately $27 million as compared to Free Cash Flow of approximately $6 million in the prior quarter.

Share Repurchase Program

In May 2023, the Company announced a $100 million share repurchase program. During the quarter, the Company repurchased and retired 1.9 million shares for $19 million. Since inception, the Company has acquired and retired 4.2 million shares representing approximately 4% of its outstanding shares as of the date of plan inception.

Liquidity and Capital Spending

As of September 30, 2023, total cash was $54 million and our borrowings under the ABL Credit Facility were $45 million. Total liquidity at the end of the third quarter of 2023 was $180 million including cash and $126 million of available capacity under the ABL Credit Facility.

Capital expenditures incurred during the third quarter of 2023 were $59 million, the majority of which related to maintenance capital expenditures and the last deliveries of the Company's Tier IV DGB dual-fuel conversions. Net cash used in investing activities during the third quarter of 2023 was $91 million.

Guidance

The Company expects full-year 2023 incurred capital expenditures to be slightly above $300 million as compared to $365 million of incurred capital expenditures in 2022. Frac fleet effective utilization is expected to be between 13 to 14 fleets during the fourth quarter.

Outlook

Mr. Sledge added, "Looking ahead, we are on track to deploy our second FORCE^SM electric frac fleet in 2023, with deployment of our third and fourth fleets planned for the first half of 2024. We believe that electric equipment will play a significant role in the future of ProPetro and are pleased to see strong demand for our FORCE^SM electric frac fleets. Additionally, with our strong balance sheet, we continue to make excellent progress on our strategic initiatives, and we will continue to seek value-accretive acquisition opportunities to further enhance our cash flow profile. We will do all of this in a disciplined and opportunistic manner, prioritizing only high-return prospects that will enhance free cash flow and create incremental shareholder value."

Mr. Sledge concluded, "As we approach the end of 2023, we continue to deliver for our customers and advance our strategy to enhance value for our company and shareholders. Despite the recent market slowdown, demand for our next generation offerings has not waned. Our strategy is designed to generate durable returns in the current market environment and through the cycle. As our dedicated blue-chip customers seek reliable completion services at competitive costs, ProPetro is uniquely positioned to provide quality service, a young, next generation equipment offering and operational density in the Permian. This differentiation continues to insulate ProPetro from some of the market inconsistency seen in other basins and in the spot market. As we continue to optimize our operations and industrialize our business, modernize our fleet, and seek opportunistic transactions in line with our commitment to disciplined capital deployment, we are confident in ProPetro's ability to generate enhanced shareholder returns for years to come."

Conference Call Information

The Company will host a conference call at 8:00 AM Central Time on Wednesday, November 1, 2023, to discuss financial and operating results for the third quarter of 2023. The call will also be webcast on ProPetro's website at www.propetroservices.com. To access the conference call, U.S. callers may dial toll free 1-844-340-9046 and international callers may dial 1-412-858-5205. Please call ten minutes ahead of the scheduled start time to ensure a proper connection. A replay of the conference call will be available for one week following the call and can be accessed toll free by dialing 1-877-344-7529 for U.S. callers, 1-855-669-9658 for Canadian callers, as well as 1-412-317-0088 for international callers. The access code for the replay is 9513361. The Company also posted the scripted remarks on its website.

About ProPetro

ProPetro Holding Corp. is a Midland, Texas-based provider of premium completion services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. We help bring reliable energy to the world. For more information visit www.propetroservices.com.

Forward-Looking Statements

Except for historical information contained herein, the statements and information in this news release and discussion in the scripted remarks described above are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words "may," "could," "plan," "project," "budget," "predict," "pursue," "target," "seek," "objective," "believe," "expect," "anticipate," "intend," "estimate," and other expressions that are predictions of, or indicate, future events and trends and that do not relate to historical matters identify forward‑looking statements. Our forward‑looking statements include, among other matters, statements about the supply of and demand for hydrocarbons, our business strategy, industry, future profitability, expected fleet utilization, sustainability efforts, the future performance of newly improved technology, expected capital expenditures, the impact of such expenditures on our performance and capital programs, our fleet conversion strategy and our share repurchase program. A forward‑looking statement may include a statement of the assumptions or bases underlying the forward‑looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable.

Although forward‑looking statements reflect our good faith beliefs at the time they are made, forward-looking statements are subject to a number of risks and uncertainties that may cause actual events and results to differ materially from the forward-looking statements. Such risks and uncertainties include the volatility of oil prices, the global macroeconomic uncertainty related to the conflict in the Israel-Gaza region and the Russia-Ukraine war, general economic conditions, including the impact of continued inflation, central bank policy actions, bank failures, and the risk of a global recession, and other factors described in the Company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, particularly the "Risk Factors" sections of such filings, and other filings with the Securities and Exchange Commission (the "SEC"). In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it, including matters related to shareholder litigation. Accordingly, no assurances can be given that the actual events and results will not be materially different than the anticipated results described in the forward-looking statements. Readers are cautioned not to place undue reliance on such forward-looking statements and are urged to carefully review and consider the various disclosures made in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other filings made with the SEC from time to time that disclose risks and uncertainties that may affect the Company's business. The forward-looking statements in this news release are made as of the date of this news release. ProPetro does not undertake, and expressly disclaims, any duty to publicly update these statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure is required by law.

PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited)

	Three Months Ended
	September 30, 2023			June 30, 2023			September 30, 2022
REVENUE - Service revenue	$	423,804		$	435,249		$	333,014
COSTS AND EXPENSES
Cost of services (exclusive of depreciation and amortization)		292,490			297,791			224,118
General and administrative (inclusive of stock-based compensation)		28,597			29,021			28,190
Depreciation and amortization		53,769			52,889			41,600
Loss on disposal of assets		4,265			3,065			25,453
Total costs and expenses		379,121			382,766			319,361
OPERATING INCOME		44,683			52,483			13,653
OTHER (EXPENSE) INCOME:
Interest expense		(1,169	)		(1,180	)		(237	)
Other income (expense)		1,883			72			(616	)
Total other (expense) income		714			(1,108	)		(853	)
INCOME BEFORE INCOME TAXES		45,397			51,375			12,800
INCOME TAX EXPENSE		(10,644	)		(12,118	)		(2,768	)
NET INCOME	$	34,753		$	39,257		$	10,032

NET INCOME PER COMMON SHARE:
Basic	$	0.31		$	0.34		$	0.10
Diluted	$	0.31		$	0.34		$	0.10

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		112,286			114,737			104,372
Diluted		112,698			114,796			105,070

NOTE:

Certain reclassifications to loss on disposal of assets and depreciation and amortization have been made to the statement of operations and the statement of cash flows for the periods prior to 2023 to conform to the current period presentation. Adjusted EBITDA in the periods prior to 2023 does not include the impact of expensing fluid ends.

PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)

	September 30, 2023		December 31, 2022
ASSETS
CURRENT ASSETS:
Cash, cash equivalents and restricted cash	$	54,330	$	88,862
Accounts receivable - net of allowance for credit losses of $202 and $419, respectively		260,757		215,925
Inventories		15,887		5,034
Prepaid expenses		8,753		8,643
Short-term investment, net		8,163		10,283
Other current assets		2,109		38
Total current assets		349,999		328,785
PROPERTY AND EQUIPMENT - net of accumulated depreciation		991,593		922,735
OPERATING LEASE RIGHT-OF-USE ASSETS		26,447		3,147
FINANCE LEASE RIGHT-OF-USE ASSETS		26,268		—
OTHER NONCURRENT ASSETS:
Goodwill		23,624		23,624
Intangible assets - net of amortization		52,047		56,345
Other noncurrent assets		2,244		1,150
Total other noncurrent assets		77,915		81,119
TOTAL ASSETS	$	1,472,222	$	1,335,786

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	194,569	$	234,299
Accrued and other current liabilities		65,305		49,027
Operating lease liabilities		5,449		854
Finance lease liabilities		8,498		—
Total current liabilities		273,821		284,180
DEFERRED INCOME TAXES		94,018		65,265
LONG-TERM DEBT		45,000		30,000
NONCURRENT OPERATING LEASE LIABILITIES		14,199		2,308
NONCURRENT FINANCE LEASE LIABILITIES		17,857		—
Total liabilities		444,895		381,753
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 30,000,000 shares authorized, none issued, respectively		—		—
Common stock, $0.001 par value, 200,000,000 shares authorized, 111,091,503 and 114,515,008 shares issued, respectively		111		114
Additional paid-in capital		941,073		970,519
Retained earnings (accumulated deficit)		86,143		(16,600	)
Total shareholders' equity		1,027,327		954,033
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,472,222	$	1,335,786

PROPETRO HOLDING CORP. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)

	Nine Months Ended September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	102,743		$	(11,012	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		157,456			120,573
Impairment expense		—			57,454
Deferred income tax expense		28,753			(1,926	)
Amortization of deferred debt issuance costs		250			720
Stock-based compensation		10,604			18,128
Loss on disposal of assets		29,410			48,401
Unrealized loss on short-term investment		2,120			3,349
Non cash income from settlement with equipment manufacturer		—			(2,668	)
Changes in operating assets and liabilities:
Accounts receivable		(44,832	)		(82,374	)
Other current assets		(2,584	)		(29,647	)
Inventories		(4,520	)		6
Prepaid expenses		(275	)		2,847
Accounts payable		9,584			7,117
Accrued and other current liabilities		16,004			43,983
Accrued interest		358			—
Net cash provided by operating activities		305,071			174,951
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(320,747	)		(247,164	)
Proceeds from sale of assets		7,976			7,207
Net cash used in investing activities		(312,771	)		(239,957	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings		30,000			—
Repayments of borrowings		(15,000	)		—
Payments on finance lease obligations		(889	)		—
Payment of debt issuance costs		(1,179	)		(824	)
Proceeds from exercise of equity awards		—			963
Tax withholdings paid for net settlement of equity awards		(3,506	)		(3,843	)
Share repurchases		(36,258	)		—
Net cash used in financing activities		(26,832	)		(3,704	)
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(34,532	)		(68,710	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - Beginning of period		88,862			111,918
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - End of period	$	54,330		$	43,208

Reportable Segment Information

	Three Months Ended
	September 30, 2023						June 30, 2023
(in thousands)	Completion Services		All Other		Total		Completion Services		All Other		Total

Service revenue	$	423,804	$	—	$	423,804	$	435,249	$	—	$	435,249
Adjusted EBITDA	$	107,714	$	—	$	107,714	$	112,813	$	—	$	112,813
Depreciation and amortization	$	53,769	$	—	$	53,769	$	52,889	$	—	$	52,889
Capital expenditures	$	59,081	$	—	$	59,081	$	115,233	$	—	$	115,233

Non-GAAP Financial Measures

Adjusted EBITDA and Free Cash Flow are not financial measures presented in accordance with GAAP. We define EBITDA as net income (loss) plus (i) depreciation and amortization, (ii) interest expense and (iii) income tax expense (benefit). We define Adjusted EBITDA as EBITDA plus (i) loss (gain) on disposal of assets, (ii) stock-based compensation, (iii) other expense (income), (iv) other general and administrative expense (net) and (v) retention bonus and severance expense. We define Free Cash Flow as net cash provided by operating activities less net cash used in investing activities.

We believe that the presentation of these non-GAAP financial measures provide useful information to investors in assessing our financial condition and results of operations. Net income (loss) is the GAAP measure most directly comparable to Adjusted EBITDA, and net cash from operating activities is the GAAP measure most directly comparable to Free Cash Flow. Non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Non-GAAP financial measures have important limitations as analytical tools because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider Adjusted EBITDA or Free Cash Flow in isolation or as a substitute for an analysis of our results as reported under GAAP. Because Adjusted EBITDA and Free Cash Flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

	Three Months Ended
	September 30, 2023								June 30, 2023
(in thousands)	Completion Services			All Other		Total			Completion Services			All Other		Total
Net income	$	34,753		$	—	$	34,753		$	39,257		$	—	$	39,257
Depreciation and amortization		53,769			—		53,769			52,889			—		52,889
Interest expense		1,169			—		1,169			1,180			—		1,180
Income tax expense		10,644			—		10,644			12,118			—		12,118
Loss on disposal of assets		4,265			—		4,265			3,065			—		3,065
Stock-based compensation		3,310			—		3,310			3,758			—		3,758
Other income⁽¹⁾		(1,883	)		—		(1,883	)		(72	)		—		(72	)
Other general and administrative expense, (net) ⁽²⁾		450			—		450			263			—		263
Retention bonus and severance expense		1,237			—		1,237			355			—		355
Adjusted EBITDA	$	107,714		$	—	$	107,714		$	112,813		$	—	$	112,813

(1)	Includes unrealized gain on short-term investment of $1.8 million and unrealized loss on short-term investment of $0.1 million for the three months ended September 30, 2023 and June 30, 2023, respectively.

(2)	Other general and administrative expense, (net of reimbursement from insurance carriers) primarily relates to nonrecurring professional fees paid to external consultants in connection with the Company's audit committee review, SEC investigation, shareholder litigation, legal settlement to a vendor and other legal matters, net of insurance recoveries. During the three months ended September 30, 2023 and June 30, 2023, we received approximately $0.1 million and $0, respectively, from our insurance carriers in connection with the SEC investigation and shareholder litigation.

Reconciliation of Cash from Operating Activities to Free Cash Flow

	Three Months Ended
(in thousands)	September 30, 2023			June 30, 2023

Cash from Operating Activities	$	118,057		$	113,954
Cash used in Investing Activities		(91,040	)		(107,981	)
Free Cash Flow	$	27,017		$	5,973

View source version on businesswire.com: https://www.businesswire.com/news/home/20231101227567/en/

ProPetro Reports Financial Results for the Third Quarter of 2023