Service & Supply | Quarterly / Earnings Reports | Oilfield Services | Second Quarter (2Q) Update | Financial Results | Capital Markets

ProPetro Holding Corp. Second Quarter 2022 Results

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   |    Wednesday,August 03,2022

ProPetro Holding Corp. announced financial and operational results for the second quarter of 2022.

2Q 2022 and Recent Highlights:

• Total revenue for the quarter increased 11% to $315 million compared to $283 million for the first quarter of 2022.

• Net loss for the quarter was $33 million, or $0.32 per diluted share, compared to net income of $12 million, or $0.11 per diluted share, for the first quarter of 2022.

• Recorded impairment expense of $57 million in connection with our DuraStim^® equipment.

• Adjusted EBITDA⁽¹⁾ for the quarter increased 13% to $76 million or 24% of revenues compared to $67 million for the first quarter of 2022.

• Effective utilization for the second quarter improved 8% to 14.8 fleets compared to 13.7 fleets for the first quarter of 2022.

• Net cash provided by operating activities for the quarter of $78 million as compared to $25 million for the first quarter of 2022.

• Positive Free Cash Flow⁽²⁾ for the quarter was approximately $0.6 million as compared to negative Free Cash Flow of approximately $39 million for the first quarter of 2022.

• Recently ordered additional Tier IV Dynamic Gas Blending ("DGB" or "dual-fuel") frac units.

Sam Sledge, Chief Executive Officer, commented, “The Company produced another strong quarter of operational and financial performance in spite of many crosswinds and challenges, including continuing supply chain disruptions and cost inflation. We attribute this success to the hard work and effort of our team executing on our returns-focused strategy to take advantage of improving market conditions and increased demand for our services, all bolstered by first-in-class service at the wellsite.

As part of our fleet transition strategy announced last year, we now have three Tier IV DGB fleets operating and expect a fourth Tier IV DGB fleet to be operating in the fourth quarter of this year, subject to final equipment deliveries over the coming months. With the additional orders announced today, we anticipate having approximately six marketed Tier IV DGB fleets during the first quarter of 2023. Given customer interest in long-term contracts for gas-burning equipment with our efficient crews, we are experiencing accelerating demand for Tier IV DGB assets into 2023.

Additionally, I want to comment that the demand for electric solutions from efficient frac providers is gaining momentum and ProPetro plans to play a significant role in the electric future of the Permian Basin. We have assessed multiple electric frac offerings with plans to deploy an electric solution in 2023, therefore putting our team in a position to participate directly in the electrification and industrialization of the Permian Basin. We are excited about continuing our transition to more efficient solutions that support gas-burning opportunities for our customers to help lower costs, reduce greenhouse gas emissions, and enhance our future competitiveness and free cash flow profile."

David Schorlemer, Chief Financial Officer, commented, "Our positive financial performance in the second quarter is a result of our commitment to our strict fleet deployment strategy and our pursuit of margin-over-market share. Achieving mid-cycle economics this early in the year gives our team confidence to move forward with our customers to prioritize Tier IV DGB equipment and the deployment of electric frac fleets in 2023."

2Q 2022 Financial Summary

Revenue for the second quarter of 2022 was $315 million, compared to revenue of $283 million for the first quarter of 2022. The 11% increase was attributable to our increased effectively utilized fleet count of 14.8 fleets, from 13.7 fleets in the first quarter of 2022, driven by fleet repositioning and increased pricing.

Cost of services, excluding depreciation and amortization of approximately $31 million, for the second quarter of 2022 increased to $219 million from $197 million during the first quarter of 2022. The 11% increase was attributable to the increased operational activity levels and cost inflation in the second quarter of 2022.

General and administrative expense of $25 million for the second quarter of 2022 decreased from $32 million in the first quarter of 2022. General and administrative expense, exclusive of a net expense of $5 million relating to a non-recurring net legal expense of approximately $2 million and non-cash items consisting of stock-based compensation of approximately $3 million, was $20 million, or 6% of revenue, for the second quarter of 2022 compared to 7% of revenue for the first quarter of 2022. The decrease in our general and administrative expense as a percentage of revenue was driven by higher revenue in the second quarter of 2022.

Net loss for the second quarter of 2022 totaled $33 million, or $0.32 per diluted share, compared to net income of $12 million, or $0.11 per diluted share, for the first quarter of 2022. The net loss recorded in the second quarter of 2022 was primarily driven by the non-recurring and non-cash impairment expense of $57 million in connection with our DuraStim^® equipment.

Adjusted EBITDA increased to $76 million for the second quarter of 2022 from $67 million for the first quarter of 2022. The increase in Adjusted EBITDA was primarily attributable to increased activity, fleet repositioning and net pricing improvements.

Liquidity and Capital Spending

As of June 30, 2022, total cash was $70 million and the Company remained debt free. Total liquidity at the end of the second quarter of 2022 was $185 million including our total cash balance and available borrowing capacity under the Company’s revolving credit facility.

Capital expenditures incurred during the second quarter of 2022 were $89 million, the majority of which related to maintenance expenditures and our previously announced Tier IV DGB conversions. Net cash used in investing activities from our statement of cash flow during the second quarter of 2022 was $78 million.

Outlook

Effective utilization for the second half of 2022 is expected to be in the range of 14 to 15 fleets. Based on that range and assuming current market and industry conditions, the Company currently anticipates full year 2022 adjusted EBITDA to be at or above $300 million with capital expenditures increasing to a range of $300 million to $350 million due to the additional orders of Tier IV DGB frac units.

Mr. Schorlemer added, "As we plan to meet customer demand for gas-burning offerings in the face of pronounced supply chain constraints, we have accelerated some of our 2023 capital expenditures into 2022 that would otherwise have been allocated to maintaining and upgrading our conventional fleets, in favor of Tier IV DGB equipment. We believe this investment will protect our ability to expand margins further in 2023 and enhance our free cash flow longer term. Assuming a continuing favorable operating environment, which we believe will continue to strengthen as we move into 2023, capital expenditures next year are currently expected to be meaningfully lower. This sets the Company up for material free cash flow in 2023 and a further bolstering of our already strong liquidity position which enables our longer term capital allocation strategy."

Mr. Sledge concluded, "As we begin to approach 2023 into what we believe is a structurally undersupplied global crude oil market, we are optimizing ProPetro to fully benefit from global demand for short-cycle barrels in the Permian Basin. It is clear to our team that the transition to dual-fuel and electric equipment is an important step in maintaining our position as a leading Permian frac provider. The dual-fuel investment decisions announced today and the role we expect to have in the electric frac market in 2023 and beyond will support a structural shift in the capabilities of our future fleet portfolio. While these assets will certainly be a highlight in 2023, optimizing our existing footprint and evaluating new technologies and other strategic opportunities will continue to play an important role in enhancing cash-on-cash returns and the long-term competitiveness of ProPetro as we move through a sustained up cycle. We expect that favorable industry conditions, our strong balance sheet, and our relentless pursuit of operational excellence will enable success in the execution of these initiatives."