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ProPetro Holding Corp. Third Quarter 2019 Results

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ProPetro Holding Corp. reported its Q3 2019 results.

Preliminary Third Quarter 2019 and Recent Highlights

• Total revenue for the quarter was $541.8 million, as compared to $529.5 million for the second quarter of 2019.
• Net income was $34.4 million, or $.33 per diluted share, compared to $36.1 million, or $.35 per diluted share, for the second quarter of 2019.
• Adjusted EBITDA⁽¹⁾ for the quarter was $131.9 million compared to $126.6 million for the second quarter of 2019.
• Effective utilization for the third quarter was 25.1 fleets.
• ProPetro plans to deploy one new-build electrically powered DuraStim® hydraulic fracturing fleet⁽²⁾ near the end of 2019 or early in 2020 and two additional DuraStim® fleets in 2020.

Dale Redman, Chief Executive Officer, commented, “Operationally the ProPetro team performed well for yet another quarter. We continue to be extremely proud of our team’s ability to perform at the wellsite and provide our customers with truly differentiated service quality. We remain confident in our ability to execute at the highest level, even in periods of industry uncertainty.”

Preliminary Third Quarter 2019 Financial Summary

Revenue for the third quarter of 2019 was $541.8 million, a slight increase compared to revenue of $529.5 million for the second quarter of 2019. During the third quarter of 2019, 97.6% of total revenue was associated with pressure pumping services, compared to 97.4% in the second quarter.

Cost of services excluding depreciation and amortization for the third quarter of 2019 increased slightly to $396.9 million from $386.2 million during the second quarter of 2019, consistent with the increase in revenue described above. As a percentage of revenues, cost of services remained relatively unchanged at approximately 73% in the third quarter of 2019.

General and administrative expense was $27.6 million for the third quarter of 2019 as compared to $27.9 million during the second quarter of 2019. Compared to the second quarter of 2019, key changes for the third quarter of 2019 included: an approximate $4.2 million increase in professional and other advisory costs incurred primarily in connection with the audit committee’s internal review, an approximate $1.4 million increase in severance expense in connection with the resignation of a former officer, offset by an approximate aggregate $2.3 million decrease in stock based compensation in connection with the forfeiture of stock awards by certain officers and employees and decrease in bonus expense of $2.5 million and net decrease in other remaining general and administrative expense of $0.5 million. General and administrative expense, exclusive of $10.8 million of professional and advisory fees, $0.6 million of stock-based compensation, $3.2 million of retention bonus and severance was $13.0 million, or 2.4% of revenue, for the third quarter of 2019.

Net income for the third quarter of 2019 totaled $34.4 million, or $.33 per diluted share, versus $36.1 million, or $.35 per diluted share, for the second quarter of 2019.

Adjusted EBITDA increased approximately 4% to $131.9 million for the third quarter of 2019 from $126.6 million for the second quarter of 2019.

Operational Highlights and Fleet Expansion

Effective utilization of the Company’s fracturing assets during the third quarter of 2019 was 25.1 fleets. ProPetro currently expects effective utilization in the fourth quarter of 2019 to be approximately 18-20 fleets. The decrease in utilization is primarily attributable to customer budget exhaustion, seasonality and overall softening industry demand.

The Company plans to deploy one electrically powered DuraStim® hydraulic fracturing fleet near the end of 2019 or early in 2020 and two additional DuraStim® fleets in 2020. These fleets will be deployed to two existing customers on a dedicated basis.

During the quarter, the Company also expanded its cementing operations by deploying one additional new-build cementing unit, bringing total current cementing capacity to 23 units.

Liquidity and Capital Spending

As of September 30, 2019, total cash was $109.2 million and total debt was $130.0 million. Total liquidity at the end of the third quarter of 2019 was $173.5 million (as compared to $146.5 million at the end of the second quarter of 2019), including cash and $64.3 million of available capacity under the Company’s revolving credit facility. As of September 30, 2019, the Company’s net debt was approximately $20.8 million, which represents outstanding debt of $130.0 million less cash of $109.2 million. We believe our conservative capital structure positions us well to balance customer demand for our new generation DuraStim® fleets and other competing uses of cash.

Capital expenditures incurred during the third quarter of 2019 were $87.0 million. As of September 30, 2019, ProPetro had spent approximately $120.8 million on its DuraStim® growth initiatives and expects to spend an additional approximately $58.3 million through 2020 on the first three DuraStim® fleets (this total includes a third turbine that the Company has not yet agreed to purchase).

Outlook

Mr. Redman concluded, “Although the current market for our services is challenging and the market is increasingly oversupplied from an equipment perspective, we remain confident that our differentiated service model, ability to pull through new technologies to the wellsite, and our operational efficiency position us to compete effectively and continue to support our customers’ operations.”