ProPetro Reports Results for the Third Quarter 2020

Rhea-AI Summary

ProPetro Holding Corp. (NYSE: PUMP) reported third quarter 2020 financial results, showing revenue of $133.7 million, up from $106.1 million in Q2. However, net loss increased to $29.2 million or $0.29 per diluted share, compared to a loss of $25.9 million in the prior quarter. Adjusted EBITDA fell to $17.4 million from $25.4 million. Effective utilization improved to 8.5 fleets from 4.0 fleets. Free cash flow was $16.9 million, while liquidity reached $85.9 million.

Positive

• Revenue increased to $133.7 million, up from $106.1 million in Q2.
• Effective utilization rose to 8.5 fleets compared to 4.0 fleets in Q2.
• Generated $16.9 million in free cash flow during the quarter.
• Total cash increased to $54.3 million as of September 30, 2020.

Negative

• Net loss of $29.2 million, worsening from a loss of $25.9 million in Q2.
• Adjusted EBITDA declined to $17.4 million from $25.4 million.
• General and administrative expenses rose to $21.8 million from $20.3 million.

MIDLAND, Texas--(BUSINESS WIRE)--ProPetro Holding Corp. (“ProPetro” or the “Company”) (NYSE: PUMP) today announced financial and operational results for the third quarter of 2020.

Third Quarter 2020 Highlights

• Total revenue for the quarter was $133.7 million compared to $106.1 million for the second quarter of 2020.
• Net loss for the quarter was $29.2 million, or $0.29 per diluted share, versus a net loss of $25.9 million, or $0.26 per diluted share, for the second quarter of 2020.
• Adjusted EBITDA⁽¹⁾ for the quarter was $17.4 million compared to $25.4 million for the second quarter of 2020.
• Effective utilization for the third quarter was 8.5 fleets compared to 4.0 fleets for the second quarter of 2020.
• Generated approximately $16.9 million in free cash flow⁽²⁾ during the quarter.

(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 (FCF) is a Non-GAAP financial measure and is defined as net cash flow provided from operating activities less net cash used in investing activities. During the three months ended September 30, 2020, net cash provided by operating activities of $21.1 million less net cash used in investing activities of $4.2 million result in a free cash flow of $16.9 million.

Phillip Gobe, Chief Executive Officer, commented, “We were pleased to see improvement in activity for the third quarter as compared to the second quarter amid uncertain market conditions. Given this environment, I am extremely proud of the resilience of the ProPetro team. Their focus on providing best-in-class execution at the wellsite continues to benefit the development efforts of our blue-chip customer base. Our performance on location has allowed us to maintain market share at levels similar to the beginning of this year, while also generating free cash flow. We are excited to be redeploying our people and equipment as we continue to develop a more efficient customer-driven completions solution. I would like to thank our customers, team members and other industry stakeholders for their efforts to move the oilfield forward and develop a more cohesive and efficient completions solution.”

Third Quarter 2020 Financial Summary

Revenue for the third quarter of 2020 was $133.7 million compared to revenue of $106.1 million for the second quarter of 2020. The increase was primarily attributable to an improvement in activity levels partially offset by an increase in direct sourcing of select consumables by certain customers. In addition, the Company received approximately $6.9 million in idle fees in the third quarter of 2020 as compared to $32.6 million in the second quarter of 2020.

Cost of services, excluding depreciation and amortization of approximately $37.5 million, for the third quarter of 2020 increased to $99.6 million compared to $68.2 million during the second quarter of 2020. The increase was substantially associated with higher activity levels in the third quarter versus the second quarter.

General and administrative expense was $21.8 million for the third quarter of 2020 compared to $20.3 million during the second quarter of 2020. General and administrative expense, exclusive of $2.5 million of non-recurring expenses and $2.5 million of non-cash stock-based compensation expense, was $16.8 million for the third quarter of 2020, compared to $16.4 million in the second quarter of 2020 after adjusting for non-recurring and/or unusual items.

Net loss for the third quarter of 2020 was $29.2 million, or a $0.29 loss per diluted share, versus a net loss of $25.9 million, or a $0.26 loss per diluted share, for the second quarter of 2020.

Adjusted EBITDA was $17.4 million for the third quarter of 2020 compared to $25.4 million for the second quarter of 2020.

Liquidity and Capital Spending

As of September 30, 2020, total cash was $54.3 million compared to $37.3 million as of June 30, 2020. Consistent with the end of the second quarter, ProPetro remains debt free. Total liquidity at the end of the third quarter of 2020 was $85.9 million, including cash and $31.6 million of available capacity under the Company’s revolving credit facility. As of October 31, 2020, total cash was $66.7 million. ProPetro will continue to proactively manage its capital and liquidity needs.

Capital expenditures incurred during the third quarter of 2020 were $7.9 million, all of which was associated with spending on maintenance capital. Full year 2020 estimated capital expenditures have been reduced from previous expectations of below $100 million to a current view of below $85 million and mostly comprised of maintenance capital spending. Capital expenditures incurred for the nine months ended September 30, 2020 totaled $59.9 million, including $8.4 million for growth capital spending during the first half of the year.

Outlook

Mr. Gobe concluded, “Looking to the fourth quarter, we expect our effective fleet utilization levels to remain flat with the third quarter exit rate, where we sit today. Taking a longer view, we expect oilfield service activity to improve as global supply and demand for crude oil becomes more balanced. We will seek to continue to further differentiate ProPetro from its peers based on the qualities we have developed carefully over the past 15 years, including leveraging our cycle-proven business model of developing and retaining a highly talented work force, maintaining a conservative balance sheet, and remaining squarely-focused on our mutual long-term success with a roster of the industry’s leading operators.”

Conference Call Information

The Company will host a conference call at 8:00 AM Central Time on Tuesday, November 3, 2020 to discuss preliminary financial and operating results for the third quarter of 2020. This 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 844-340-9046 and international callers may dial 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 877-344-7529 for U.S. callers, 855-669-9658 for Canadian callers, as well as 412-317-0088 for international callers. The access code for the replay is 10147385.

About ProPetro

ProPetro Holding Corp. is a Midland, Texas-based oilfield services company providing pressure pumping and other complementary services to leading upstream oil and gas companies engaged in the exploration and production of North American unconventional oil and natural gas resources. For more information visit www.propetroservices.com.

Forward-Looking Statements

Except for historical information contained herein, the statements in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the future performance of newly improved technology (such as our DuraStim® fleets), our expected capital expenditures and our expected cost reductions. 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 and recent declines in oil prices, the operational disruption and market volatility resulting from the COVID-19 pandemic 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 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 and the SEC investigation. 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,				June 30,				September 30,
					2020				2020				2019
REVENUE - Service revenue				$	133,710			$	106,109			$	541,847
COSTS AND EXPENSES
	Cost of services (exclusive of depreciation and amortization)				99,592				68,193				396,922
	General and administrative (inclusive of stock-based compensation)				21,817				20,331				27,558
	Depreciation and amortization				37,467				40,173				37,653
	Loss on disposal of assets				11,286				8,734				31,153
		Total costs and expenses			170,162				137,431				493,286
OPERATING INCOME (LOSS)					(36,452	)			(31,322	)			48,561
OTHER EXPENSE:
	Interest expense				(137	)			(791	)			(1,749	)
	Other expense				(312	)			(267	)			(75	)
		Total other expense			(449	)			(1,058	)			(1,824	)
INCOME (LOSS) BEFORE INCOME TAXES					(36,901	)			(32,380	)			46,737
INCOME TAX (EXPENSE) BENEFIT					7,717				6,460				(12,340	)
NET INCOME (LOSS)				$	(29,184	)		$	(25,920	)		$	34,397
NET INCOME (LOSS) PER COMMON SHARE:
	Basic			$	(0.29	)		$	(0.26	)		$	0.34
	Diluted			$	(0.29	)		$	(0.26	)		$	0.33
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
	Basic				100,897				100,821				100,606
	Diluted				100,897				100,821				103,652

PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
				September 30, 2020			December 31, 2019
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	54,255		$	149,036
	Accounts receivable - net of allowance for credit losses of $1,497 and $1,049, respectively				94,663			212,183
	Inventories				1,849			2,436
	Prepaid expenses				6,189			10,815
	Other current assets				117			1,121
		Total current assets			157,073			375,591
PROPERTY AND EQUIPMENT - Net of accumulated depreciation					936,283			1,047,535
OPERATING LEASE RIGHT-OF-USE ASSETS					781			989
OTHER NONCURRENT ASSETS:
	Goodwill				-			9,425
	Other noncurrent assets				2,000			2,571
		Total other noncurrent assets			2,000			11,996
TOTAL ASSETS				$	1,096,137		$	1,436,111
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Accounts payable			$	71,577		$	193,096
	Operating lease liabilities				326			302
	Finance lease liabilities				-			2,831
	Accrued and other current liabilities				24,364			36,343
	Accrued interest payable				-			394
		Total current liabilities			96,267			232,966
DEFERRED INCOME TAXES					87,551			103,041
LONG-TERM DEBT					-			130,000
NONCURRENT OPERATING LEASE LIABILITIES					552			799
		Total liabilities			184,370			466,806
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, 100,898,445 and 100,624,099 shares issued, respectively				101			101
	Additional paid-in capital				831,999			826,629
	Retained earnings				79,667			142,575
		Total shareholders’ equity			911,767			969,305
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY				$	1,096,137		$	1,436,111

PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
						Nine Months Ended September 30,
							2020				2019
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income (loss)					$	(62,908	)		$	140,335
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization					117,844				106,252
		Impairment expense					16,654				-
		Deferred income taxes					(15,490	)			42,623
		Amortization of deferred debt issuance costs					407				405
		Stock‑based compensation					5,968				5,246
		Provision for credit losses					448				475
		Loss on disposal of assets					39,875				81,578
	Changes in operating assets and liabilities:
		Accounts receivable					117,072				(73,268	)
		Other current assets					2,598				603
		Inventories					587				4,503
		Prepaid expenses					4,741				1,973
		Accounts payable					(97,380	)			(11,496	)
		Accrued and other current liabilities					(11,996	)			8,042
		Accrued interest					(394	)			358
			Net cash provided by operating activities				118,026				307,629
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures						(86,509	)			(394,343	)
	Proceeds from sale of assets						4,330				6,774
			Net cash used in investing activities				(82,179	)			(387,569	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from borrowings						-				110,000
	Repayments of borrowings						(130,000	)			(50,000	)
	Payment of finance lease obligations						(30	)			(186	)
	Repayments of insurance financing						-				(4,547	)
	Proceeds from exercise of equity awards						-				1,164
	Tax withholdings paid for net settlement of equity awards						(598	)			-
			Net cash (used in) provided by financing activities				(130,628	)			56,431
NET DECREASE IN CASH AND CASH EQUIVALENTS							(94,781	)			(23,509	)
CASH AND CASH EQUIVALENTS — Beginning of period							149,036				132,700
CASH AND CASH EQUIVALENTS — End of period						$	54,255			$	109,191

Reportable Segment Information
			Three Months Ended
			September 30, 2020										June 30, 2020
($ in thousands)			Pressure Pumping			All Other				Total			Pressure Pumping			All Other				Total
	Service revenue		$	131,321		$	2,389			$	133,710		$	103,815		$	2,294			$	106,109
	Adjusted EBITDA		$	26,662		$	(9,308	)		$	17,354		$	34,030		$	(8,620	)		$	25,410
	Depreciation and amortization		$	36,326		$	1,141			$	37,467		$	38,910		$	1,263			$	40,173
	Capital expenditures incurred		$	7,571		$	370			$	7,941		$	10,034		$	1,846			$	11,880

Non-GAAP Financial Measures

Adjusted EBITDA is not a financial measure presented in accordance with GAAP. We believe that the presentation of this non-GAAP financial measure provides 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. Non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. 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 in isolation or as a substitute for an analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of this non-GAAP financial measure 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, 2020												June 30, 2020
($ in thousands)			Pressure Pumping				All Other				Total				Pressure Pumping				All Other				Total
	Net loss		$	(20,920	)		$	(8,264	)		$	(29,184	)		$	(13,528	)		$	(12,392	)		$	(25,920	)
	Depreciation and amortization			36,326				1,141				37,467				38,910				1,263				40,173
	Interest expense			-				137				137				-				791				791
	Income taxes			-				(7,717	)			(7,717	)			-				(6,460	)			(6,460	)
	Loss on disposal of assets			11,256				30				11,286				8,587				147				8,734
	Stock-based compensation			-				2,535				2,535				-				2,962				2,962
	Other expense			-				312				312				-				267				267
	Other general and administrative expense			-				2,481				2,481				-				4,802				4,802
	Retention bonus and severance expense			-				37				37				61				-				61
	Adjusted EBITDA		$	26,662			$	(9,308	)		$	17,354			$	34,030			$	(8,620	)		$	25,410