Business Wire | Nov 2, 2020 04:15PM EST

ProPetro Reports Results for the Third Quarter 2020

Nov. 02, 2020

MIDLAND, Texas--(BUSINESS WIRE)--Nov. 02, 2020--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.

Adjusted EBITDA is a Non-GAAP financial measure and is described and(1) reconciled to net income (loss) in the table under "Non-GAAP Financial Measures."

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(2) 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(r) 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 June 30, September 30, 30,

2020 2020 2019

REVENUE - Service revenue $ 133,710 $ 106,109 $ 541,847

COSTS AND EXPENSES Cost of services (exclusive of 99,592 68,193 396,922 depreciation and amortization) General and administrative (inclusive 21,817 20,331 27,558 of stock-based compensation) 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 SHARESOUTSTANDING: 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

ASSETSCURRENT ASSETS:Cash and cash equivalents$

54,255

$

149,036

Accounts receivable - net of allowance for credit losses of $1,497 and $1,049, respectively94,663

212,183

Inventories1,849

2,436

Prepaid expenses6,189

10,815

Other current assets117

1,121

Total current assets157,073

375,591

PROPERTY AND EQUIPMENT - Net of accumulated depreciation936,283

1,047,535

OPERATING LEASE RIGHT-OF-USE ASSETS781

989

OTHER NONCURRENT ASSETS:Goodwill-

9,425

Other noncurrent assets2,000

2,571

Total other noncurrent assets2,000

11,996

TOTAL ASSETS$

1,096,137

$

1,436,111

LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Accounts payable$

71,577

$

193,096

Operating lease liabilities326

302

Finance lease liabilities-

2,831

Accrued and other current liabilities24,364

36,343

Accrued interest payable-

394

Total current liabilities96,267

232,966

DEFERRED INCOME TAXES87,551

103,041

LONG-TERM DEBT-

130,000

NONCURRENT OPERATING LEASE LIABILITIES552

799

Total liabilities184,370

466,806

COMMITMENTS AND CONTINGENCIESSHAREHOLDERS' 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, respectively101

101

Additional paid-in capital831,999

826,629

Retained earnings79,667

142,575

Total shareholders' equity911,767

969,305

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$

1,096,137

$

1,436,111

PROPETRO HOLDING CORP.CONDENSED CONSOLIDATED BALANCE SHEETS(In thousands, except share data)(Unaudited) September December 30, 2020 31, 2019

ASSETSCURRENT ASSETS: Cash and cash equivalents $ 54,255 $ 149,036

Accounts receivable - net of allowance for credit 94,663 212,183 losses of $1,497 and $1,049, respectively 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 936,283 1,047,535depreciationOPERATING 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' EQUITYCURRENT 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 CONTINGENCIESSHAREHOLDERS' 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 101 101 authorized, 100,898,445 and 100,624,099 shares issued, respectively 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 amortization117,844

106,252

Impairment expense16,654

-

Deferred income taxes(15,490

)

42,623

Amortization of deferred debt issuance costs407

405

Stock?based compensation5,968

5,246

Provision for credit losses448

475

Loss on disposal of assets39,875

81,578

Changes in operating assets and liabilities:Accounts receivable117,072

(73,268

)

Other current assets2,598

603

Inventories587

4,503

Prepaid expenses4,741

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 activities118,026

307,629

CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures(86,509

)

(394,343

)

Proceeds from sale of assets4,330

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 period149,036

132,700

CASH AND CASH EQUIVALENTS - End of period$

54,255

$

109,191

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 407 405 issuance costs 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 (11,996 ) 8,042 liabilities Accrued interest (394 ) 358

Net cash provided by 118,026 307,629 operating activitiesCASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (86,509 ) (394,343 )

Proceeds from sale of assets 4,330 6,774

Net cash used in (82,179 ) (387,569 ) investing activitiesCASH 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 (598 ) - equity awards Net cash (used in) (130,628 ) 56,431 provided by financing activitiesNET DECREASE IN CASH AND CASH EQUIVALENTS (94,781 ) (23,509 )

CASH AND CASH EQUIVALENTS - Beginning of 149,036 132,700 periodCASH AND CASH EQUIVALENTS - End of period $ 54,255 $ 109,191

Reportable Segment InformationThree 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.

ReportableSegmentInformation Three Months Ended

September 30, 2020 June 30, 2020

($ in Pressure All Other Total Pressure All Other Totalthousands) Pumping Pumping

Service $ 131,321 $ 2,389 $ 133,710 $ 103,815 $ 2,294 $ 106,109 revenue Adjusted $ 26,662 $ (9,308 ) $ 17,354 $ 34,030 $ (8,620 ) $ 25,410 EBITDA Depreciation $ 36,326 $ 1,141 $ 37,467 $ 38,910 $ 1,263 $ 40,173 and amortization Capital $ 7,571 $ 370 $ 7,941 $ 10,034 $ 1,846 $ 11,880 expenditures incurred 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

Pressure All Other Total Pressure All Other Total($ in thousands) Pumping Pumping

Net loss $ (20,920 ) $ (8,264 ) $ (29,184 ) $ (13,528 ) $ (12,392 ) $ (25,920 )

Depreciation 36,326 1,141 37,467 38,910 1,263 40,173 and amortization Interest - 137 137 - 791 791 expense Income taxes - (7,717 ) (7,717 ) - (6,460 ) (6,460 )

Loss on 11,256 30 11,286 8,587 147 8,734 disposal of assets Stock-based - 2,535 2,535 - 2,962 2,962 compensation Other expense - 312 312 - 267 267

Other general and - 2,481 2,481 - 4,802 4,802 administrative expense Retention bonus - 37 37 61 - 61 and severance expense Adjusted EBITDA $ 26,662 $ (9,308 ) $ 17,354 $ 34,030 $ (8,620 ) $ 25,410

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CONTACT: ProPetro Holding Corp Sam Sledge, 432-688-0012 Chief Strategy and Administrative Officer sam.sledge@propetroservices.com