August 8, 2019 - 4:15 PM EDT
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ProPetro Reports Preliminary Financial Results for the Second Quarter 2019

MIDLAND, Texas

Delays Conference Call and Form 10-Q

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today announced preliminary financial and operational results for the second quarter of 2019 and delayed its second quarter earnings conference call in order to allow additional time to complete its Quarterly Report on Form 10-Q for the three months ended June 30, 2019 (the "Form 10-Q").

Preliminary Second Quarter 2019 Highlights

  • Total revenue for the quarter was $529.5 million, as compared to $546.2 million for the first quarter of 2019.
  • Net income was $36.1 million, or $0.35 per diluted share, compared to $69.8 million, or $0.67 per diluted share, for the first quarter of 2019.
  • Adjusted EBITDA(1) for the quarter was $126.6 million compared to $150.3 million for the first quarter of 2019.
  • Effective utilization for the second quarter was 25.6 fleets.
  • As previously announced, ProPetro plans to deploy three new-build electrically powered DuraStim® hydraulic fracturing fleets(2) beginning in late 2019.

(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) DuraStim® is a registered trademark of AFGlobal Corporation (“AFGlobal”)

Dale Redman, Chief Executive Officer, commented, “ProPetro continues to benefit from the close relationships we have formed in the Permian basin with our customers and supply chain. Our team continues to demonstrate an exceptional focus on serving the needs of our customers. In turn, our customers have supported us through a volatile macro environment. I appreciate every customer and employee for their support and contributions to our business.”

The delay in the Form 10-Q is due to an ongoing review by the audit committee of the Company’s board of directors which initially focused on the disclosure of agreements previously entered into by the Company with AFGlobal for the purchase of DuraStim® hydraulic fracturing fleets and effective communications related thereto. A corrective release regarding these agreements which addressed the disclosure issue was previously issued on June 28, 2019.

As part of the review, the audit committee expanded its work to include, among other items, expense reimbursements and certain transactions involving related parties or potential conflicts of interest, as described in the Company’s current report on Form 8-K filed today, August 8, 2019. While the additional work has resulted in the reversal of certain expense reimbursements, the establishment of a disclosure committee and other improvements, the audit committee and management have not identified to date any items that would require revision or restatement of the Company’s historical financial statements. The audit committee expects to complete its review within the next 30 days.

ProPetro expects to file a Form 12b-25, Notification of Late Filing, with the Securities and Exchange Commission. The Company currently expects to file the Form 10-Q as soon as possible following the completion of the review, subject to any definitive conclusions of the review that would cause further delay. ProPetro will announce revised details for the second quarter earnings conference call as soon as possible.

Preliminary Second Quarter 2019 Financial Summary

Revenue for the second quarter of 2019 was $529.5 million, a decrease of 3% as compared to revenue of $546.2 million for the first quarter of 2019. The decrease was primarily attributable to a slight decrease in customer activity. During the second quarter of 2019, 97.4% of total revenue was associated with pressure pumping services, similar to 97.4% in the first quarter.

Cost of services excluding depreciation and amortization for the second quarter of 2019 increased slightly to $386.2 million from $381.5 million during the first quarter of 2019. The increase was primarily attributable to increased costs associated with materials as well as increased repairs and maintenance expense. As a percentage of pressure pumping segment revenues, pressure pumping cost of services increased to 72.6% from 69.7% in the first quarter of 2019.

General and administrative expense was $27.9 million as compared to $18.5 million in the first quarter of 2019. The increase was due in part to approximately $5.1 million in professional and other advisory costs incurred in connection with the audit committee’s review described above. General and administrative expense, exclusive of stock-based compensation, deferred IPO bonus, retention expense, and legal fees (including fees associated with the audit committee’s review) was $16.7 million, or 3.2% of revenue, for the second quarter of 2019.

Net income for the second quarter of 2019 totaled $36.1 million, or $0.35 per diluted share, versus $69.8 million, or $0.67 per diluted share, for the first quarter of 2019.

Adjusted EBITDA for the second quarter of 2019 was $126.6 million, compared to $150.3 million in the previous quarter. Adjusted EBITDA margin for the second quarter of 2019 was 23.9% as compared to 27.5% for the first quarter of 2019.

Operational Highlights and Fleet Expansion

Effective utilization of the Company’s fracturing assets during the second quarter of 2019 was 25.6 fleets. ProPetro currently expects effective utilization in the third quarter of 2019 to be approximately 25 fleets. The slight decrease in utilization is primarily attributable to a decrease in customer activity.

As previously announced, the Company plans to deploy three electrically powered DuraStim® hydraulic fracturing fleets beginning in late 2019. Each of these fleets consists of 36,000 HHP and associated auxiliary and mixing equipment and power generation. These fleets will be deployed to two existing customers on a dedicated basis with the first fleet expected to be deployed before the end of 2019.

During the quarter the Company also expanded its cementing and coiled tubing operations by deploying one additional new-build cementing unit and one additional new-build coiled tubing unit, bringing total current cementing capacity to 22 units and total coiled tubing capacity to 9 units. Also, as previously announced, ProPetro plans to organically expand its cementing operation by two additional units during the remainder of 2019.

Liquidity and Capital Spending

As of June 30, 2019, total cash was $36.3 million and total debt was $150.0 million. Total liquidity at the end of the second quarter of 2019 was $146.5 million, including cash and $110.2 million of available capacity under the Company’s $300 million revolving credit facility. As of August 6, 2019, the Company’s net debt was approximately $11.4 million, which represents outstanding debt of $130.0 million less cash of $118.6 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 second quarter of 2019 were $161.2 million. Of the total capital expenditures incurred, approximately $102.1 million was associated with growth capital (primarily related to the DuraStim® hydraulic fracturing fleets and associated power generation) and approximately $59.1 million was associated with maintenance capital. Based on expected utilization, the Company now estimates maintenance capital spending to be approximately $6-7 million per active fleet (inclusive of fluid ends) during 2019.

Outlook

“ProPetro is excited to be a leader in technological advances in our sector that will allow our customers to more efficiently complete their projects. We will continue to execute upon our differentiated business model. While we currently face a challenging and volatile market and commodity price environment, we currently remain confident in our ability to remain highly utilized as our core customer base remains committed to disciplined capital spending that should drive sustainable activity levels over the long run,” commented Dale Redman.

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.

Cautionary Statement Regarding Preliminary Financial Information

The Company has prepared the preliminary financial information set forth above on a materially consistent basis with its historical financial information and in good faith based upon its internal reporting as of and for the three months ended June 30, 2019. This financial information is preliminary and unaudited and is thus inherently uncertain and subject to change as the Company finalizes its financial results and related reviews for the three months ended June 30, 2019. The Company is in the process of completing its customary quarterly close and review procedures as of and for the three months ended June 30, 2019, and there can be no assurance that its final results for this period will not differ from this preliminary financial information. During the course of the preparation of the Company’s consolidated financial statements and related notes as of and for the three months ended June 30, 2019, the Company may identify items that could cause its final reported results to be materially different from the preliminary financial information set forth above.

This preliminary financial information should not be viewed as a substitute for full interim financial statements prepared in accordance with GAAP. In addition, this preliminary financial information for the three months ended June 30, 2019 is not necessarily indicative of the results to be achieved for the remainder of 2019 or any future period. This preliminary financial information has been prepared by and is the responsibility of management. In addition, the preliminary financial information presented above has not been audited, reviewed, or compiled by the Company’s independent registered public accounting firm. Accordingly, the Company’s independent registered public accounting firm does not express an opinion or any other form of assurance with respect thereto and assumes no responsibility for, and disclaims any association with, this information.

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. 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 those 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. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it, including the ultimate conclusions of the audit committee’s ongoing review. 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 Securities and Exchange Commission 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. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended

June 30

March 31

June 30

2019

2019

2018

REVENUE - Service revenue

$

529,494

 

$

546,179

 

$

459,888

 

 
COSTS AND EXPENSES
Cost of services (exclusive of depreciation and amortization)

 

386,218

 

 

381,523

 

 

351,888

 

General and administrative (inclusive of stock-based compensation)

 

27,889

 

 

18,524

 

 

14,178

 

Depreciation and amortization

 

35,482

 

 

33,117

 

 

21,276

 

Loss on disposal of assets

 

31,198

 

 

19,228

 

 

18,990

 

Total costs and expenses

 

480,787

 

 

452,392

 

 

406,332

 

OPERATING INCOME

 

48,707

 

 

93,787

 

 

53,556

 

OTHER EXPENSE:
Interest expense

 

(2,026

)

 

(1,903

)

 

(2,231

)

Other expense

 

(276

)

 

(187

)

 

(182

)

Total other expense

 

(2,302

)

 

(2,090

)

 

(2,413

)

INCOME BEFORE INCOME TAXES

 

46,405

 

 

91,697

 

 

51,143

 

INCOME TAX EXPENSE

 

(10,272

)

 

(21,892

)

 

(12,052

)

NET INCOME

$

36,133

 

$

69,805

 

$

39,091

 

NET INCOME PER COMMON SHARE:
Basic

$

0.36

 

$

0.70

 

$

0.47

 

Diluted

$

0.35

 

$

0.67

 

$

0.45

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic

 

100,425

 

 

100,232

 

 

83,447

 

Diluted

 

104,379

 

 

104,123

 

 

86,878

 

PROPETRO HOLDING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
June 30, 2019 December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents

$

36,279

$

132,700

 

Accounts receivable - net of allowance for doubtful accounts of $575 and $100, respectively

 

371,478

 

202,956

 

Inventories

 

4,948

 

6,353

 

Prepaid expenses

 

4,934

 

6,610

 

Other current assets

 

328

 

638

 

Total current assets

 

417,967

 

349,257

 

PROPERTY AND EQUIPMENT - net of accumulated depreciation

 

1,038,557

 

912,846

 

OPERATING LEASE RIGHT-OF-USE ASSETS

 

1,636

 

-

 

OTHER NONCURRENT ASSETS:
Goodwill

 

9,425

 

9,425

 

Intangible assets - net of amortization

 

-

 

13

 

Other noncurrent assets

 

2,972

 

2,981

 

Total other noncurrent assets

 

12,397

 

12,419

 

TOTAL ASSETS

$

1,470,557

$

1,274,522

 

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable

$

284,730

$

214,460

 

Operating lease liabilities

 

425

 

-

 

Finance lease liabilities

 

2,980

 

-

 

Accrued and other current liabilities

 

36,204

 

138,089

 

Accrued interest payable

 

630

 

211

 

Total current liabilities

 

324,969

 

352,760

 

DEFERRED INCOME TAXES

 

85,221

 

54,283

 

LONG-TERM DEBT

 

150,000

 

70,000

 

NONCURRENT OPERATING LEASE LIABILITIES

 

1,330

 

-

 

OTHER LONG-TERM LIABILITIES

 

-

 

124

 

Total liabilities

 

561,520

 

477,167

 

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, 100,551,319 and 100,190,126 shares issued, respectively

 

101

 

100

 

Additional paid-in capital

 

823,433

 

817,690

 

Accumulated surplus (deficit)

 

85,503

 

(20,435

)

Total shareholders’ equity

 

909,037

 

797,355

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,470,557

$

1,274,522

 

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

Six Months Ended June 30,

2019

 

2018

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income

$

105,938

 

$

75,799

 

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization

 

68,599

 

 

40,211

 

Deferred income tax expense

 

30,937

 

 

21,592

 

Amortization of deferred revenue rebate

 

-

 

 

615

 

Amortization of deferred debt issuance costs

 

269

 

 

191

 

Stock‑based compensation

 

4,669

 

 

2,201

 

Loss on disposal of assets

 

50,425

 

 

27,804

 

Changes in operating assets and liabilities:
Accounts receivable

 

(168,524

)

 

(116,843

)

Other current assets

 

596

 

 

(383

)

Inventories

 

1,274

 

 

(1,559

)

Prepaid expenses

 

1,417

 

 

1,708

 

Accounts payable

 

42,533

 

 

59,109

 

Accrued liabilities and other current liabilities

 

12,299

 

 

12,941

 

Accrued interest

 

419

 

 

1,056

 

Net cash provided by operating activities

 

150,851

 

 

124,442

 

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures

 

(325,881

)

 

(152,191

)

Proceeds from sale of assets

 

1,547

 

 

2,282

 

Net cash used in investing activities

 

(324,334

)

 

(149,909

)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings

 

90,000

 

 

57,378

 

Repayments of borrowings

 

(10,000

)

 

(25,230

)

Payment of finance lease obligation

 

(123

)

 

-

 

Repayments of insurance financing

 

(3,890

)

 

(3,218

)

Payment of debt issuance costs

 

-

 

 

(360

)

Proceeds from exercise of equity awards

 

1,075

 

 

51

 

Net cash provided by financing activities

 

77,062

 

 

28,621

 

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

(96,421

)

 

3,154

 

CASH AND CASH EQUIVALENTS — Beginning of period

 

132,700

 

 

23,949

 

CASH AND CASH EQUIVALENTS — End of period

$

36,279

 

$

27,103

 

Non-GAAP Financial Measures

 
Reportable Segment Information
 
Three Months Ended
June 30, 2019 March 31, 2019
($ in thousands)

Pressure Pumping

All Other

Total

Pressure Pumping

All Other

Total

 
Service revenue

$

515,867

$

13,627

 

$

529,494

$

532,064

$

14,115

 

$

546,179

Adjusted EBITDA

$

131,187

$

(4,625

)

$

126,562

$

151,040

$

(765

)

$

150,275

Depreciation and amortization

$

34,023

$

1,459

 

$

35,482

$

31,783

$

1,334

 

$

33,117

Capital expenditures

$

156,542

$

4,677

 

$

161,219

$

82,035

$

4,112

 

$

86,147

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 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

June 30, 2019

March 31, 2019

($ in thousands)

Pressure Pumping

All Other

Total

Pressure Pumping

All Other

Total

 
Net income (loss)

$

64,230

$

(28,097

)

$

36,133

$

98,094

$

(28,289

)

$

69,805

Depreciation and amortization

 

34,023

 

1,459

 

 

35,482

 

31,783

 

1,334

 

 

33,117

Interest expense

 

22

 

2,004

 

 

2,026

 

-

 

1,903

 

 

1,903

Income tax expense

 

-

 

10,272

 

 

10,272

 

-

 

21,892

 

 

21,892

Loss on disposal of assets

 

31,117

 

81

 

 

31,198

 

19,006

 

222

 

 

19,228

Stock-based compensation

 

-

 

2,840

 

 

2,840

 

-

 

1,829

 

 

1,829

Other expense

 

-

 

276

 

 

276

 

-

 

187

 

 

187

Other general and administrative expense

 

-

 

6,540

 

 

6,540

 

-

 

-

 

 

-

Deferred IPO bonus and retention expense

 

1,795

 

-

 

 

1,795

 

2,157

 

157

 

 

2,314

Adjusted EBITDA

$

131,187

$

(4,625

)

$

126,562

$

151,040

$

(765

)

$

150,275

 

ProPetro Holding Corp
Sam Sledge, 432-688-0012
Director of Investor Relations
[email protected]


Source: Business Wire (August 8, 2019 - 4:15 PM EDT)

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