ProPetro Holding Corp. — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. ProPetro provides pressure-pumping and related oilfield services, primarily in the Permian Basin. Results are unaudited.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Service revenue | $315.1 million | $216.9 million | $597.8 million | $378.3 million |
| Operating income (loss) | $(40.3) million | $(11.7) million | $(34.5) million | $(40.4) million |
| Net income (loss) | $(32.9) million | $(8.5) million | $(21.0) million | $(28.9) million |
| Adjusted EBITDA | $75.9 million | $35.7 million | $142.5 million | $55.7 million |
| Adjusted EBITDA margin | 24.1% | 16.5% | 23.8% | 14.7% |
| Operating cash flow | — | $103.3 million | $61.5 million | |
| Capital expenditures | $89.1 million | $30.8 million | $160.8 million | $63.1 million |
Q2 revenue rose 45.3%, reflecting greater customer activity, improved pricing and increased fleet utilization; average active fleets increased to approximately 14.8 from 13.1. The pressure-pumping segment generated $309.4 million of Q2 revenue and $86.3 million of adjusted EBITDA. Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for GAAP results or cash flow.
Q2 net loss included a $57.5 million impairment of DuraStim electric fracturing pumps and a $22.5 million loss on asset disposals. For the six-month period, higher revenue and operating cash flow improved the net loss compared with 2021, but results also included the impairment and higher G&A and asset-disposal losses. Six-month other income included a $10.7 million net Texas tax refund.
At June 30, cash was $69.8 million, current assets were $259.0 million and current liabilities were $193.7 million. Total liabilities were $250.6 million; the company reported no borrowings under its credit facility. Total liquidity was approximately $185.3 million, including $115.5 million of facility availability. The April 2022 amended ABL facility has $150 million capacity, subject to a borrowing base, and matures in April 2027. The borrowing base was approximately $120.5 million.
Six-month cash decreased by $42.1 million to $69.8 million, as investing outflows—primarily equipment spending—exceeded operating cash generation. Accounts receivable increased to $182.0 million from $128.1 million at year-end; the filing attributes operating cash flow partly to collection and vendor-payment timing.
Material changes, outlook and risks
- Management attributed higher activity and improved pricing to rising demand for pressure-pumping services. Cost inflation and supply-chain constraints remain pressures; management cautioned that profitability could suffer if cost increases cannot be passed through to customers.
- The company concluded timely commercialization of its DuraStim pumps was no longer reasonably certain and recorded the impairment. It does not expect to deploy the pumps in their current form; certain ancillary assets may be used elsewhere.
- ProPetro had 1.315 million HHP available at quarter-end, including 197,500 HHP of Tier IV DGB equipment. It expected to receive the remaining 80,000 HHP of committed conversions during the second half of 2022. In August, it committed to an additional approximately $43 million purchase and conversion of Tier IV DGB equipment.
- Management expected 2022 capital spending to focus on maintenance, lower-emissions equipment conversions and related purchases, funded through cash, operating cash flow and, if needed, the ABL facility. No specific full-year capex guidance amount is provided in the filing text.
- Lower-emissions equipment transition requires significant investment. Other identified risks include oil-and-gas market volatility, inflation, labor and supply availability, customer activity and credit, seasonality, competition, regulatory changes and the effects of the Russia-Ukraine conflict and COVID-19.
- Pioneer accounted for approximately $115.2 million, or about 37% of Q2 revenue; receivables due from Pioneer were approximately $69.0 million at quarter-end. The amended services agreement covers six fleets and runs through December 31, 2022.
- Legal matters include the ongoing Logan securities class action and a related shareholder demand review; the company recorded no provision because the outcome could not be reasonably estimated. A sand supplier has sued over alleged shortfall fees; the company contests the claims and says the outcome cannot currently be estimated.
Investor verification points
- Assess whether revenue growth, fleet utilization and pricing gains are sustainable and sufficient to offset inflation and higher operating costs.
- Review the DuraStim impairment assumptions and whether remaining ancillary equipment can be redeployed as expected.
- Track capital spending, the additional $43 million DGB commitment, cash balances and borrowing-base availability as investment continues.
- Evaluate revenue and receivable concentration with Pioneer, including the services agreement’s year-end expiration.
- Monitor litigation, the sand-supplier dispute and the outcome of ongoing tax audits; the filing does not quantify potential exposure for these matters.