ProPetro Holding Corp. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. ProPetro provides hydraulic fracturing and related oilfield services, primarily in the Permian Basin.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $250.1 million | $133.7 million | $628.4 million | $634.9 million |
| Operating loss | $5.9 million | $36.5 million | $46.3 million | $75.2 million |
| Net loss | $5.1 million | $29.2 million | $34.0 million | $62.9 million |
| Adjusted EBITDA and margin | $42.1 million; 16.8% | $17.4 million; 13.0% | $97.8 million; 15.6% | $117.7 million; 18.5% |
| Operating cash flow | Not separately presented for the quarter | $109.3 million | $118.0 million |
Q3 pressure-pumping revenue was $245.6 million, up 87.1% year over year; the average effectively utilized fleet count rose to 13.8 from 8.5 fleets. Nine-month pressure-pumping revenue fell 0.8% to $617.3 million, while its Adjusted EBITDA declined 4.8% to $132.7 million and margin narrowed to 21.5% from 22.4%. Adjusted EBITDA is a non-GAAP measure.
Q3 cost of services was $188.7 million; general and administrative expense was $21.3 million; depreciation and amortization was $33.5 million. Nine-month results included $40.5 million of asset disposal losses and no impairment expense, versus $16.7 million of impairment expense in 2020. The filing does not provide a separately stated gross margin.
Balance sheet, liquidity and cash flow
- At September 30, cash was $84.6 million; current assets were $242.9 million and current liabilities $192.0 million.
- No ABL borrowings were outstanding. Reported total liquidity was $153.6 million: $84.6 million cash plus $69.0 million availability. The ABL facility has a $300 million stated capacity, subject to its borrowing base, and matures December 2023.
- Total liabilities were $255.9 million and shareholders’ equity $842.8 million. The filing reports no long-term debt balance; debt-related interest expense was mainly loan-cost amortization.
- For the first nine months, investing cash outflow was $85.5 million, including $87.7 million of cash capital expenditures; financing cash outflow was $7.9 million. Cash increased $15.8 million from year-end 2020.
Changes, outlook and risks
- Management attributed the Q3 revenue rebound to recovering demand, improved utilization, operating efficiencies and better pricing. For the nine-month period, discounts and reduced idle-fee revenue offset higher utilization; idle fees were $5.3 million versus $41.1 million a year earlier.
- Management noted persistent service-industry pricing pressure, labor shortages, inflation and supply-chain constraints. It expects seasonal operating declines in November and December. Results remain sensitive to customer activity, commodity prices, COVID-19 developments and customers’ spending decisions.
- In September, ProPetro ordered 125,000 HHP of Tier IV DGB equipment for approximately $74 million, with deliveries beginning in December 2021 and continuing into the first half of 2022. Up to approximately $30 million could be paid in 2021. The company expects the equipment to replace conventional Tier II horsepower.
- DuraStim electric fracturing equipment remains in field trials; management targeted first-fleet commercialization in 2022 subject to successful testing, but said supply-chain disruption could extend the decision timeline. The company has an option for up to an additional 108,000 HHP through July 2022 and had not determined whether to exercise it.
- The Logan securities lawsuit and SEC investigation remained pending; the company recorded no provision because outcomes could not be reasonably estimated. A shareholder derivative suit was dismissed without prejudice in September 2021. A sand supplier lawsuit alleges shortfall fees; management could not estimate the outcome but did not expect a material adverse effect.
- Beginning in November 2021, the company planned to self-insure up to $10 million per occurrence for certain wellsite fire and explosion losses. The filing also identifies environmental compliance, lower-emissions investment requirements and LIBOR transition as matters to monitor.
Important facts for investors to verify
- Whether improved pricing, fleet utilization and operating margins continue, particularly after the seasonal fourth-quarter slowdown.
- Execution, delivery timing, cash cost and expected returns on the $74 million Tier IV DGB order; progress and commercialization prospects for DuraStim.
- Customer concentration and collections: Pioneer accounted for $147.3 million of Q3 revenue, and approximately $89.4 million was due from Pioneer at quarter-end.
- Developments in the SEC investigation, Logan lawsuit and sand supplier litigation, including any change to potential exposure or insurance recoveries.
- Liquidity and borrowing-base availability as receivables and business activity change; the facility is secured by substantially all company assets and has covenant and availability triggers.