ProPetro Holding Corp. — Q1 2021 Form 10-Q
Business context and period: Unaudited results for the three months ended March 31, 2021. ProPetro provides hydraulic fracturing and related oilfield services, primarily in the Permian Basin. Pressure pumping is its reportable segment; coiled tubing and corporate costs are included in “all other.”
Key financial results
| Metric | Q1 2021 | Q1 2020 |
|---|---|---|
| Revenue | $161.5 million | $395.1 million |
| Operating loss | $28.7 million | $7.4 million |
| Net loss | $20.4 million | $7.8 million |
| Diluted loss per share | $0.20 | $0.08 |
| Adjusted EBITDA (non-GAAP) | $20.0 million | $74.9 million |
| Adjusted EBITDA margin (non-GAAP) | 12.4% | 19.0% |
| Operating cash flow | $17.0 million | $61.7 million |
| Capital expenditures (cash flow statement) | $22.5 million | $47.3 million |
- Pressure-pumping revenue was $158.2 million, down 59.1%. Its Adjusted EBITDA was $31.9 million, with a 20.1% margin versus 20.3% a year earlier.
- Cash and cash equivalents were $55.9 million at quarter-end, down from $68.8 million at December 31, 2020. Total assets were $1.045 billion; shareholders’ equity was $847.3 million.
- No ABL borrowings were outstanding at March 31. The company reported $57.8 million of facility availability and total liquidity of $113.7 million. The ABL borrowing base was approximately $61.5 million; the facility matures December 2023.
- Accounts receivable was $110.4 million, compared with $84.2 million at year-end. Accounts payable rose to $108.9 million from $79.2 million.
Changes, outlook, and notable items
- Revenue fell 59.1% year over year, reflecting lower pressure-pumping demand and customer pricing discounts amid the COVID-19-driven industry downturn. Average effectively utilized fleets declined to about 10.3 from 18.6. February 2021 severe weather caused approximately eight days of lost revenue and added costs.
- Net loss widened despite lower expenses. Q1 2020 included $16.7 million of impairment expense; Q1 2021 had none. Q1 2021 also included a $2.1 million sales and excise/use tax refund, recorded in other income. Loss on disposal of assets remained significant at $13.1 million.
- Management described a gradual recovery in oil prices and activity but gave no specific revenue or earnings guidance. 2021 capital spending is expected to focus mainly on maintenance and converting conventional Tier II equipment to lower-emissions Tier IV DGB equipment; spending will depend on activity and demand.
- The company had 1.388 million HHP of available equipment at quarter-end and expected delivery of an additional 35,000 HHP of DGB equipment in Q2. It targeted commercializing its first DuraStim fleet in the second half of 2021; the equipment was still being tested and had limited deployment. Management said exercising an option for up to an additional 108,000 HHP of DuraStim equipment was not probable under current conditions.
- Material risks include commodity-price and customer-activity volatility, COVID-19 impacts, competition and pricing pressure, the capital-intensive shift to lower-emissions equipment, customer credit and collection risk, and potential impairment if market conditions remain weak. Management said borrowing-base availability could decline if conditions worsen.
- Pending matters include a shareholder class action, a derivative lawsuit, and an SEC investigation. The company reported no provision because outcomes could not be reasonably estimated. It also disclosed approximately $3.0 million of equipment commitments and $5.5 million of remaining crew-lodging commitments.
- After quarter-end, ProPetro entered a short-term gas-turbine lease beginning June 1, 2021, with approximately $3.0 million of expected lease income. Management reported disclosure controls were effective as of March 31, 2021.
Important facts for investors to verify
- Whether customer activity, fleet utilization, pricing, and cash generation continued to recover after quarter-end, and how much of Q1’s decline was temporary or structural.
- Accounts-receivable collections and customer concentration: Pioneer-related revenue was approximately $86.3 million in Q1, and its quarter-end receivable was approximately $61.2 million.
- Liquidity and ABL availability as the borrowing base is tied to eligible receivables, including covenant and fixed-charge-coverage triggers.
- Capital spending needs, DGB delivery and conversion progress, and DuraStim testing, commercialization, and potential additional commitments.
- Developments and potential financial effects of the SEC investigation and shareholder litigation; no loss estimate or provision was recorded.
- Reconcile the $22.5 million of capital expenditures in the cash flow statement with the $32.3 million of segment capital expenditures disclosed in the segment table; the filing text does not explain the difference clearly.