• Revenue: $361 million, a 1% increase from the second quarter.
• Net Loss: $137 million for the third quarter.
• Adjusted EBITDA: Increased 8% sequentially to $71 million.
• Adjusted Net Income: $13 million, excluding non-cash impairment expense.
• Non-Cash Impairment Expense: $189 million related to Tier II diesel-only pumping units.
• Operating Lease Expense: $13 million for electric fleets, up from $12 million in the prior quarter.
• Capital Expenditures: $37 million, primarily for maintenance and support equipment.
• Cash and Liquidity: Total cash of $47 million; total liquidity of $127 million.
• Share Repurchase Program: 1.3 million shares retired in the third quarter, totaling 12.6 million shares since inception.
• Active Hydraulic Fracturing Fleets: 14 fleets active during the third quarter.

• Warning! GuruFocus has detected 4 Warning Sign with PUMP.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ProPetro Holding Corp (NYSE:PUMP) delivered strong results in the third quarter, with resilient free cash flow generation despite a challenging market environment.
• The company is successfully transitioning its fleet to next-generation technologies, including Tier IV DGB dual-fuel and FORCE electric frac fleets, which have received positive customer feedback.
• ProPetro has secured a three-year contract with ExxonMobil for hydraulic fracturing and other services, indicating strong demand for its next-generation services.
• The company has a dynamic capital allocation strategy focusing on fleet electrification, value-enhancing M&A, and shareholder returns, which has contributed to top and bottom line growth.
• ProPetro's share repurchase program has been active, with 12.6 million shares retired, representing approximately 11% of outstanding shares, demonstrating a commitment to returning capital to shareholders.

Negative Points

• The wireline business continues to experience softness, and pricing in the conventional diesel-only frac market remains competitive, putting pressure on that part of the portfolio.
• The third quarter was impacted by uncharacteristic weather events, particularly in July and August, affecting operations more than anticipated.
• ProPetro incurred a non-cash impairment expense of $189 million related to its conventional Tier II diesel-only pumping units, reflecting a shift in customer preference away from these assets.
• Short-term working capital headwinds impacted free cash flow, despite strong adjusted EBITDA performance.
• The company expects a sequential revenue decline in the fourth quarter due to normal seasonality and holiday-related downtime, with decremental margins anticipated.

Q & A Highlights

Q: You noted that you expect your active fleets to hold flat at around 14 fleets in the fourth quarter. Could you give us some more color on the utilization of those fleets? A: As we stated in our materials, we do expect to hold fleet count flat. The additional variable is the usual holiday time-off around Thanksgiving and Christmas. We expect a small step down in days worked or hours pumped due to this seasonality. Our position as the baseload for many of our larger customers allows us to stay active.

Q: Could you remind us what the contract duration is on the fourth and fifth FORCE fleets you expect to deploy? A: Once we deploy the fifth, it will be across four different customers. We aim for multiyear agreements, but specifics depend on customer needs. The electric operation is performing better than expected, with high operating efficiencies and customer satisfaction.

Q: Some of your peers expect revenues to decline double digits quarter-over-quarter in Q4. Where do you expect quarter-over-quarter revenue change? A: We're expecting just into the double-digit range on the low end, mostly driven by normal seasonality. We have active fleets operating consistently through the quarter.

Q: How do the economics of your fourth and fifth fleets compare to the first three that you built? A: Electric fleet pricing has slightly increased over the last year, adding to our conviction about the opportunity of electrified equipment. Profitability is strong, supporting continued investment in electric rather than diesel equipment.

Q: With your fleet high-grading and ending of investment on the legacy Tier 2 pumps, how should we think about your frac maintenance expense going forward? A: Maintenance expenses are down significantly. Electric fleets require less maintenance, which is mostly done in the field. This shift has allowed us to right-size our maintenance organization and optimize operations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.