PUMP ProPetro Holding Corp

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today announced financial and operational results for the third quarter of 2018.

Third Quarter 2018 and Recent Highlights

• Total revenue for the quarter was $434.0 million, as compared to $459.9 million for the second quarter of 2018.
• Net income was $46.3 million, or $0.53 per diluted share, an increase of 18% from $39.1 million, or $0.45 per diluted share, for the second quarter of 2018.
• Adjusted EBITDA for the quarter was $103.4 million, an increase of 8% from $96.0 million for the second quarter of 2018.
• Active hydraulic horsepower (“HHP”) deployed during the quarter and at quarter end was 860,000, or 19 fleets.
• The Company deployed one additional fleet in early October, increasing current total frac fleet capacity to 905,000 HHP, or 20 fleets.

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.”

Dale Redman, Chief Executive Officer, commented, “ProPetro’s success in the third quarter is a direct result of our differentiated, customer-centric business model. We remain extremely proud of our best-in-class team and the consistent results they produce. Our team supports some of the most effective and efficient operators in the upstream space, and we will remain closely focused on their needs as we finish 2018 strong and prepare for an exciting 2019.”

Third Quarter 2018 Financial Summary

Revenue for the third quarter of 2018 was $434.0 million, or 6% lower than $459.9 million for the second quarter of 2018. The decrease was primarily attributable to increased volumes of local sand. During the third quarter of 2018, 97.1% of total revenue was associated with pressure pumping services, compared to 96.9% in the second quarter.

Costs of services excluding depreciation and amortization for the third quarter of 2018 decreased to $320.1 million from $351.9 million during the second quarter of 2018 primarily due to increased volumes of local sand. As a percentage of pressure pumping segment revenues, pressure pumping costs of services decreased to 73.9% from 76.7% in the second quarter of 2018.

General and administrative expense was $12.8 million as compared to $14.2 million in the second quarter of 2018. The decrease was primarily attributable to normalizing costs after one-time expenses incurred in the second quarter. General and administrative expense, exclusive of stock-based compensation and deferred IPO bonus, was $10.5 million, or 2.4% of revenue, for the third quarter of 2018.

Net income for the third quarter of 2018 totaled $46.3 million, or $0.53 per diluted share, versus $39.1 million, or $0.45 per diluted share, for the second quarter of 2018.

Adjusted EBITDA increased approximately 8% to $103.4 million for the third quarter of 2018 from $96.0 million in the previous quarter. Adjusted EBITDA margin for the third quarter of 2018 was 23.8%, as compared to 20.9% for the second quarter of 2018.

Operational Highlights and Fleet Expansion

Active HHP deployed during the quarter and at quarter end was 860,000, or 19 fleets. Consistent with the Company’s previously announced plans, ProPetro expanded its fracturing capacity by an additional 45,000 HHP, or one fleet, in October. This brings current and expected 2018 year-end capacity to 905,000 HHP or, or 20 fleets. This fleet is working under a dedicated agreement with a new customer.

The Company also deployed one new build cementing unit in September bringing total cementing capacity to 19 units. To support growing demand, ProPetro plans to further expand its cementing fleet capacity with one additional new-build unit that is targeted to commence operations by the end of the year.

Liquidity and Capital Spending

As of September 30, 2018, total cash was $78.2 million and total debt was $89.1 million. Total liquidity at the end of the third quarter of 2018 was $198.2 million, including cash and $120.0 million of capacity under the Company’s $200 million revolving credit facility.

Capital expenditures incurred during the third quarter of 2018 were $74.2 million. This reflects spending on ProPetro’s growth initiatives as well as maintenance capital.

Outlook

Mr. Redman concluded, “We remain confident in our ability to produce consistent results driven by our high performing workforce and close partnerships with a blue-chip customer base. The Permian Basin is the premier resource play in North America and we expect it will remain so for decades to come. We believe we are uniquely positioned for outperformance through the end of 2018 and beyond.”

Conference Call Information

The Company will host a conference call at 8:00 AM Central Time on Wednesday, November 7, 2018 to discuss financial and operating results for the third quarter of 2018 and recent developments. This call will also be webcast, along with a presentation slide deck on ProPetro’s website at www.propetroservices.com. The slide deck will be published on the website the morning of the call. To access the conference call, U.S. callers may dial toll free 1-844-340-9046 and international callers may dial 1-412-858-5205. Please call ten minutes ahead of the scheduled start time to ensure a proper connection. A replay of the conference call will be available for one week following the call and can be accessed toll free by dialing 1-877-344-7529 for U.S. callers, 1-855-669-9658 for Canadian callers, as well as 1-412-317-0088 for international callers. The access code for the replay is 10124240.

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.

Forward-Looking Statements

The information above includes forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. These forward-looking statements are subject to certain risks, uncertainties and assumptions identified above or as disclosed from time to time in the Company’s filings with the Securities and Exchange Commission. As a result of these factors, actual results may differ materially from those indicated or implied by such forward-looking statements.

        PROPETRO HOLDING CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended September 30 June 30 September 30   2018     2018     2017   REVENUE - Service revenue $ 434,041 $ 459,888 $ 282,730 COSTS AND EXPENSES Cost of services (exclusive of depreciation and amortization) 320,146 351,888 225,433 General and administrative (inclusive of stock-based compensation) 12,821 14,178 11,106 Depreciation and amortization 23,217 21,276 14,745 Loss on disposal of assets   16,407     18,990     8,742   Total costs and expenses 372,591 406,332 260,026 OPERATING INCOME 61,450 53,556 22,704 OTHER INCOME (EXPENSE): Interest expense (1,480 ) (2,231 ) (644 ) Other expense   (93 )   (182 )   (191 ) Total other income (expense) (1,573 ) (2,413 ) (835 ) INCOME BEFORE INCOME TAXES 59,877 51,143 21,869 INCOME TAX (EXPENSE)/BENEFIT   (13,592 )   (12,052 )   96   NET INCOME $ 46,285   $ 39,091   $ 21,965   NET INCOME PER COMMON SHARE: Basic $ 0.55   $ 0.47   $ 0.26   Diluted $ 0.53   $ 0.45   $ 0.25   WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic   83,544     83,447     83,040   Diluted   86,878     86,878     86,264           PROPETRO HOLDING CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited)   September 30, 2018 December 31, 2017 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 78,164 $ 23,949 Accounts receivable - net of allowance for doubtful accounts of $457 and $443, respectively 252,390 199,656 Inventories 6,681 6,184 Prepaid expenses 2,911 5,123 Other current assets   1,179     748   Total current assets 341,325 235,660 PROPERTY AND EQUIPMENT - Net of accumulated depreciation 586,218 470,910 OTHER NONCURRENT ASSETS: Goodwill 9,425 9,425 Intangible assets - net of amortization 85 301 Deferred revenue rebate - net of amortization - 615 Other noncurrent assets   2,665     2,121   Total other noncurrent assets   12,175     12,462   TOTAL ASSETS $ 939,718   $ 719,032   LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 250,074 $ 211,149 Accrued liabilities 20,774 16,607 Current portion of long-term debt 9,088 15,764 Accrued interest payable   480     76   Total current liabilities 280,416 243,596 DEFERRED INCOME TAXES 39,958 4,881 LONG-TERM DEBT 80,000 57,178 OTHER LONG-TERM LIABILITIES   125     125   Total liabilities 400,499 305,780 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS’ EQUITY: Common stock, $0.001 par value, 200,000,000 shares authorized, 83,543,839 and 83,039,854 shares issued, respectively 84 83 Additional paid-in capital 611,348 607,466 Accumulated deficit   (72,213 )   (194,297 ) Total shareholders’ equity   539,219     413,252   TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 939,718   $ 719,032               PROPETRO HOLDING CORP. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)  

Nine Months Ended September 30,

  2018     2017   CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 122,084 $ 2,535 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 63,428 38,602 Deferred income tax expense 34,546 166 Amortization of deferred revenue rebate 615 1,385 Amortization of deferred debt issuance costs 295 3,322 Stock-based compensation 3,832 8,730 Loss on disposal of assets 42,898 28,971 Gain on interest rate swap - (226 ) Changes in operating assets and liabilities: Accounts receivable (52,734 ) (44,868 ) Other current assets (431 ) 3,271 Inventories (496 ) (4,435 ) Prepaid expenses 2,265 (910 ) Accounts payable 26,378 41,564 Accrued liabilities and other current liabilities 7,384 589 Accrued interest   1,030     (23 ) Net cash provided by operating activities   251,094     78,673   CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (212,152 ) (193,820 ) Proceeds from sale of assets   3,280     4,237   Net cash used in investing activities   (208,872 )   (189,583 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from borrowings 77,378 27,112 Repayments of borrowings (61,858 ) (164,638 ) Repayments of insurance financing (3,218 ) (2,900 ) Payment of debt issuance costs (360 ) (1,653 ) Proceeds from exercise of equity awards 51 - Proceeds from IPO - 185,500 Payment of IPO costs -   (15,099 ) Net cash provided by financing activities   11,993     28,322   NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 54,215 (82,588 ) CASH AND CASH EQUIVALENTS — Beginning of period   23,949     133,596   CASH AND CASH EQUIVALENTS — End of period $ 78,164   $ 51,008                     Reportable Segment Information   Three Months Ended September 30, 2018 June 30, 2018 ($ in thousands)

PressurePumping

All Other Total

PressurePumping

All Other Total   Service revenue $ 421,436 $ 12,605   $ 434,041 $ 445,805 $ 14,083   $ 459,888 Adjusted EBITDA $ 105,069 $ (1,701 ) $ 103,368 $ 97,818 $ (1,850 ) $ 95,968 Depreciation and amortization $ 22,026 $ 1,191   $ 23,217 $ 20,042 $ 1,234   $ 21,276 Capital expenditures $ 73,143 $ 1,060   $ 74,203 $ 68,106 $ 2,437   $ 70,543  

Non-GAAP Financial Measures

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 September 30, 2018 June 30, 2018 ($ in thousands)

PressurePumping

All Other Total

PressurePumping

All Other Total   Net income (loss) $ 66,493 $ (20,208 ) $ 46,285 $ 57,524 $ (18,433 ) $ 39,091 Depreciation and amortization 22,026 1,191 23,217 20,042 1,234 21,276 Interest expense - 1,480 1,480 - 2,231 2,231 Income tax expense - 13,592 13,592 - 12,052 12,052 Loss on disposal of assets 16,117 290 16,407 19,823 (833 ) 18,990 Stock-based compensation - 1,631 1,631 - 1,443 1,443 Other expense and legal settlement - 93 93 2 198 200 Deferred IPO bonus expense   433   230     663   427   258     685 Adjusted EBITDA $ 105,069 $ (1,701 ) $ 103,368 $ 97,818 $ (1,850 ) $ 95,968

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ProPetro Holding CorpSam Sledge, 432-688-0012Director of Investor Relationssam.sledge@propetroservices.com