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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
______________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-38035
______________________________
ProPetro Holding Corp.
(Exact name of registrant as specified in its charter)
______________________________
Delaware26-3685382
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1706 South Midkiff,
Midland, Texas 79701
(Address of principal executive offices)
(432) 688-0012
(Registrant’s telephone number, including area code) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per sharePUMPNew York Stock Exchange
Preferred Stock Purchase RightsN/ANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    No   
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
The number of the registrant’s common shares, par value $0.001 per share, outstanding at October 29, 2021, was 103,371,315.



PROPETRO HOLDING CORP.
TABLE OF CONTENTS
Page
-i-


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
          This Quarterly Report on Form 10-Q (this "Form 10-Q") contains forward-looking statements that are intended to be covered by the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Form 10-Q are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are all statements other than statements of historical facts, and give our expectations or forecasts of future events as of the effective date of this Form 10-Q. Words such as "may," "could," "plan," "project," "budget," "predict," "pursue," "target," "seek," "objective," "believe," "expect," "anticipate," "intend," "estimate," "will," "should" and similar expressions are generally to identify forward-looking statements. These statements include, but are not limited to statements about our business strategy, industry, future profitability and future capital expenditures. Such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those implied or projected by the forward-looking statements. Factors that could cause our actual results to differ materially from those contemplated by such forward-looking statements include:
the severity and duration of world health events, including the coronavirus ("COVID-19") pandemic and the related economic repercussions;
the actions taken by the members of the Organization of the Petroleum Exporting Countries ("OPEC") and Russia (together with OPEC and other allied producing countries, "OPEC+") with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;
actions taken by the Biden Administration, such as executive orders or new regulations, that may negatively impact the future production of oil and natural gas in the United States and may adversely affect our future operations;
the level of production and resulting market prices for crude oil, natural gas and other hydrocarbons;
changes in general economic and geopolitical conditions, including the rate of inflation;
the effects of existing and future laws and governmental regulations (or the interpretation thereof) on us and our customers;
cost increases and supply chain constraints related to our services;
competitive conditions in our industry;
changes in the long-term supply of, and demand for, oil and natural gas;
actions taken by our customers, suppliers, competitors and third-party operators;
technological changes, including lower emissions oilfield services equipment and similar advancements;
changes in the availability and cost of capital;
our ability to successfully implement our business plan;
large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;
the effects of consolidation on our customers or competitors;
the price and availability of debt and equity financing (including changes in interest rates);
our ability to complete growth projects on time and on budget;
operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;
changes in our tax status;
regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services;
new or expanded regulations that materially limit our customers’ access to federal and state lands for oil and gas development, thereby reducing demand for our services in the affected areas;
-ii-


growing demand for electric vehicles that result in reduced demand for gasoline and therefore the demand for our services;
our ability to successfully implement technological developments and enhancements, including the DuraStim® hydraulic fracturing equipment and associated power solutions;
operating hazards, natural disasters, weather-related delays, casualty and equipment losses and other matters beyond our control, which risks may be self-insured, or may not be fully covered under our insurance programs;
acts of terrorism, war or political or civil unrest in the United States or elsewhere;
the effects of current and future litigation, including the Logan Lawsuit;
the timing and outcome of, including potential expense associated with, the pending U.S. Securities and Exchange Commission (the "SEC") investigation;
the potential impact on our business and stock price of any announcements regarding the SEC's pending investigation, the Logan Lawsuit; and
our ability to successfully execute on our plans and objectives.
          Whether actual results and developments will conform with our expectations and predictions contained in forward-looking statements is subject to a number of risks and uncertainties which could cause actual results to differ materially from such expectations and predictions, including, without limitation, in addition to those specified in the text surrounding such statements, the risks described under Part II, Item 1A, "Risk Factors" in this Form 10-Q and elsewhere throughout this report, the risks described under Part I, Item 1A, "Risk Factors" in our Form 10-K for the year ended December 31, 2020, filed with the SEC (the "Form 10-K") and elsewhere throughout that report, and other risks, many of which are beyond our control.
          Readers are cautioned not to place undue reliance on our forward-looking statements, which are made as of the effective date of this Form 10-Q. We do not undertake, and expressly disclaim, any duty to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. Investors are also advised to carefully review and consider the various risks and other disclosures discussed in our SEC reports, including the risk factors described in the Form 10-K.
-iii-


PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
September 30, 2021December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$84,601 $68,772 
Accounts receivable - net of allowance for credit losses of $217 and $1,497, respectively
149,650 84,244 
Inventories3,477 2,729 
Prepaid expenses5,197 11,199 
Other current assets14 782 
Total current assets242,939 167,726 
PROPERTY AND EQUIPMENT - net of accumulated depreciation853,928 880,477 
OPERATING LEASE RIGHT-OF-USE ASSETS
486 709 
OTHER NONCURRENT ASSETS:
Other noncurrent assets1,397 1,827 
Total other noncurrent assets1,397 1,827 
TOTAL ASSETS$1,098,750 $1,050,739 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$167,085 $79,153 
Operating lease liabilities360 334 
Accrued and other current liabilities 24,597 24,676 
Total current liabilities192,042 104,163 
DEFERRED INCOME TAXES63,701 75,340 
NONCURRENT OPERATING LEASE LIABILITIES192 465 
Total liabilities255,935 179,968 
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value, 30,000,000 shares authorized, none issued, respectively
  
Common stock, $0.001 par value, 200,000,000 shares authorized, 103,259,971 and 100,912,777 shares issued, respectively
103 101 
Additional paid-in capital841,110 835,115 
Retained earnings 1,602 35,555 
Total shareholders’ equity842,815 870,771 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,098,750 $1,050,739 
See notes to condensed consolidated financial statements.
-1-

PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
REVENUE - Service revenue
$250,099 $133,710 $628,444 $634,888 
COSTS AND EXPENSES
Cost of services (exclusive of depreciation and amortization)
188,690 99,592 474,905 468,633 
General and administrative (inclusive of stock-based compensation)21,348 21,817 59,079 67,086 
Depreciation and amortization33,531 37,467 100,253 117,844 
Impairment expense   16,654 
Loss on disposal of assets12,424 11,286 40,500 39,875 
Total costs and expenses255,993 170,162 674,737 710,092 
OPERATING LOSS(5,894)(36,452)(46,293)(75,204)
OTHER EXPENSE:
Interest expense(143)(137)(477)(2,208)
Other (expense)/Income(309)(312)1,178 (583)
Total other (expense)/Income(452)(449)701 (2,791)
LOSS BEFORE INCOME TAXES(6,346)(36,901)(45,592)(77,995)
INCOME TAX BENEFIT1,279 7,717 11,639 15,087 
NET LOSS$(5,067)$(29,184)$(33,953)$(62,908)
NET LOSS PER COMMON SHARE:
Basic$(0.05)$(0.29)$(0.33)$(0.62)
Diluted$(0.05)$(0.29)$(0.33)$(0.62)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic103,257 100,897 102,408 100,802 
Diluted103,257 100,897 102,408 100,802 

See notes to condensed consolidated financial statements.
-2-

PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
(Unaudited)

Nine Months Ended September 30, 2021
Common Stock
SharesAmountAdditional Paid-In CapitalRetained Earnings Total
BALANCE - January 1, 2021100,913 $101 $835,115 $35,555 $870,771 
Stock-based compensation cost— — 2,487 — 2,487 
Issuance of equity awards, net1,145 1 (1)—  
Tax withholdings paid for net settlement of equity awards— — (5,614)— (5,614)
Net loss— — — (20,375)(20,375)
BALANCE - March 31, 2021102,058 $102 $831,987 $15,180 $847,269 
Stock-based compensation cost— — 2,909 — 2,909 
Issuance of equity awards, net1,169 1 (1)—  
Tax withholdings paid for net settlement of equity awards— — (159)— (159)
Proceeds from exercise of stock awards— — 3,235 — 3,235 
Net loss— — — (8,511)(8,511)
BALANCE - June 30, 2021103,227 $103 $837,971 $6,669 $844,743 
Stock-based compensation cost— — 3,009 — 3,009 
Issuance of equity awards, net33 — — — — 
Proceeds from exercise of stock awards— — 130 — 130 
Net loss— — — (5,067)(5,067)
BALANCE - September 30, 2021103,260 $103 $841,110 $1,602 $842,815 
Nine Months Ended September 30, 2020
Common Stock
SharesAmountAdditional Paid-In CapitalRetained Earnings Total
BALANCE - January 1, 2020100,624 $101 $826,629 $142,575 969,305 
Stock-based compensation cost— — 471 — 471 
Issuance of equity awards, net154 — — — — 
Tax withholdings paid for net settlement of equity awards— — (456)— (456)
Net loss— — — (7,804)(7,804)
BALANCE - March 31, 2020100,778 $101 $826,644 $134,771 $961,516 
Stock-based compensation cost— — 2,962 — 2,962 
Issuance of equity awards, net111 — — — — 
Tax withholdings paid for net settlement of equity awards— — (129)— (129)
Net loss— — — (25,920)(25,920)
BALANCE - June 30, 2020100,889 $101 $829,477 $108,851 $938,429 
Stock-based compensation cost— — 2,535 — 2,535 
Issuance of equity awards, net9 — — — — 
Tax withholdings paid for net settlement of equity awards— — (13)— (13)
Net loss— — — (29,184)(29,184)
BALANCE - September 30, 2020100,898 $101 $831,999 $79,667 $911,767 
See notes to condensed consolidated financial statements.
-3-

PROPETRO HOLDING CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Nine Months Ended September 30,
20212020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(33,953)$(62,908)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization100,253 117,844 
Impairment expense 16,654 
Deferred income tax benefit(11,639)(15,490)
Amortization of deferred debt issuance costs405 407 
Stock-based compensation8,405 5,968 
Provision for credit losses282 448 
Loss on disposal of assets40,500 39,875 
Changes in operating assets and liabilities:
Accounts receivable(65,244)117,072 
Other current assets325 2,598 
Inventories(747)587 
Prepaid expenses6,027 4,741 
Accounts payable64,237 (97,380)
Accrued and other current liabilities408 (11,996)
Accrued interest (394)
Net cash provided by operating activities109,259 118,026 
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures(87,700)(86,509)
Proceeds from sale of assets2,151 4,330 
Net cash used in investing activities(85,549)(82,179)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of borrowings (130,000)
Payment of finance lease obligation (30)
Repayments of insurance financing(5,473) 
Proceeds from exercise of equity awards3,365  
Tax withholdings paid for net settlement of equity awards(5,773)(598)
Net cash used in financing activities(7,881)(130,628)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS15,829 (94,781)
CASH AND CASH EQUIVALENTS - Beginning of period68,772 149,036 
CASH AND CASH EQUIVALENTS - End of period$84,601 $54,255 

See notes to condensed consolidated financial statements.
-4-

PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation
          The accompanying condensed consolidated financial statements of ProPetro Holding Corp. and its subsidiary (the "Company," "we," "us" or "our") have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission ("SEC") for interim financial information and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. Those adjustments (which consisted of normal recurring accruals) that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made. Results of operations for such interim periods are not necessarily indicative of the results of operations for a full year due to changes in market conditions and other factors. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Form 10-K filed with the SEC (our "Form 10-K").
Revenue Recognition
          The Company’s services are sold based upon contracts with customers. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of the principal activities, aggregated into our one reportable segment—"Pressure Pumping," and "all other" category, from which the Company generates its revenue.
          Pressure Pumping — Pressure pumping consists of downhole pumping services, which includes hydraulic fracturing (inclusive of acidizing services) and cementing.
Hydraulic fracturing is a well-stimulation technique intended to optimize hydrocarbon flow paths during the completion phase of shale wellbores. The process involves the injection of water, sand and chemicals under high pressure into shale formations. Our hydraulic fracturing contracts with our customers have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output, unit-of-work performed method, which is based on the agreed fixed transaction price and actual stages completed. We believe that recognizing revenue based on actual stages completed faithfully depicts how our hydraulic fracturing services are transferred to our customers over time. In addition, certain of our hydraulic fracturing equipment is entitled to daily idle fee charges if a customer were to idle committed hydraulic fracturing equipment. The Company recognizes revenue related to idle fee charges on a daily basis as the performance obligations are met.
Acidizing, which is part of our hydraulic fracturing operating segment, involves a well-stimulation technique where acid or similar chemicals are injected under pressure into formations to form or expand fissures. Our acidizing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service or sale of the acid or chemical when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize acidizing revenue at a point-in-time, upon completion of the performance obligation.
Our cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole. Our cementing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize cementing revenue at a point-in-time, upon completion of the performance obligation.
The transaction price for each performance obligation for all our pressure pumping services is fixed per our contracts with our customers.
           All Other— All other consists of coiled tubing operations, which are downhole well completion/remedial services. The performance obligation for these services has a fixed transaction price which is satisfied at a point-in-time upon completion of the service when control is transferred to the customer. Accordingly, we recognize revenue at a point-in-time, upon completion of the service and transfer of control to the customer.
Accounts Receivable
          Accounts receivables are stated at the amount billed and billable to customers. At September 30, 2021 and December 31, 2020, accrued revenue (unbilled receivable) included as part of our accounts receivable was $33.3 million and $8.6 million, respectively. At September 30, 2021, the transaction price allocated to the remaining performance obligation for our partially
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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation (Continued)
completed hydraulic fracturing operations was $15.5 million, which is expected to be completed and recognized within one month following the current period balance sheet date, in our pressure pumping reportable segment.
Allowance for Credit Losses
          As of September 30, 2021, the Company had $0.2 million allowance for credit losses. Our allowance for credit losses is based on the evaluation of both our historic collection experience and the expected impact of any potential deteriorating economic conditions for the oil and gas industry. We evaluated the historic loss experience on our accounts receivable and also considered separately customers with receivable balances that may be negatively impacted by current economic developments and market conditions. While the Company has not experienced significant credit losses in the past and has not yet seen material changes to the payment patterns of its customers, the Company cannot predict with any certainty the degree to which the impacts of the COVID-19 pandemic, including the potential impact of periodically adjusted borrowing base limits, level of hedged production, or unforeseen well shut-downs may affect the ability of its customers to timely pay receivables when due. Accordingly, in future periods, the Company may revise its estimates of expected credit losses.
          The table below shows a summary of allowance for credit losses during the nine months ended September 30, 2021:
(in thousands)
Balance - January 1, 2021$1,497 
Provision for credit losses during the period282 
Write-off during the period(1,562)
Balance - September 30, 2021$217 
Note 2 - Recently Issued Accounting Standards
Recently Issued Accounting Standards Adopted in 2021
           In December 2019, the Financial Accounting Standards Board ("FASB") Accounting Standards Update ("ASU") issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 in Generally Accepted Accounting Principles. ASU 2019-12 is effective for public entities for fiscal years beginning after December 15, 2020, with early adoption permitted. Effective January 1, 2021, we adopted this guidance and the adoption did not materially affect the Company’s condensed consolidated financial statements.
Recently Issued Accounting Standards Not Yet Adopted in 2021
            In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate ("LIBOR"). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s condensed consolidated financial statements.
Note 3 - Fair Value Measurement
           Fair value ("FV") is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
          In determining fair value, the Company uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used, when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company's assumptions about the assumptions other market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:


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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3 - Fair Value Measurement (Continued)
          Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment.
          Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
          Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
          A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
          Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued and other current liabilities, and long-term debt (if any). The estimated fair value of our financial instruments at September 30, 2021, and December 31, 2020, approximated or equaled their carrying values as reflected in our condensed consolidated balance sheets.
Assets Measured at Fair Value on a Nonrecurring Basis
            In the first quarter of 2020, the negative future near-term outlook resulting from the continued idling of our Permian drilling assets and current market prices were indicative of potential impairment, resulting in the Company comparing the carrying value of the Permian drilling assets with its estimated fair value. In the first quarter of 2020, we determined that the carrying value of the Permian drilling assets was greater than its estimated fair value. Accordingly, impairment expense of $1.1 million was recorded for our Permian drilling assets during the three months ended March 31, 2020. There was no impairment of assets during the nine months ended September 30, 2021.
          In 2019, the Company entered an agreement with its equipment manufacturer granting the Company the option to purchase additional 108,000 hydraulic horsepower ("HHP") of DuraStim® equipment, with the purchase option expiring at different times through July 31, 2022, as amended. The option fee of $6.1 million, classified as a deposit for property and equipment as part of our pressure pumping reportable segment, was fully impaired and written off in the first quarter of 2020 because it was not probable that the Company will exercise the option to purchase the equipment given the then depressed crude oil prices and other market conditions that resulted in a decline in the demand for our hydraulic fracturing services.
          The total non-cash property and equipment impairment charges recorded during the nine months ended September 30, 2021, and 2020 in our hydraulic fracturing and drilling segments was $0 and $7.2 million, respectively.
          We generally apply fair value techniques to our reporting units on a nonrecurring basis associated with valuing potential impairment loss related to goodwill. Our estimate of the reporting unit fair value is based on a combination of income and market approaches, Level 1 and 3, respectively, in the fair value hierarchy. The income approach involves the use of a discounted cash flow method, with the cash flow projections discounted at an appropriate discount rate. The market approach involves the use of comparable public companies' market multiples in estimating the fair value. Significant assumptions include projected revenue growth, capital expenditures, utilization, gross margins, discount rates, terminal growth rates, and weight allocation between income and market approaches. If the reporting unit's carrying amount exceeds its fair value, we consider goodwill impaired, and the impairment loss is calculated and recorded in the period. There were no additions to, or disposals of, goodwill during the nine months ended September 30, 2021. In the first quarter of 2020, the depressed crude oil prices and crude oil storage challenges faced in the U.S. oil and gas industry triggered the Company to perform an interim goodwill impairment test, and as a result, we compared the carrying value of the goodwill in our hydraulic fracturing reporting unit with the estimated fair value. Our impairment test also considered other relevant factors, including market capitalization and market participants' view of the oil and gas industry in reaching our conclusion that that carrying value of our goodwill in our pressure pumping reportable segment of $9.4 million was fully impaired during the first quarter of 2020. Accordingly, during the nine months ended September 30, 2020, we recorded goodwill impairment of approximately $9.4 million.


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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4 - Long-Term Debt
Asset-Based Loan ("ABL") Credit Facility
          Our revolving credit facility ("ABL Credit Facility"), as amended, has a total borrowing capacity of $300 million (subject to the Borrowing Base limit), with a maturity date of December 19, 2023. The ABL Credit Facility has a borrowing base of 85% of monthly eligible accounts receivable less customary reserves (the "Borrowing Base"), as redetermined monthly. The Borrowing Base as of September 30, 2021, was approximately $72.7 million. The ABL Credit Facility includes a Springing Fixed Charge Coverage Ratio to apply when excess availability is less than the greater of (i) 10% of the lesser of the facility size or the Borrowing Base or (ii) $22.5 million. Under this facility we are required to comply, subject to certain exceptions and materiality qualifiers, with certain customary affirmative and negative covenants, including, but not limited to, covenants pertaining to our ability to incur liens, indebtedness, changes in the nature of our business, mergers and other fundamental changes, disposal of assets, investments and restricted payments, amendments to our organizational documents or accounting policies, prepayments of certain debt, dividends, transactions with affiliates, and certain other activities. Borrowings under the ABL Credit Facility are secured by a first priority lien and security interest in substantially all assets of the Company.
          Borrowings under the ABL Credit Facility accrue interest based on a three-tier pricing grid tied to availability, and we may elect for loans to be based on either LIBOR or base rate, plus the applicable margin, which ranges from 1.75% to 2.25% for LIBOR loans and 0.75% to 1.25% for base rate loans, with a LIBOR floor of zero.
          The loan origination costs relating to the ABL Credit Facility are classified as an asset in our balance sheet. There were no borrowings under the ABL Credit Facility as of September 30, 2021, and December 31, 2020.
Note 5 - Reportable Segment Information
          The Company has three operating segments for which discrete financial information is readily available: hydraulic fracturing (inclusive of acidizing), cementing and coiled tubing. These operating segments represent how the Chief Operating Decision Maker evaluates performance and allocates resources.
          In accordance with the FASB Accounting Standards Codification ("ASC") 280—Segment Reporting, the Company has one reportable segment (pressure pumping) comprised of the hydraulic fracturing and cementing operating segments. The coiled tubing operating segment and corporate administrative expense (inclusive of our total income tax expense (benefit), other (income) and expense and interest expense) are included in the "all other" category in the table below. Total corporate administrative expense for the three and nine months ended September 30, 2021, was $13.5 million and $25.1 million, respectively. The corporate administrative expense for the three and nine months ended September 30, 2020, was $7.0 million and $27.9 million, respectively.
          Our hydraulic fracturing operating segment revenue approximated 93.4% and 93.5% of our pressure pumping revenue during the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2020, our hydraulic fracturing operating segment revenue approximated 95.2% and 94.0% of our pressure pumping revenue, respectively.
          Inter-segment revenues are not material and are not shown separately in the table below.
          The Company manages and assesses the performance of the reportable segment by its adjusted EBITDA (earnings before other income (expense), interest expense, income taxes, depreciation and amortization, stock-based compensation expense, severance and related expense, impairment expense, (gain)/loss on disposal of assets and other unusual or nonrecurring expenses or (income)). A reconciliation from segment level financial information to the consolidated statement of operations is provided in the table below (in thousands):
-8-

PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Reportable Segment Information (Continued)

Three Months Ended September 30, 2021
Pressure PumpingAll OtherTotal
Service revenue$245,641 $4,458 $250,099 
Adjusted EBITDA$53,975 $(11,877)$42,098 
Depreciation and amortization$32,536 $995 $33,531 
Capital expenditures$52,904 $300 $53,204 
Total assets at September 30, 2021$1,060,206 $38,544 $1,098,750 
Three Months Ended September 30, 2020
Pressure PumpingAll OtherTotal
Service revenue$131,321 $2,389 $133,710 
Adjusted EBITDA$26,662 $(9,308)$17,354 
Depreciation and amortization$36,326 $1,141 $37,467 
Capital expenditures$7,571 $370 $7,941 
Total assets at December 31, 2020$1,009,631 $41,108 $1,050,739 
Nine Months Ended September 30, 2021
Pressure PumpingAll OtherTotal
Service revenue$617,293 $11,151 $628,444 
Adjusted EBITDA$132,673 $(34,866)$97,807 
Depreciation and amortization$97,307 $2,946 $100,253 
Capital expenditures$113,670 $2,634 $116,304 
Total assets at September 30, 2021$1,060,206 $38,544 $1,098,750 
Nine Months Ended September 30, 2020
Pressure PumpingAll OtherTotal
Service revenue$622,055 $12,833 $634,888 
Adjusted EBITDA$139,359 $(21,671)$117,688 
Depreciation and amortization$114,205 $3,639 $117,844 
Capital expenditures$56,873 $3,042 $59,915 
Total assets at December 31, 2020$1,009,631 $41,108 $1,050,739 


-9-

PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Reportable Segment Information (Continued)

Reconciliation of net income (loss) to adjusted EBITDA (in thousands):
Three Months Ended September 30, 2021
Pressure PumpingAll OtherTotal
Net income (loss)$9,058 $(14,125)$(5,067)
Depreciation and amortization32,536 995 33,531 
Interest expense 143 143 
Income tax benefit (1,279)(1,279)
Loss on disposal of assets12,381 43 12,424 
Stock-based compensation 3,009 3,009 
Other expense 309 309 
Other general and administrative expense(1)
 (972)(972)
Adjusted EBITDA $53,975 $(11,877)$42,098 
Three Months Ended September 30, 2020
Pressure PumpingAll OtherTotal
Net loss$(20,920)$(8,264)$(29,184)
Depreciation and amortization36,326 1,141 37,467 
Interest expense 137 137 
Income tax benefit (7,717)(7,717)
Loss on disposal of assets11,256 30 11,286 
Stock-based compensation 2,535 2,535 
Other expense 312 312 
Other general and administrative expense(1)
 2,481 2,481 
Severance expense 37 37 
Adjusted EBITDA $26,662 $(9,308)$17,354 


-10-

PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 5 - Reportable Segment Information (Continued)

Nine Months Ended September 30, 2021
Pressure PumpingAll OtherTotal
Net loss$(5,426)$(28,527)$(33,953)
Depreciation and amortization97,307 2,946 100,253 
Interest expense 477 477 
Income tax benefit (11,639)(11,639)
Loss (gain) on disposal of assets40,792 (292)40,500 
Stock-based compensation 8,405 8,405 
Other income (1,178)(1,178)
Other general and administrative expense (1)
 (5,670)(5,670)
Severance expense 612 612 
Adjusted EBITDA $132,673 $(34,866)$97,807 
Nine Months Ended September 30, 2020
Pressure PumpingAll OtherTotal
Net loss$(30,140)$(32,768)$(62,908)
Depreciation and amortization114,205 3,639 117,844 
Impairment expense15,559 1,095 16,654 
Interest expense1 2,207 2,208 
Income tax benefit (15,087)(15,087)
Loss on disposal of assets39,659 216 39,875 
Stock-based compensation 5,968 5,968 
Other expense 583 583 
Other general and administrative expense (1)
 12,418 12,418 
Retention bonus and severance expense75 58 133 
Adjusted EBITDA $139,359 $(21,671)$117,688 
(1)Other general and administrative expense, (net of reimbursement from insurance carriers) relates to nonrecurring professional fees paid to external consultants in connection with the Company's pending SEC investigation and shareholder litigation, net of insurance recoveries. During the three and nine months ended September 30, 2021, we received reimbursement of approximately $1.4 million and $8.1 million, respectively, from our insurance carriers in connection with the SEC investigation and shareholder litigation.


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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6 - Net Loss Per Share
          Basic net loss per common share is computed by dividing the net loss relevant to the common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share uses the same net loss divided by the sum of the weighted average number of shares of common stock outstanding during the period, plus dilutive effects of options, performance and restricted stock units outstanding during the period calculated using the treasury method and the potential dilutive effects of preferred stocks (if any) calculated using the if-converted method.
          The table below shows the calculations for the three and nine months ended September 30, 2021 and 2020, (in thousands, except for per share data):
Three Months Ended September 30,
20212020
Numerator (both basic and diluted)
Net loss relevant to common stockholders$(5,067)$(29,184)
Denominator
Denominator for basic loss per share103,257 100,897 
Dilutive effect of stock options  
Dilutive effect of performance share units  
Dilutive effect of restricted stock units  
Denominator for diluted loss per share103,257 100,897 
Basic loss per share$(0.05)$(0.29)
Diluted loss per share$(0.05)$(0.29)
Nine Months Ended September 30,
20212020
Numerator (both basic and diluted)
Net loss relevant to common stockholders$(33,953)$(62,908)
Denominator
Denominator for basic loss per share102,408 100,802 
Dilutive effect of stock options  
Dilutive effect of performance share units  
Dilutive effect of restricted stock units  
Denominator for diluted loss per share102,408 100,802 
Basic loss per share$(0.33)$(0.62)
Diluted loss per share$(0.33)$(0.62)


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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
             As shown in the table below, the following stock options, restricted stock units and performance stock units outstanding as of September 30, 2021 and 2020, respectively, have not been included in the calculation of diluted loss per common share for the three and nine months ended September 30, 2021 and 2020 because they will be anti-dilutive to the calculation of diluted net loss per common share:
(In thousands)
20212020
Stock options962 4,220 
Restricted stock units1,435 1,218 
Performance stock units1,586 1,042 
Total3,983 6,480 
Note 7 - Stock-Based Compensation
Stock Options
          There were no new stock option grants during the nine months ended September 30, 2021. As of September 30, 2021, the aggregate intrinsic value for our outstanding stock options was $2.6 million, and the aggregate intrinsic value for our exercisable stock options was $2.6 million. The aggregate intrinsic value for the exercised stock options during the nine months ended September 30, 2021 was approximately $18.9 million. The remaining exercise period for both the outstanding and exercisable stock options as of September 30, 2021 was 3.9 years.

          A summary of the stock option activity for the nine months ended September 30, 2021 is presented below:
Number of SharesWeighted
Average
Exercise
Price
Outstanding at January 1, 20214,200 $4.82 
Granted $ 
Exercised(3,162)$3.40 
Forfeited $ 
Expired(76)$14.00 
Outstanding at September 30, 2021962 $8.76 
Exercisable at September 30, 2021962 $8.76 
Restricted Stock Units
         During the nine months ended September 30, 2021, we granted a total of 851,885 restricted stock units ("RSUs") to employees, officers and directors pursuant to the ProPetro Holding Corp. 2020 Long Term Incentive Plan (the "2020 Incentive Plan"), which generally vest ratably over a three-year vesting period, in the case of awards to employees and officers, and generally vest in full after one year, in the case of awards to directors. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases to be an employee or director of the Company prior to vesting of the award. Each RSU represents the right to receive one share of common stock. The grant date fair value of the RSUs is based on the closing share price of our common stock on the date of grant. As of September 30, 2021, the total unrecognized compensation expense for all RSUs was approximately $8.9 million, and is expected to be recognized over a weighted average period of approximately 2.0 years.


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PROPETRO HOLDING CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7 - Stock-Based Compensation (Continued)
          The following table summarizes RSUs activity during the nine months ended September 30, 2021:
Number of
Shares
Weighted
Average
Grant Date
Fair Value
Outstanding at January 1, 20211,165 $8.50 
Granted852 $9.69 
Vested(570)$8.58 
Forfeited(12)$10.40 
Canceled $ 
Outstanding at September 30, 20211,435 $9.16 
Performance Share Units
           During the nine months ended September 30, 2021, we granted 650,774 performance share units ("PSUs") to certain key employees and officers as new awards under the 2020 Incentive Plan. The actual number of shares of common stock that may be issued under the PSUs ranges from 0% up to a maximum of 200% of the target number of PSUs granted to the participant, based on our total shareholder return ("TSR") relative to a designated peer group, generally at the end of a three year period. In addition to the TSR conditions, vesting of the PSUs is generally subject to the recipient’s continued employment through the end of the applicable performance period. Compensation expense is recorded ratably over the corresponding requisite service period. The grant date fair value of PSUs is determined using a Monte Carlo probability model. Grant recipients do not have any shareholder rights until performance relative to the peer group has been determined following the completion of the performance period and shares have been issued.
          The following table summarizes information about PSUs activity during the nine months ended September 30, 2021:
Period
Granted
Target Shares Outstanding at January 1, 2021Target
Shares
Granted
Target Shares VestedTarget
Shares
Forfeited
Target Shares Outstanding at September 30, 2021Weighted
Average
Grant Date
FV Per
Share
201884  (84)  $27.51 
2019126    126 $27.49 
2020809    809 $8.30 
2021 651   651 $14.76 
Total1,019 651 (84) 1,586 $12.48 
Weighted Average FV Per Share$12.27 $14.76 $27.51 $ $12.48 
          The total stock-based compensation expense for the nine months ended September 30, 2021 and 2020 for all stock awards was $8.4 million and $6.0 million, respectively. The total unrecognized stock-based compensation expense as of September 30, 2021 was approximately $19.5 million, and is expected to be recognized over a weighted average period of approximately 2.0 years.


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