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approximately $370,000 of expenses reimbursed to members of senior management, including the former chief executive officer (approximately $346,000) and former chief financial officer (approximately $18,000), were incorrectly recorded as expenses of the Company and should have been the responsibility of the officers individually; each of these officers has reimbursed the Company in full for the identified amounts. These improper reimbursements were attributable to inadequate documentation stemming from the lack of a more robust employee expense review and approval procedure;

•	the Company’s former chief accounting officer entered into a related party transaction that was not properly disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”);

•	a number of internal and disclosure control deficiencies and material weaknesses were identified, as described in more detail in Part II - Item 9A. “Controls and Procedures,” including, but not limited to, the following:

◦	the Company’s former executive management team did not establish and promote a control environment with an appropriate tone of compliance and control consciousness throughout the entire Company;

◦	the Company did not appropriately identify and monitor conflicts of interest;

◦	certain whistleblower allegations were not properly investigated and elevated to the Committee;

◦	instances were identified of non-compliance with the Company’s internal policies, including its Insider Trading Compliance Policy and Code of Conduct and Ethics; and

◦	management did not appropriately communicate information internally and externally, including communication between management and the Board.

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•	the severity and duration of world health events, including the recent outbreak of the novel coronavirus (“COVID-19”) pandemic, related economic repercussions and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business;

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the current significant surplus in the supply of oil and actions 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;

•	uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for our services;

•	the level of production and resulting market prices for crude oil, natural gas and other hydrocarbons;

•	changes in general economic and geopolitical conditions;

•	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;

•	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 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;

•	technological changes;

•	our ability to successfully implement technological developments and enhancements, including the new DuraStim® fleets and associated power solutions;

•	operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;

•	acts of terrorism, war or political or civil unrest in the United States or elsewhere;

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•	the effects of existing and future laws and governmental regulations (or the interpretation thereof);

•	the effects of current and future litigation, including the Logan Lawsuit, the Boca Raton Lawsuit and the Chang Lawsuit (each defined herein);

•	the timing and outcome of, including potential expense associated with, the SEC pending investigation;

•	the potential impact on our business and stock price of any announcements regarding the SEC's pending investigation, the Logan Lawsuit, the Boca Raton Lawsuit or the Chang Lawsuit;

•	the material weaknesses in our internal controls over financial reporting and disclosure controls and procedures described under Part I, Item 9, “Controls and Procedures” in this Annual Report;

•	matters related to the Expanded Audit Committee Review and related findings, as well as the implementation and effectiveness of the Company's remediation plan; and

•	our ability to successfully execute on our plans and objectives.

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Strong market position in the Permian Basin. We believe we are one of the largest hydraulic fracturing providers by HHP in the Permian Basin, which is one of the most prolific oil producing areas in the United States. Our longstanding customer relationships and substantial Permian Basin market presence uniquely position us to maintain our market position and grow as the basin is developed in the future. The Permian Basin is a mature, liquids‑rich basin with well-known geology and a large, exploitable resource base that delivers attractive E&P producer economics. As a result of its significant size, coupled with the presence of multiple prospective geologic benches and other favorable characteristics, the Permian Basin has become widely recognized as one of the most attractive and economic oil resources in North America.

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Deep relationships and operational alignment with high‑quality, Permian Basin‑focused customers. Our deep local roots, operational expertise and commitment to safe and reliable service have allowed us to cultivate longstanding customer relationships with the most active and well‑capitalized Permian Basin operators. Many of our current customers have worked with us since our inception and have integrated our fleet scheduling with their well development programs. We have a long-term partnership agreement with one customer, an E&P company focused in the Permian Basin, to continue to provide pressure pumping and other complementary services for up to 10 years. This relationship differentiates us from our peers. This high degree of operational alignment and partnership with our customers has allowed us to maintain relatively high utilization rates over time compared to our peers. If our customers increase activity levels, we expect to continue to leverage our strong relationships to keep our fleets utilized.

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Proven cross‑cycle financial performance. Over the past several years, we have maintained high cross‑cycle fleet utilization rates. From late 2017 through 2018 our fleets were consistently fully utilized. In 2019, following a decline in certain of our customers’ operations in the last quarter of 2019, our fleets utilization decreased slightly, and our utilization has decreased dramatically in 2020 as a result of COVID-19 and related matters. Historically, our consistent track record of steady growth, coupled with our ability to quickly deploy new HHP on a dedicated and fully utilized basis, has resulted in revenue growth across the industry’s cycles. We believe that we will be able to continue to operate more efficiently than our competitors while preserving attractive profitability and cash flows as a result of our differentiated service offerings and wellsite efficiencies. Furthermore, we believe that our philosophy of maintaining modest financial leverage and a healthy balance sheet has left us more conservatively capitalized than most of our peers. We expect that improving market fundamentals, our superior execution and our customer‑focused approach should continue to result in strong financial performance.

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Seasoned management and operating team. We have a seasoned executive management team, with our senior members contributing more than 100 years of collective industry and financial experience. We believe their deep roots and relationships throughout the West Texas community, provide a meaningful competitive advantage for our business. In addition, our management team has assembled a loyal group of highly‑motivated and talented managers and field personnel, and we have had minimal manager‑level turnover in our core service divisions

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Capture an increasing share of demand for hydraulic fracturing services in the Permian Basin. We intend to continue to position ourselves as a Permian Basin‑focused hydraulic fracturing business, as we believe the Permian Basin hydraulic fracturing market offers supportive long‑term growth fundamentals. These fundamentals are characterized by increased demand for our HHP and well completion intensity levels. We have historically operated at a high utilization relative to our peers, and we believe we are strategically positioned to deploy our idle horse-power if overall market condition and demand for pressure pumping services increases.

•	Capitalize on improving efficiency gains. We intend to continue to work with our customers and vendors to improve our operational efficiencies and enhance our profitability. We believe that improving our efficiencies will result in greater revenue and enhanced profitability as fixed costs are spread over a broader revenue base.

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Cross‑sell our complementary services. In addition to our hydraulic fracturing services, we offer a broad range of complementary services in support of our customers’ development activities, including cementing and coiled tubing. These complementary services create operational efficiencies for our customers, and allow us to capture a greater percentage of their capital spending across the lifecycle of an unconventional well. We believe that, if our customers increase spending levels, we are well positioned to continue cross‑selling and growing our complementary service offerings.

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Maintain financial stability and flexibility to pursue growth opportunities. Consistent with our historical practices, we plan to continue to maintain a conservative balance sheet, which will allow us to better react to potential changes in industry and market conditions and opportunistically grow our business. In the near term, we intend to continue our past practice of aligning our growth capital expenditures with visible customer demand by strategically deploying new equipment on a dedicated basis in response to inbound customer requests. We will also selectively evaluate potential strategic acquisitions that increase our scale and capabilities or diversify our operations.

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•	the severity and duration of world health events, including the recent COVID-19 pandemic, related economic repercussions and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business;

•	the current significant surplus in the supply of oil and actions by the members of 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;

•	uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for our services;

•	the domestic and foreign supply of, and demand for, oil and natural gas;

•	the level of prices, and expectations about future prices, of oil and natural gas;

•	the level of global oil and natural gas exploration and production;

•	the cost of exploring for, developing, producing and delivering oil and natural gas;

•	the supply of and demand for drilling and hydraulic fracturing equipment;

•	the expected decline rates of current production;

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•	the price and quantity of foreign imports;

•	political and economic conditions in oil and natural gas producing countries and regions, including the United States, the Middle East, Africa, South America and Russia;

•	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;

•	speculative trading in crude oil and natural gas derivative contracts;

•	the level of consumer product demand;

•	the discovery rates of new oil and natural gas reserves;

•	contractions in the credit market;

•	the strength or weakness of the U.S. dollar;

•	available pipeline and other transportation capacity;

•	the levels of oil and natural gas storage;

•	weather conditions and other natural disasters;

•	domestic and foreign tax policy;

•	domestic and foreign governmental approvals and regulatory requirements and conditions;

•	the continued threat of terrorism and the impact of military and other action, including military action in the Middle East;

•	political or civil unrest in the United States or elsewhere;

•	technical advances affecting energy consumption;

•	the proximity and capacity of oil and natural gas pipelines and other transportation facilities;

•	the price and availability of alternative fuels;

•	the ability of oil and natural gas producers to raise equity capital and debt financing;

•	merger and divestiture activity among oil and natural gas producers; and

•	overall domestic and global economic conditions.

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•	increasing our vulnerability to general adverse economic and industry conditions;

•	the covenants that are contained in the agreements governing our indebtedness could limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments;

•	our debt covenants could also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

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•	any failure to comply with the financial or other debt covenants, including covenants that impose requirements to maintain certain financial ratios, could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable;

•	our level of debt could impair our ability to obtain additional financing, or obtain additional financing on favorable terms, in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; and

•	our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness.

•	grant liens;

•	incur additional indebtedness;

•	engage in a merger, consolidation or dissolution;

•	enter into transactions with affiliates;

•	sell or otherwise dispose of assets, businesses and operations;

•	materially alter the character of our business as currently conducted; and

•	make acquisitions, investments and capital expenditures.

•	requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporate purposes;

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•	limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements;

•	increasing our vulnerability to economic downturns and changing market conditions; and

•	placing us at a competitive disadvantage relative to competitors that have less debt.

•	goodwill impairment of approximately $9.4 million;

•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

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•	limitations on the removal of directors;

•	limitations on the ability of our shareholders to call special meetings;

•	advance notice provisions for shareholder proposals and nominations for elections to the Board to be acted upon at meetings of shareholders;

•	providing that the Board is expressly authorized to adopt, or to alter or repeal our bylaws; and

•	establishing advance notice and certain information requirements for nominations for election to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings.

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Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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(1)	Exclusive of depreciation and amortization.

(2)	Inclusive of stock‑based compensation.

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•	Placed in service, at the beginning of 2019, pressure pumping and related assets (510,000 HHP) acquired in connection with the Pioneer Pressure Pumping Acquisition, which resulted in an increase to our revenue and profitability in 2019;

•	Purchased 108,000 HHP of DuraStim® hydraulic fracturing pumps with the first DuraStim® pumps of 54,000 HHP delivered in December 2019, while the remaining hydraulic fracturing pumps or 54,000 HHP expected to be delivered in 2020;

•	Entered into a purchase option agreement with our equipment supplier to purchase additional DuraStim® hydraulic fracturing pumps of 108,000 HHP;

•	Maintained a high fleet utilization for the year 2019; and

•	Improved operational and financial processes by making changes to senior management in 2019.

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•	Revenue increased $347.8 million, or 20.4%, to $2,052.3 million, as compared to $1,704.6 million for the year ended December 31, 2018, primarily a result of the increase in our fleet size in connection with the Pioneer Pressure Pumping Acquisition placed in service at the beginning of 2019;

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Cost of services (exclusive of depreciation and amortization) increased $199.8 million or 15.7% to $1,470.4 million, as compared to $1,270.6 million for the year ended December 31, 2018, primarily a result of the increase in head count and higher activity levels resulting from the increase in fleet size. Cost of services as a percentage of revenue decreased to 71.6% in 2019 compared to 74.5% for the year ended December 31, 2018;

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General and administrative expenses, inclusive of stock-based compensation (“G&A”), increased $51.1 million, or 94.7% to $105.1 million, as compared to $54.0 million for the December 31, 2018. G&A as a percentage of revenue increased to 5.1% in 2019 from 3.2% for the year ended December 31, 2018. The increase was driven by increase in legal and professional fees, payroll related expense and net increase in other G&A expenses resulting partly from the expansion of our business with the Pioneer Pressure Pumping Acquisition. Included in G&A was approximately $24.2 million related to legal and professional fees incurred in connection with the Audit Committee internal review;

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Net income was $163.0 million, compared to $173.9 million for the December 31, 2018. Diluted net income per common share was $1.57, compared to $2.00 for the year ended December 31, 2018. Adjusted EBIDTA was approximately $519.1 million, compared to $388.5 million for the year ended December 31, 2018 (see reconciliation of Adjusted EBITDA to net income in the subsequent section “How We Evaluate Our Operations”); and

•	Maintained a conservative balance sheet and sufficient liquidity.

◦	Growth Capital. We cancelled substantially all our planned growth capital expenditures for the remainder of 2020.

◦	Other Expenditures. We significantly reduced our maintenance expenditures and field level consumable costs due to our reduced activity levels. We have been seeking lower pricing for our expendable items, materials used in day-to-day operations and large component replacement parts. Also, we have been internalizing certain support services that were outsourced.

◦	Labor Force Reductions. We have reduced our workforce by over 60% due to the changing activity levels for our services. We will continue to make appropriate adjustments to our workforce to reflect outlook related to activity levels.

◦	Compensation Related Costs. The directors and officers have voluntarily reduced compensation at different levels up to 20%. We have taken efforts to manage work schedules, primarily related to hourly employees, to minimize overtime costs.

◦	Working Capital. We have negotiated more favorable payment terms with certain of our larger vendors and are continuing to increase our diligence in collecting and managing our portfolio of accounts receivables.

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(1)	Other general and administrative expense primarily relates to nonrecurring professional fees paid to external consultants in connection with the Expanded Audit Committee Review and advisory services in 2019, and legal settlements in 2018 and 2017.

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(1)	Exclusive of depreciation and amortization.

(2)	Inclusive of stock‑based compensation of $7.8 million and $5.5 million for 2019 and 2018, respectively.

(3)	For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluate Our Operations”.

(4)	The non‑GAAP financial measure of Adjusted EBITDA margin for the pressure pumping segment is calculated by taking Adjusted EBITDA for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment.

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(1)

Exclusive of future commitment fees, amortization of deferred financing costs, interest expense or other fees on our revolving credit facility because obligations thereunder are floating rate instruments and we cannot determine with accuracy the timing of future loan advances, repayments or future interest rates to be charged. However, assuming a weighted average interest rate of 4.4%, and that our ABL Credit Facility debt balance remains the same, our estimated annual interest payment will be $5.8 million.

(2)	Finance and Operating leases include agreements for various office and yard locations, excluding short-term leases (see Note 17. Leases and Note 18. Commitments and Contingencies in the financial statements for additional disclosures, including estimated interest).

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•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

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•	We evaluated the completeness of related-party transactions by obtaining the Company’s list of related-party relationships and transactions and performing the following:

–	Comparing it to public filings, external news, third-party information or research reports, selected vendor and customer websites, questionnaires completed by the Company’s directors and officers, and other sources.

–	Searching for potential related-party transactions within the accounts receivable, accounts payable, and vendor listings master files and journal entries by searching for the name, vendor identification numbers, and customer identification numbers of the related parties.

–	Inspecting the Company’s minutes from meetings of the Board of Directors and related committees.

–	Making inquiries of executive officers, key members of management, and the Audit Committee of the Board of Directors regarding related party transactions.

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          ProPetro Holding Corp. (“Holding”), a Texas corporation was formed on April 14, 2007, to serve as a holding company for its wholly owned subsidiary ProPetro Services, Inc. (“Services”), a Texas corporation. Services offers hydraulic fracturing, cementing, coiled tubing, drilling and flowback services to oil and gas producers, located primarily in Texas, Oklahoma, New Mexico and Utah. Holding was converted and incorporated to a Delaware Corporation on March 8, 2017.

          Unless otherwise indicated, references in these notes to consolidated financial statements to “ProPetro Holding Corp.,” “the Company,” “we,” “our,” “us” or like terms refer to ProPetro Holding Corp. and Services.

          On March 22, 2017, we consummated our initial public offering (“IPO”) in which 25,000,000 shares of our common stock, par value $0.001 per share, were sold at a public offering price of $14.00 per share, with 13,250,000 shares issued and sold by the Company and 11,750,000 shares sold by existing stockholders. We received net proceeds of approximately $170.1 million after deducting $10.9 million of underwriting discounts and commissions, and $4.5 million of other offering expenses. At closing, we used the proceeds (i) to repay $71.8 million in outstanding borrowings under the term loan, (ii) $86.8 million to fund the purchase of additional hydraulic fracturing units and other equipment, and (iii) the remaining for general corporate purposes.

          In connection with the IPO, the Company executed a stock split, such that each holder of common stock of the Company received 1.45 shares of common stock for every one share of previous common stock, and all 16,999,990 shares of our outstanding Series A preferred stock converted to common stock on a 1:1 basis.

          Accordingly, any information related to or dependent upon the share or option counts in the 2019, 2018 and 2017 consolidated financial statements and Note 13 Net Income Per Share, Note 14 Stock‑Based Compensation, Note 19 Quarterly Financial Data (Unaudited) have been updated to reflect the effect of the stock split in March 2017, as applicable.

          On December 31, 2018, we consummated the purchase of pressure pumping and related assets of Pioneer Natural Resources USA, Inc.(“Pioneer”) and Pioneer Pumping Services, LLC (the “Pioneer Pressure Pumping Acquisition”). The pressure pumping assets acquired were used to provide integrated well completion services in the Permian Basin to Pioneer’s completion and production operations. The acquisition cost of the assets was comprised of $110.0 million of cash and 16.6 million shares of our common stock. The incremental direct cost of $3.4 million incurred to consummate the transaction was capitalized as part of the acquisition cost. The pressure pumping assets acquired included hydraulic fracturing pumps of 510,000 HHP, four coiled tubing units and the associated equipment maintenance facility. In connection with the acquisition, we became a long-term service provider to Pioneer under a pressure pumping services agreement (the “Pioneer Services Agreement”), providing pressure pumping and related services for a term of up to 10 years; provided, that Pioneer has the right to terminate the Pioneer Services Agreement, in whole or in part, effective as of December 31 of each of the calendar years of 2022, 2024 and 2026. Pioneer can increase the number of committed fleets prior to December 31, 2022. Pursuant to the Pioneer Services Agreement, the Company is entitled to receive compensation if Pioneer were to idle committed fleets (“idle fees”); however, we are first required to use all economically reasonable effort to deploy the idled fleets to another customer. At the present, we have eight fleets committed to Pioneer.

Risks and Uncertainties

          As an oilfield services company, we are exposed to a number of risks and uncertainties that are inherent to our industry. In addition to such industry-specific risks, the global public health crisis associated with the novel coronavirus (“COVID-19”) pandemic has, and is anticipated to continue to have, an adverse effect on global economic activity for the immediate future and has resulted in travel restrictions, business closures and the institution of quarantining and other restrictions on movement in many communities. The slowdown in global economic activity attributable to the COVID-19 pandemic has resulted in a dramatic decline in the demand for

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energy, which directly impacts our industry and the Company. In addition, global crude oil prices experienced a collapse starting in early March 2020 as a direct result of failed negotiations between the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia. In response to the global economic slowdown, OPEC had recommended a decrease in production levels in order to accommodate reduced demand. Russia rejected the recommendation of OPEC as a concession to U.S. producers. After the failure to reach an agreement, Saudi Arabia, a dominant member of OPEC, and other Persian Gulf OPEC members announced intentions to increase production and offer price discounts to buyers in certain geographic regions.

          As the breadth of the COVID-19 health crisis expanded throughout the month of March 2020 and governmental authorities implemented more restrictive measures to limit person-to-person contact, global economic activity continued to decline commensurately. The associated impact on the energy industry has been adverse and continued to be exacerbated by the unresolved conflict regarding production. In the second week of April 2020, OPEC, Russia and certain other petroleum producing nations (“OPEC+”), reconvened to discuss the matter of production cuts in light of unprecedented disruption and supply and demand imbalances that expanded since the failed negotiations in early March 2020. Tentative agreements were reached to cut production by up to 10 million barrels of oil per day with allocations to be made among the OPEC+ participants. Some of these production cuts went into effect in the first half of May 2020, however, commodity prices remain depressed as a result of an increasingly utilized global storage network and near-term demand loss attributable to the COVID-19 health crisis and related economic slowdown.

         The combined effect of COVID-19 and the energy industry disruptions led to a decline in WTI crude oil prices of approximately 67 percent from the beginning of January 2020, when prices were approximately $62 per barrel, through the end of March 2020, when they were just above $20 per barrel. Overall crude oil price volatility has continued despite apparent agreement among OPEC+ regarding production cuts and as of June 17, 2020, the WTI price for a barrel of crude oil was approximately $38.

          Despite a significant decline in drilling and completion activities by U.S. producers starting in mid-March 2020, domestic supply is exceeding demand which has led to significant operational stress with respect to capacity limitations associated with storage, pipeline and refining infrastructure, particularly within the Gulf Coast region. The combined effect of the aforementioned factors is anticipated to have an adverse impact on the industry in general and our operations specifically.

          Since March 2020, we initiated several actions to mitigate the anticipated adverse economic conditions for the immediate future and to support our financial position and liquidity. The more significant actions that we have taken included: (i) canceling substantially all of our growth capital projects, (ii) significantly reducing our maintenance expenditures and field level consumable costs, (iii) reducing our workforce to follow our activity levels, (iv) efforts to manage our compensation costs, such as compensation reductions and management of work schedules to reduce overtime costs and (v) negotiating more favorable payment terms with certain of our larger vendors and proactively managing our portfolio of accounts receivable.

          A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements are as follows:

          Principles of Consolidation — The accompanying consolidated financial statements include the accounts of Holding and its wholly owned subsidiary, Services. All intercompany accounts and transactions have been eliminated in consolidation.

          Basis of Presentation — The accompanying consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the United States Securities Exchange Commission (“SEC”) and in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

          Use of Estimates — Management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated

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financial statements and revenues and expenses during the reporting period. Such estimates include, but are not limited to, allowance for doubtful accounts, useful lives for depreciation of property and equipment, estimates of fair value of property and equipment, estimates related to fair value of reporting units for purposes of assessing goodwill, estimates related to deferred tax assets and liabilities, including any related valuation allowances, and estimates of fair value of stock‑based compensation and finance and operating leases. Actual results could differ from those estimates.

          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, separated by reportable segment and all other, 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 wellbores. The process involves the injection of water, sand and chemicals under high pressure into formations. Hydraulic fracturing contracts with our customer have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output method, 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.

Acidizing, which is part of our hydraulic fracturing operating segment, involves a well-stimulation technique where acid is injected under pressure into formations to form or expand fissures. Acidizing provides downhole solutions, and contracts with customers have one performance obligation, which is 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 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. Cementing involves well bonding solutions, and contracts with customers have one performance obligation, which is 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 are fixed per our contract with customer.

          All Other— All other services consist of our drilling, coiled tubing and flowback, which are downhole well stimulation and completion/remedial services. The performance obligation for each of the 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. Payment is typically due in full, upon completion of the job for all of our services to customers. At December 31, 2019 and 2018 accrued revenue (unbilled receivable) included as part of our accounts receivable was $37.0 million and $18.0 million, respectively. At December 31, 2019, the transaction price allocated to the remaining performance obligation for our partially completed hydraulic fracturing operations was $47.5 million, which is expected to be completed and recognized in approximately one month following the current period balance sheet date, in our pressure pumping reportable segment. At December 31, 2018 the transaction price allocated to the remaining

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performance obligation for our then partially completed hydraulic fracturing operations was $43.9 million, which was recorded as part of our pressure pumping segment revenue for the year ended December 31, 2019.

          At December 31, 2019, 2018 and 2017 the allowance for doubtful accounts was $1.0 million, $0.1 million and $0.4 million, respectively. During the year ended December 31, 2019, additional allowance for doubtful accounts was $0.9 million and there was no write-off of previously recognized allowance. During the year ended December 31, 2018, additional allowance for doubtful accounts was $0.1 million and the write-off of previously recognized allowance was $0.4 million. During the year ended December 31, 2017, additional allowance for doubtful accounts was $0.1 million and the write-off of previously recognized allowance was $0.2 million.

          Inventories — Inventories, which consists only of raw materials, are stated at lower of average cost and net realizable value.

          Property and Equipment — The Company’s property and equipment are recorded at cost, less accumulated depreciation.

          Depreciation — Depreciation of property and equipment is provided on the straight‑line method over the following estimated useful lives:

Land	Indefinite
Buildings and property improvements	5 - 30 years
Vehicles	1 ‑ 5 years
Equipment	1 ‑ 20 years
Leasehold improvements	5 ‑ 20 years

          Upon sale or retirement of property and equipment, including certain major components of our pressure pumping equipment that are replaced, the cost and related accumulated depreciation are removed from the balance sheet and the net amount, less proceeds from disposal, is recognized as a gain or loss in the statement of operations. The Company recorded a loss on disposal of assets of $106.8 million, $59.2 million and $39.1 million for the years ended December 31, 2019, 2018 and 2017, respectively.

          Impairment of Long‑Lived Assets — In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360, Accounting for the Impairment or Disposal of Long‑Lived Assets, the Company reviews its long‑lived assets to be held and used whenever events or circumstances indicate that the carrying value of those assets may not be recoverable.

          An impairment loss is indicated if the sum of the expected future undiscounted cash flows attributable to the asset group is less than the carrying amount of such asset group. In this circumstance, the Company recognizes an impairment loss for the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Property and equipment impairment loss of $1.2 million and $2.2 million was recorded during the year ended December 31, 2019 relating to our drilling and flow back asset groups, respectively. No impairment was recorded in the years ended December 31, 2018 and 2017. Our drilling and flowback asset groups are included in the “all other” category in our reportable segment disclosure.

          The Company accounts for long‑lived assets to be disposed of at the lower of their carrying amount or fair value, less cost to sell once management has committed to a plan to dispose of the assets.

          Goodwill — Goodwill is the excess of the consideration transferred over the fair value of the tangible and identifiable intangible assets and liabilities recognized. Goodwill is not amortized. We perform an annual impairment test of goodwill as of December 31, or more frequently if circumstances indicate that impairment may exist. The determination of impairment is made by comparing the carrying amount of a reporting unit with its fair value, which is generally calculated using a combination of market and income approaches. If the fair value of the

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reporting unit exceeds the carrying value, no further testing is performed. If the fair value of the reporting unit is less than the carrying value, we consider goodwill to be impaired, and the amount of impairment loss is estimated and recorded in the statement of operations.

          In 2011, we acquired Technology Stimulation Services, LLC (“TSS”) for $24.4 million. The assets acquired from TSS were recorded as $15.0 million of equipment with the excess of the purchase price over fair value of the assets recorded as goodwill of $9.4 million. The acquisition complemented our existing pressure pumping business. The transaction has been accounted for using the acquisition method of accounting and, accordingly, assets and liabilities assumed were recorded at their fair values as of the acquisition date. Based on our goodwill impairment tests as of December 31, 2019, 2018 and 2017, we concluded that the goodwill related to TSS acquisition was not impaired. The goodwill related to the TSS acquisition of $9.4 million is recorded in our pressure pumping reportable segment.

          Intangible Assets — Intangible assets with finite useful lives are amortized on a basis that reflects the pattern in which the economic benefits of the intangible assets are realized, which is generally on a straight‑line basis over the asset’s estimated useful life.

          Income Taxes — Income taxes are accounted for under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of differences between the consolidated financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

          We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, we consider all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and the results of recent operations. If we determine that we would not be able to fully realize our deferred tax assets in the future, we would record a valuation allowance.

          Advertising Expense — All advertising costs are expensed as incurred. For the years ended December 31, 2019, 2018 and 2017, advertising expense was $1.2 million, $1.3 million and $0.8 million, respectively.

          Deferred Loan Costs — The Company capitalized certain costs in connection with obtaining its borrowings, including lender, legal, and accounting fees. These costs are being amortized over the term of the related loan using the straight‑line method. Unamortized deferred loan costs associated with loans paid off or refinanced with different lenders are expensed in the period in which such an event occurs. Deferred loan costs are classified as a reduction of long‑term debt or in certain instances as an asset in the consolidated balance sheet. Amortization of deferred loan costs is recorded as interest expense in the statement of operations, and during the years ended December 31, 2019, 2018 and 2017, the amount of expense recorded was $0.5 million, $0.4 million and $3.4 million, respectively.

          Stock-Based Compensation — The Company recognizes the cost of stock‑based awards on a straight‑line basis over the requisite service period of the award, which is usually the vesting period under the fair value method. Total compensation cost is measured on the grant date using fair value estimates.

          Insurance Financing — The Company annually renews its commercial insurance policies and records a prepaid insurance asset and amortizes it monthly over the coverage period. The Company may choose to finance a portion of the premiums and will make repayments monthly over the financing period in equal installments.

          Concentration of Credit Risk — The Company’s assets that are potentially subject to concentrations of credit risk are cash and cash equivalents and trade accounts receivable. Cash balances are maintained in financial

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institutions, which at times exceed federally insured limits. The Company monitors the financial condition of the financial institutions in which accounts are maintained and has not experienced any losses in such accounts. The receivables of the Company are spread over a number of customers, a majority of which are credible operators and suppliers to the oil and natural gas industries. The Company performs ongoing evaluations as to the financial condition of its customers with respect to trade receivables.

Recently Issued Accounting Standards Adopted in 2019

          In February 2016, the FASB issued Accounting Standard Update (“ASU”) No. 2016-02, Leases. This new lease standard introduces a lessee model that brings most leases on the balance sheet. This new standard increases transparency and comparability by recognizing a lessee’s rights and obligations resulting from leases by recording them on the balance sheet as Right of Use ("ROU") Assets and Lease Liabilities. Leases will be classified as either finance or operating, which will impact the pattern of expense recognition on the income statement. ASU No. 2016-02 also requires additional qualitative and quantitative disclosures to better enable users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Effective January 1, 2019, we adopted the new leases standard using the modified retrospective transition method and electing to account for comparative periods under legacy GAAP. We also elected other practical expedients provided by the new leases standard, the short-term lease recognition practical expedient in which leases with an initial term of 12 months or less will not be recognized on the balance sheet and the practical expedient to not separate lease and non-lease components for our real estate class of leased assets. See Note 17 for additional disclosures relating to our adoption of ASU 2016-02.

Recently Issued Accounting Standards Not Yet Adopted in 2019

          In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduces a new impairment model for financial instruments that is based on expected credit losses rather than incurred credit losses. The new impairment model applies to most financial assets, including trade accounts receivable and lease receivables. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which clarified that receivables arising from operating leases are not within the scope of ASC 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, and should be accounted for in accordance with ASC 842. ASU 2016-13 and ASU 2018-19 are effective for annual periods beginning after December 15, 2019. Effective January 1, 2020, the Company adopted ASU 2016-13 using the modified-retrospective approach. The adoption of this guidance did not materially affect our consolidated financial statements. While there was no material impact to the consolidated financial statements as a result of adoption of ASU 2016-13, as a result of deteriorating economic conditions for the oil and gas industry brought on by the COVID-19 pandemic, during the first quarter of 2020, the Company recorded a provision for credit losses of $4.3 million.

          In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which removes the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test. As a result, under this ASU, an entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, although the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for impairment tests in fiscal years beginning after December 15, 2019, on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The adoption of this guidance did not materially affect our consolidated financial statement.

          In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The Company adopted ASU 2018-13 on January 1, 2020 and determined the adoption of this standard did not impact the Company’s consolidated financial statements.

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          In December 2019, the FASB 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. The Company does not expect ASU 2019-12 to have a material effect on the Company’s consolidated financial statements.

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 consolidated financial statements.

($ in thousands)
	Year Ended December 31,
	2019				2018				2017
Supplemental cash flows disclosures
Interest paid	$	6,433			$	5,068			$	3,966
Income taxes paid	$	1,018			$	—			$	—
Supplemental disclosure of non‑cash investing and financing activities
Capital expenditures included in accounts payable and accrued liabilities	$	31,226			$	137,647			$	33,850
Conversion of preferred stock to common stock at Initial Public Offering	$	—			$	—			$	162,511
Non-cash purchases of property and equipment	$	—			$	204,512			$	—

          Fair value 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:

          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.

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          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 and accounts payable, accrued liabilities and long-term debt. The estimated fair value of our financial instruments — cash and cash equivalent, accounts receivable and accounts payable and accrued liabilities at December 31, 2019 and 2018 approximated or equaled their carrying value as reflected in our consolidated balance sheets because of their short‑term nature. During the year ended December 31, 2019 and 2018, we did not have a derivative financial instrument. Prior to 2018, we used a derivative financial instrument, an interest rate swap, to manage interest rate risk. Our policies do not permit the use of derivative financial instruments for speculative purposes. We did not designate the interest rate swap as a hedge for accounting purposes. We record all derivatives as of the end of our reporting period in our consolidated balance sheet at fair value, which is based on quoted market prices, which represents a level 1 in the fair value measurement hierarchy.

Assets Measured at Fair Value on a Nonrecurring Basis

          Assets measured at fair value on a nonrecurring basis at December 31, 2019 and 2018, respectively, are set forth below ($ in thousands):

					Estimated fair value measurements
	Balance				Quoted prices in active market (Level 1)				Significant other observable inputs (Level 2)				Significant other unobservable inputs (Level 3)				Total gains (losses)
2019:
Property and equipment, net	$	2,000			$	—			$	2,000			$	—			$	(3,405	)
2018:
Property and equipment, net	$	—			$	—			$	—			$	—			$	—

          In 2019, the depressed cash flows and continued decline in utilization of our drilling and flow back asset groups were indicative of potential impairment, resulting in the Company comparing the carrying value of the asset group with its estimated fair value. We determined that the carrying value of the asset groups was greater than its estimated fair value and accordingly, an impairment was recorded. Impairment loss related to our property and equipment of $1.2 million and $2.2 million was recorded at December 31, 2019 relating to our drilling and flow back asset groups, respectively. No impairment was recorded during the years ended December 31, 2018 and 2017. Prior to the impairment write-down during the year ended December 31, 2019, the drilling assets net carrying value was $3.2 million and our flow back assets net carrying value was $2.2 million. See Note 7, “Impairment of Long‑Lived Assets”.

          We generally apply fair value techniques to our reporting units on a nonrecurring basis associated with valuing potential impairment 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

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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 is recorded in that period. There were no additions to, or disposal of, goodwill during the years ended December 31, 2019, 2018 and 2017. Based on our annual goodwill impairment test, no impairment of goodwill was recorded for the years ended December 31, 2019, 2018 and 2017.

          Intangible assets are composed of internally developed software. Intangible assets are amortized on a straight‑line basis with a useful life of five years. Amortization expense included in net income for the years ended December 31, 2019, 2018 and 2017 was $0, $0.3 million and $0.3 million, respectively. The Company’s intangible assets subject to amortization are as follows:

($ in thousands)
	December 31,
	2019				2018
Internally developed software	$	1,440			$	1,440
Less accumulated amortization	1,440				1,427
Intangible assets — net	$	—			$	13

          Property and equipment consisted of the following:

($ in thousands)
	December 31,
	2019				2018
Land	$	10,772			$	7,669
Buildings	24,375				23,840
Equipment and vehicles	1,333,705				1,105,380
Leasehold improvements	8,030				5,559
Subtotal	1,376,882				1,142,448
Less accumulated depreciation	(329,347		)		(229,602		)
Property and equipment — net	$	1,047,535			$	912,846

          Whenever events or circumstances indicate that the carrying value of long‑lived assets may not be recoverable, the Company reviews the carrying value of long‑lived assets, such as property and equipment and other assets to determine if they are recoverable. If any long‑lived assets are determined to be unrecoverable, an impairment is recorded in the period. Asset recoverability is estimated using undiscounted future net cash flows at the lowest identifiable level, excluding interest expense and nonrecurring other income and expense adjustments. During the year, the Company determined the lowest level of identifiable cash flows to be at the asset group level, which consists of hydraulic fracturing, cementing, coiled tubing, flowback and drilling.

          The shift to horizontal drilling rigs in the Permian Basin led to the deterioration in utilization of our vertical drilling rigs, and we expected undiscounted future cash flows to be lower than the carrying value of the drilling assets. In addition,

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the pricing pressure on our flowback services led to a deterioration in the utilization of our flowback assets, resulting in our expected undiscounted future cash flows to be lower than the carrying value. Given that the carrying value of the drilling and flowback assets may not be recoverable, the Company estimated the fair value of each asset group and compared it to its carrying value. Potential impairment exists if the estimated undiscounted future net cash flows for a given asset group is less than the carrying amount of the asset group. The impairment is determined by comparing the estimated fair value with the carrying value of the related asset, and any excess amount by which the carrying value exceeds the fair value is recorded as an impairment in that period. At December 31, 2019, the estimated fair value of the drilling and flowback asset groups was $2.0 million and $0, respectively. Our fair value estimate for our drilling assets was determined using a market transaction, which represents a level 2 in the fair value measurement hierarchy, while our fair value estimate for our flowback approach was determined using unobservable inputs, which represents a level 3 in the fair value measurement hierarchy. Our fair value estimates required us to use significant other observable inputs including assumptions related to replacement cost, auction value, among others. Accordingly, an impairment expense of $1.2 million and $2.2 million was recorded during the year ended December 31, 2019 for our drilling and flowback asset groups, respectively, because the carrying value of the drilling asset group of $3.2 million and the flowback asset group of $2.2 million was greater than their estimated fair value.

          In November 2011, the Company acquired certain oilfield fracturing equipment from a customer and agreed to provide future fracturing services to the customer for a period of 78 months in exchange for a 12% $25.0 million note payable to the customer. The Company recorded the fracturing equipment at its estimated fair value of approximately $13.0 million and assigned the remaining value of approximately $12.0 million to a deferred revenue rebate account to be amortized over the customer’s 78‑month service period. In March 2013, the Company repaid the note payable to the customer. The deferred revenue rebate was fully amortized as of December 31, 2018. Accordingly, for the years ended December 31, 2018 and 2017 the Company recorded $0.6 million and $1.8 million, respectively, of amortization rebate as a reduction of revenue.

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, as determined monthly, of 85% of monthly eligible accounts receivable less customary reserves (the "Borrowing Base"). The Borrowing Base as of December 31, 2019 was approximately $181.2 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 weighted average interest rate for our ABL Credit Facility for the year ended December 31, 2019 was 4.4%.

          In March 2020, we obtained a waiver from our lenders under the ABL Credit Facility to extend the time period for us to provide our lenders the Company’s audited financial statements for the year ended December 31, 2019 to July 31, 2020.

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          Total debt consisted of the following:

($ in thousands)
	December 31,
	2019				2018
ABL Credit Facility	$	130,000			$	70,000
Total debt	130,000				70,000
Less current portion of long-term debt	—				—
Total long-term debt	$	130,000			$	70,000

          The loan origination costs relating to the ABL Credit Facility are classified as an asset in the balance sheet. The fair value of the ABL Credit Facility approximates its carrying value.

          Annual Maturities — Scheduled annual maturities of total debt are as follows at December 31, 2019:

($ in thousands)
2020	$	—
2021	—
2022	—
2023	130,000
2024 and thereafter	—
Total	$	130,000

          Accrued and other current liabilities consisted of the following:

($ in thousands)
	December 31,
	2019				2018
Accrued capital expenditure	$	—			$	109,832
Accrued insurance	1,231				3,905
Accrued payroll and related expenses	16,809				15,854
Accrued taxes and others	18,303				8,498
Total	$	36,343			$	138,089

          The Company has a 401(k) plan, modified effective January 1, 2019, whereby all employees with sixty days of service may contribute up to $19,000 to the plan annually. The employees vest in the Company contributions to the 401(k) plan 25% per year, beginning in the employee’s first year of service, with full vesting occurring after four years of service. The employees are fully vested in their contributions when made. The Company matches 100% of the employee contributions up to 6% of gross salary, up to the annual limit. During the years ended December 31, 2019, 2018 and 2017, the recorded expense under the plan was $3.0 million, $0.3 million and $0.2 million, respectively.

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          The Company has five operating segments for which discrete financial information is readily available: hydraulic fracturing, cementing, coiled tubing, flowback, and drilling. These operating segments represent how the Chief Operating Decision Maker evaluates performance and allocates resources.

          On August 31, 2018, we divested our surface air drilling operations, included in our "all other" category, in order to continue to focus and position ourselves as a Permian Basin-focused pressure pumping business because we believe the pressure pumping market in the Permian Basin offers more supportive long-term growth fundamentals. The divestiture of our surface air drilling operations did not qualify for presentation and disclosure as discontinued operations, and accordingly, during the year ended December 31, 2018, we have recorded the resulting loss on disposal of our surface air drilling of $0.3 million as part of our loss on disposal of asset in our consolidated statement of operations. The divestiture of our surface air drilling operations resulted in a reduction in the number of our current operating segments to five. The change in the number of our operating segments did not impact our reportable segment information reported for the years presented.

          In accordance with ASC 280—Segment Reporting, the Company has one reportable segment (pressure pumping) comprised of the hydraulic fracturing and cementing operating segments. All other operating segments and corporate administrative expense (inclusive of our stock-based compensation expense, income tax expense and interest expense) are included in the ‘‘all other’’ category in the tables below. Total corporate administrative expense for the years ended December 31, 2019, 2018 and 2017 was $113.0 million, $83.9 million and $35.8 million, respectively.

          Our hydraulic fracturing operating segment revenue approximated 95.6%, 95.4% and 95.3% of our pressure pumping revenue for the years ended December 31, 2019, 2018 and 2017, 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. We define Adjusted EBITDA as earnings before interest expense, income taxes, depreciation and amortization (EBITDA), plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock-based compensation, and (iv) other unusual or non‑recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related to asset acquisitions or one-time professional fees.

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          A reconciliation from segment level financial information to the consolidated statement of operations is provided in the table below ($ in thousands):

	Pressure Pumping				All Other				Total
Year ended and as of December 31, 2019
Service revenue	$	2,001,627			$	50,687			$	2,052,314
Adjusted EBITDA	$	533,760			$	(14,691	)		$	519,069
Depreciation and amortization	$	139,348			$	5,956			$	145,304
Impairment expense	$	—			$	3,405			$	3,405
Capital expenditures	$	387,119			$	13,552			$	400,671
Goodwill	$	9,425			$	—			$	9,425
Total assets	$	1,381,811			$	54,300			$	1,436,111
	Pressure Pumping				All Other				Total
Year ended and as of December 31, 2018
Service revenue	$	1,658,403			$	46,159			$	1,704,562
Adjusted EBITDA	$	398,396			$	(9,873	)		$	388,523
Depreciation and amortization	$	83,404			$	4,734			$	88,138
Capital expenditures	$	577,171			$	15,431			$	592,602
Goodwill	$	9,425			$	—			$	9,425
Total assets	$	1,230,830			$	43,692			$	1,274,522
	Pressure Pumping				All Other				Total
Year ended and as of December 31, 2017
Service revenue	$	945,040			$	36,825			$	981,865
Adjusted EBITDA	$	145,122			$	(7,679	)		$	137,443
Depreciation and amortization	$	51,155			$	4,473			$	55,628
Capital expenditures	$	300,406			$	4,893			$	305,299
Goodwill	$	9,425			$	—			$	9,425
Total assets	$	688,279			$	30,753			$	719,032

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Reconciliation of net income (loss) to adjusted EBITDA ($ in thousands):

	Pressure Pumping				All Other				Total
Year ended December 31, 2019
Net income (loss)	$	281,090			$	(118,080	)		$	163,010
Depreciation and amortization	139,348				5,956				145,304
Interest expense	51				7,090				7,141
Income tax expense	—				50,494				50,494
Loss on disposal of assets	106,178				633				106,811
Impairment expense	—				3,405				3,405
Stock‑based compensation	—				7,776				7,776
Other expense	—				717				717
Other general and administrative expense (1)	—				25,208				25,208
Deferred IPO bonus, retention bonus and severance expense	7,093				2,110				9,203
Adjusted EBITDA	$	533,760			$	(14,691	)		$	519,069
	Pressure Pumping				All Other				Total
Year ended December 31, 2018
Net income (loss)	$	253,196			$	(79,334	)		$	173,862
Depreciation and amortization	83,404				4,734				88,138
Interest expense	—				6,889				6,889
Income tax expense	—				51,255				51,255
Loss (gain) on disposal of assets	59,962				(742		)		59,220
Stock‑based compensation	—				5,482				5,482
Other expense	—				663				663
Other general and administrative expense (1)	2				203				205
Deferred IPO bonus	1,832				977				2,809
Adjusted EBITDA	$	398,396			$	(9,873	)		$	388,523
	Pressure Pumping				All Other				Total
Year ended December 31, 2017
Net income (loss)	$	50,417			$	(37,804	)		$	12,613
Depreciation and amortization	51,155				4,473				55,628
Interest expense	—				7,347				7,347
Income tax expense	—				3,128				3,128
Loss on disposal of assets	38,059				1,027				39,086
Stock‑based compensation	—				9,489				9,489
Other expense	—				1,025				1,025
Other general and administrative expense (1)	—				722				722
Deferred IPO bonus	5,491				2,914				8,405
Adjusted EBITDA	$	145,122			$	(7,679	)		$	137,443

                         

(1)	Other general and administrative expense primarily relates to nonrecurring professional fees paid to external consultants in connection with the Company’s expanded audit committee review and advisory services in 2019, and legal settlements in 2018 and 2017.

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Major Customers

          The Company had revenue from the following significant customers that accounted for the following percentages of the Company’s total revenue:

	Year Ended December 31,
	2019			2018			2017
Customer A	25.5	%		24.1	%		15.0	%
Customer B	20.9	%		16.5	%		13.8	%
Customer C	13.2	%		12.2	%		12.7	%
Customer D	9.2	%		8.9	%		12.6	%
Customer E	8.2	%		7.1	%		11.8	%

           The above significant customers’ revenue that relates to pressure pumping is below:

	Year Ended December 31,
	2019			2018			2017
Customer A	99.7	%		97.4	%		99.9	%
Customer B	95.4	%		98.3	%		99.2	%
Customer C	99.9	%		100.0	%		99.9	%
Customer D	100.0	%		100.0	%		99.8	%
Customer E	100.0	%		100.0	%		95.5	%

          Basic net income per common share is computed by dividing the net income relevant to the common stockholders by the weighted-average number of shares outstanding during the year. Diluted net income per common share uses the same net income divided by the sum of the weighted-average number of shares of common stock outstanding during the period, plus dilutive effects of options, performance stock units 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.

(In thousands, except for per share data)
	Year Ended December 31,
	2019				2018				2017
Numerator (both basic and diluted)
Net income relevant to common stockholders	$	163,010			$	173,862			$	12,613
Denominator
Denominator for basic net income per share	100,472				83,460				76,371
Dilutive effect of stock options	2,929				3,129				2,903
Dilutive effect of performance stock units	169				277				59
Dilutive effect of restricted stock units	179				180				250
Denominator for diluted net income per share	103,750				87,046				79,583
Basic net income per common share	$	1.62			$	2.08			$	0.17
Diluted net income per common share	$	1.57			$	2.00			$	0.16

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2017 Incentive Award Plan

          In March 2017, our shareholders approved the ProPetro Holding Corp. 2017 Incentive Award Plan (the "Incentive Plan") pursuant to which our Board of Directors may grant stock options, restricted stock units ("RSUs"), performance stock units ("PSUs"), or other stock-based awards to consultants, directors, executives and employees. The Incentive Plan authorizes up to 5,800,000 shares of common stock to be issued under awards granted pursuant to the plan.

Stock Options

          On June 14, 2013, we granted 2,799,408 stock option awards to certain key employees, officers and directors pursuant to the Stock Option Plan that vested and became exercisable based upon the achievement of a service requirement. The options vested in 25% increments for each year of continuous service and an option became fully vested upon the optionee’s completion of the fourth year of service. The contractual term for the options awarded is 10 years. The fair value of each option award granted was estimated on the date of grant using the Black-Scholes option-pricing model.

          On July 19, 2016, we granted 1,274,549 stock option awards to certain key employees, officers and directors pursuant to the Stock Option Plan which vested in five substantially equal semi-annual installments commencing in December 2016, subject to a continuing services requirement. The contractual term for the options awarded is 10 years. We fully accelerated vesting of the options in connection with our IPO. The fair value of each option award granted was estimated on the date of grant using the Black-Scholes option-pricing model.

          On March 16, 2017, we granted 793,738 stock option awards to certain key employees, officers and directors pursuant to the Incentive Plan which are scheduled to vest in four substantially equal annual installments, subject to a continuing service requirement. The contractual term for the options awarded is 10 years. The fair value of each stock option award granted was estimated on the date of grant using the Black-Scholes option-pricing model. There were no new stock option grants during the years ended December 31, 2019 and 2018. The weighted average grant-date fair value of stock options granted during the year ended December 31, 2017 was $3.35.

          As of December 31, 2019, the aggregate intrinsic value for our outstanding stock options was $28.6 million, and the aggregate intrinsic value for our exercisable stock options was $28.6 million. The aggregate intrinsic value for the exercised stock options during the year ended December 31, 2019 was $2.9 million. The remaining contractual term for the outstanding and exercisable stock options as of December 31, 2019, was 4.9 years and 4.7 years, respectively. For the years ended December 31, 2019, 2018 and 2017, the Company recognized approximately $0.5 million, $0.6 million and $2.9 million, respectively, in compensation expense related to stock options.

          A summary of the stock option activity during the year ended December 31, 2019 is presented below:

	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2019	4,557,186			$	5.14
Granted	—			$	—
Exercised	(212,242	)		$	5.49
Forfeited	(24,847	)		$	14.00
Expired	(20,009	)		$	14.00
Outstanding at December 31, 2019	4,300,088			$	5.03
Exercisable at December 31, 2019	3,953,122			$	4.25

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Restricted Stock Units

          In 2019, we granted 424,624 RSUs to key employees, officers and directors pursuant to the 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 was based on the closing share price of our common stock on the date of grant. For the years ended December 31, 2019, 2018 and 2017, the Company recognized stock compensation expense for RSUs of approximately $3.5 million, $2.9 million and $6.2 million, respectively. As of December 31, 2019, the total unrecognized compensation expense for all RSUs was approximately $6.4 million, and is expected to be recognized over a weighted-average period of approximately 1.8 years.

          The following table summarizes the RSUs activity during the year December 31, 2019:

		Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2019		473,505			$	16.52
Granted		424,624			$	19.81
Vested		(217,474	)		$	15.93
Forfeited		(67,438	)		$	18.86
Canceled		—			$	—
Outstanding at December 31, 2019		613,217			$	18.75

Performance Stock Units

          In 2019, we granted PSUs to certain key employees and officers under the Incentive Plan. The actual number of shares of common stock that may be issued under the PSUs ranges from zero 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 from January 1, 2019 through December 31, 2021. 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 was 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. For the years ended December 31, 2019, 2018 and 2017 the Company recognized stock compensation expense for the PSUs of approximately $3.8 million, $2.0 million and $0.4 million, respectively.

          The following table summarizes the PSUs activity during the year ended December 31, 2019:

Period Granted		Target Shares Outstanding at January 1, 2019			Target Shares Granted			Target Shares Vested			Target Shares Forfeited			Target Shares Outstanding at December 31, 2019			Weighted Average Grant Date Fair Value per Share
2017		169,635			—			—			(18,143	)		151,492			$	10.73
2018		178,975			—			(2,960	)		(19,439	)		156,576			$	27.51
2019		—			238,376			(1,297	)		(22,526	)		214,553			$	30.94
Total		348,610			238,376			(4,257	)		(60,108	)		522,621			$	24.05

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The components of the provision for income taxes are as follows:

($ in thousands)
	Year Ended December 31,
	2019				2018				2017
Federal:
Current	$	—			$	—			$	(376	)
Deferred	47,090				48,738				3,634
	47,090				48,738				3,258
State:
Current	1,736				1,551				74
Deferred	1,668				966				(204		)
	3,404				2,517				(130		)
Total income tax expense	$	50,494			$	51,255			$	3,128

Reconciliation between the amounts determined by applying the federal statutory rate of 21% for years ended December 31, 2019 and 2018 and 35% for the year ended December 31, 2017 to income tax expense is as follows:

($ in thousands)
	Year Ended December 31,
	2019				2018				2017
Taxes at federal statutory rate	$	44,836			$	47,275			$	5,510
State taxes, net of federal benefit	2,504				1,874				176
Non-deductible expenses	3,683				2,423				1,582
Stock-based compensation	(717		)		(426		)		(655		)
Valuation allowance	—				(1,151		)		273
Effect of change in enacted tax rate	—				—				(3,448		)
Other	188				1,260				(310		)
Total income tax expense	$	50,494			$	51,255			$	3,128

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Deferred tax assets and liabilities are recognized for estimated future tax effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. The significant items giving rise to deferred tax assets (liabilities) are as follows:

($ in thousands)
	December 31,
	2019				2018
Deferred Income Tax Assets
Accrued liabilities	$	633			$	769
Allowance for doubtful accounts	224				21
Lease liabilities	605				—
Goodwill and other intangible assets	2,724				4,010
Stock‑based compensation	3,438				2,632
Net operating losses	66,311				111,580
Other	55				63
Total deferred tax assets	73,990				119,075
Valuation allowance	—				—
Total deferred tax assets — net	$	73,990			$	119,075
Deferred Income Tax Liabilities
Property and equipment	$	(176,404	)		$	(172,164	)
Prepaid expenses	(627		)		(1,194		)
Total deferred tax liabilities	$	(177,031	)		$	(173,358	)
Net deferred tax liabilities	$	(103,041	)		$	(54,283	)

          At December 31, 2019, the Company had approximately $304.7 million of federal net operating loss carryforwards some of which will begin to expire in 2035. After January 1, 2018, federal net operating loss carryforwards can be carried forward indefinitely. Approximately $229.5 million of our federal net operating loss carryfoward relates to pre-2018 periods which are not subject to an annual 80% limitation of taxable income. Our state net operating losses is approximately $50.4 million and will begin to expire in 2024. Utilization of net operating loss carryforwards may be limited due to past or future ownership changes. As of December 31, 2019, we determined that no valuation allowance was necessary against our deferred tax assets.

          The Company’s U.S. federal income tax returns for the year ended December 31, 2016 and through the most recent filing remain open to examination by the Internal Revenue Service under the applicable U.S. federal statute of limitations provisions. The various states in which the Company is subject to income tax are generally open to examination for the tax years ended December 31, 2015 and through the most recent filing.

          On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (“Tax Act”).  The Tax Act makes broad and complex changes to the U.S. tax code including, but not limited to (1) reducing the U.S. federal corporate tax rate from 35% to 21%, (2) eliminating the corporate alternative minimum tax (“AMT’’) and changing how existing AMT credits can be realized, (3) creating a new limitation on deductible interest expense, (4) changes to bonus depreciation, and (5) changing rules related to use and limitations of net operating loss carryforwards for tax years beginning after December 31, 2017. We have completed our analysis of the Tax Act. The only material items that impacted the Company’s consolidated financial statements in 2017 was the corporate rate reduction. While the corporate rate reduction was effective January 1, 2018, we accounted for the effect of the rate change during the year ended December 31, 2017, the year of enactment. Consequently, we recorded a $3.4 million decrease to the net deferred tax liability.

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          We record uncertain tax positions in accordance with ASC 740, Income Taxes, on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than fifty percent likely to be realized upon ultimate settlement with the related tax authority. As of December 31, 2019, 2018 and 2017, no uncertain tax positions were recorded. The Company will continue to evaluate its tax positions in accordance with ASC 740 and will recognize any future effect as a charge to income in the applicable period.

          Income tax penalties and interest assessments recognized under ASC 740 are accrued as a tax expense in the period that the Company’s taxes are in an uncertain tax position. Any accrued tax penalties or interest assessments will remain until the uncertain tax position is resolved with the taxing authorities or until the applicable statute of limitations has expired.

Corporate Office Building

          The Company rents its corporate office building and the associated real property from an entity, in which a former executive officer of the Company has an equity interest. The rent expense on our corporate office building is approximately $0.1 million per year. During the years ended December 31, 2019 and 2018, the Company incurred costs of approximately $1.6 million and $0.9 million, respectively, for improvements made to our corporate office building that we rent. In April 2020, the Company acquired the corporate office building and associated real property for approximately$1.5 million.

Operations and Maintenance Yards

          The Company also rents five yards from an entity, which certain former executive officers, an executive officer and a director of the Company have equity interests and total annual rent expense for each of the five yards was approximately $0.03 million, $0.03 million, $0.1 million, $0.1 million, and $0.2 million, respectively. The Company also leased a yard from another entity, which a certain executive officer of the Company has an equity interest, and with annual lease expense of $0.1 million.

          Subsequent to the issuance of the consolidated financial statements for the year ended December 31, 2018 we identified the following related party transaction. In 2018, the Company entered into a construction and purchase agreement for a maintenance facility for our pressure pumping operations with a developer. The developer for the maintenance facility was an equal partner with a former executive officer of the Company in a separate legal entity. The entity the former executive officer was associated with provided funding to the developer related to the construction of the maintenance facility. The construction and purchase cost of $2.3 million was paid to the developer during the year ended December 31, 2018.

Transportation and Equipment Rental

          For the years ended December 31, 2019, 2018 and 2017, the Company incurred costs for transportation services with an entity, in which a former executive officer of the Company had an equity interest, of approximately $0.2 million, $0.4 million and $0.3 million, respectively. During the years ended December 31, 2018 and 2017, the partner in the entity with the former executive officer reimbursed the Company approximately $0.05 million and $0.1 million, respectively, for the use of the Company’s personnel to operate the transportation equipment.

          The Company also rented equipment in Elk City, Oklahoma for our flowback operations from an entity, which a former executive officer of the Company has an equity interest. For the years ended December 31, 2019, 2018 and 2017, the Company incurred and paid $0.2 million, $0.2 million and $0.2 million, respectively. This rental arrangement was terminated in January 2020.

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          At December 31, 2019 and 2018, the Company had $0 and $0.01 million in payables to the above related parties, respectively. There were no receivables at December 31, 2019 and 2018 from the above related party transactions.

PT Petroleum, LLC

          Subsequent to the issuance of the consolidated financial statements for the year ended December 31, 2018 we identified the following related party transaction. For the years ended December 31, 2018 and 2017, the Company provided services to PT Petroleum, LLC, an entity in which a director was an officer, of approximately $16.7 million and $39.0 million, respectively.

Pioneer

          On December 31, 2018, we consummated the purchase of certain pressure pumping assets and real property in connection with the Pioneer Pressure Pumping Acquisition. The acquisition cost of the assets was comprised of approximately $110.0 million of cash and 16.6 million shares of our common stock. In connection with the consummation of the Pioneer Pressure Pumping Acquisition and effective January 1, 2019, we became a long-term service provider to Pioneer, providing pressure pumping and related services for a term of up to ten years. Revenue from services provided to Pioneer accounted for approximately $524.2 million, $76.0 million and $36.0 million of our total revenue during the years ended December 31, 2019, 2018 and 2017, respectively. During 2019, the Company reimbursed Pioneer approximately $4.2 million for our portion of the retention bonuses paid to former Pioneer employees that were subsequently employed by the Company and also Pioneer reimbursed the Company approximately $2.5 million for severance payments made on their behalf, in connection with the Pioneer Pressure Pumping Acquisition. As of December 31, 2019, the total accounts receivable due from Pioneer, including estimated unbilled receivable for services we provided, amounted to $61.7 million and the amount due to Pioneer was $0.

Operating Leases

Description of Lease

          In March 2013, we entered into a ten-year real estate lease contract (the "Real Estate Lease") with a commencement date of April 1, 2013, as part of the expansion of our equipment yard. The lease is with an entity in which a director of the Company has a noncontrolling equity ownership interest. For the years ended December 31, 2019, 2018 and 2017, the Company made lease payments of approximately $0.4 million, $0.3 million and $0.3 million, respectively. The assets and liabilities under this contract are equally allocated between our cementing and coiled tubing segments. In addition to the contractual lease period, the contract includes an optional renewal of up to ten years, and in management's judgment the exercise of the renewal option is not reasonably assured. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Real Estate Lease does not contain variability in payments resulting from either an index change or rate change. Effective January 1, 2019, the remaining lease term in our present value estimate of the minimum future lease payments was four years.

          Consistent with the requirements of the new lease standard, ASC 842, we have determined the Real Estate Lease to be an operating lease. Our assumptions resulted from the existence of the right to control the use of the assets throughout the lease term. We did not account for the land separately from the building of the real estate lease

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because we concluded that the accounting effect was insignificant. As of December 31, 2019, the weighted average discount rate and remaining lease term was 6.7% and 3.3 years, respectively.

          In January 2019, we entered into a four-year real estate lease contract with Pioneer, a related party, (the "Crew Camp Lease") with a commencement date of January 1, 2019 for purposes of providing housing to Company personnel. The contract does not include a residual value guarantee, covenants or financial restrictions. Further, the Crew Camp Lease does not contain variability in payments resulting from either an index change or rate change. The lease term used in our estimate of the present value of the minimum future lease payments for the purpose of determining our right-of-use asset and lease obligation was four-years. We determined the Crew Camp Lease to be an operating lease. However, effective July 1, 2019, the Crew Camp Lease was terminated in connection with our disposal of our camp assets located at the leased real estate for $5.0 million. In connection with the Crew Camp Lease termination, we derecognized the right-of-use asset and lease liability of $0.5 million and $0.5 million, respectively. The total operating lease cost recorded during the year ended December 31, 2019, in connection with the Crew Camp Lease was $0.1 million. Effective July 1, 2019, we disposed of our camp assets and entered into a twelve month lease (the "Lodging Lease"), which we determined to be a short-term lease, to rent a certain number of rooms daily, including related services, for a fixed rate and accordingly, we recorded a gain on sale in our statement of operations during the year ended December 31, 2019 of approximately $4.2 million.

          As of December 31, 2019, our total operating lease right-of-use asset cost was $1.2 million, and accumulated amortization was $0.3 million. For the year ended December 31, 2019, we recorded operating lease cost of $0.4 million in our statement of operations. During the years ended December 31, 2018 and 2017, our operating lease expense, under legacy GAAP, ASC 840, was $1.7 million and $1.4 million, respectively.

Finance Leases

Description of Ground Lease

        In 2018, we entered into a ten-year land lease contract (the "Ground Lease") with an exclusive option to purchase the land exercisable beginning one year from the commencement date of October 1, 2018 through the end of the contractual lease term. The Ground Lease does not include any residual value guarantee, covenants or financial restrictions. Further, the Ground Lease does not contain variability in payments resulting from either an index change or rate change. The remaining lease term used in our estimate of the present value of the minimum future lease payments for the purpose of determining our right-of-use asset and lease obligation was 1.2 years, assuming we will exercise our option to purchase the land shortly after the option becomes exercisable.

          Consistent with the requirements of the new lease standard, ASC 842, we have determined the Ground Lease to be a finance lease. Our assumptions resulted from the existence of the right to control the use of the land for a period of time and the option to purchase the land, which we are reasonably certain of exercising shortly after 1.0 year from the commencement date. As of December 31, 2019, the weighted average discount rate and remaining lease term was 4.3% and 0.2 years, respectively.

          As of December 31, 2019, our net finance lease right-of-use asset included as part of property and equipment in our consolidated balance sheet consists of a cost of $3.1 million and accumulated amortization of $0. The interest on our finance lease for the year ended December 31, 2019 was $0.1 million. No amortization was recorded in the period for our finance lease right-of-use asset because it is comprised of land. In March 2020, the Company exercised its option and purchased the land associated with the Ground Lease.

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          The maturity analysis of liabilities and reconciliation to undiscounted and discounted remaining future lease payments for operating and finance leases as of December 31, 2019 are as follows:

		Leases
($ in thousands)		Operating				Finance
2020		$	366			$	2,833
2021		377				—
2022		389				—
2023		98				—
2024		—				—
Total undiscounted future lease payments		1,230				2,833
Amount representing interest		(129		)		(2		)
Present value of future lease payments (lease obligation)		$	1,101			$	2,831

          The total cash paid in connection with our operating and finance lease liabilities during the year ended December 31, 2019 was $0.4 million and $0.4 million, respectively. The non-cash lease obligation we recorded effective January 1, 2019, upon adopting the new lease standard, ASC 842, was $2.0 million and $3.1 million for operating and finance leases, respectively. The non-cash changes to our lease liabilities during the year ended December 31, 2019, relate to the derecognition of the lease liability of $0.5 million, in connection with the Crew Camp Lease termination on July 1, 2019.

Short-Term Leases

          We elected the practical expedient, consistent with ASC 842, to exclude leases with an initial term of twelve months or less ("short-term leases") from our balance sheet and continue to record short-term leases as a period expense. For the year ended December 31, 2019, our short-term asset lease and Lodging Lease expense was approximately $1.3 million and $2.4 million, respectively. At December 31, 2019, the total remaining commitments and other obligations for all of our short-term lease and lodging arrangements was $6.9 million.

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Commitments

          As of December 31, 2018, our required remaining lease payments under legacy GAAP, ASC 840, for each fiscal year are as follows. See Note 17 for additional lease disclosures under the new lease standard, ASC 842.

($ in thousands)
2019		$	892
2020		721
2021		721
2022		721
2023 and thereafter		2,258
Total		$	5,313

          As of December 31, 2019, the Company has an agreement with its equipment manufacturer granting the Company the option to purchase additional 108,000 of DuraStim® hydraulic horsepower (“HHP”), with the purchase option expiring at different times through April 30, 2021. The option fee of $6.1 million, which we have classified as a deposit for property and equipment, will be applied equally towards the purchase price of each additional DuraStim® fleet ordered. As of December 31, 2019, the total outstanding remaining contractual obligations under the purchase agreement for the original DuraStim® fleets and related ancillary equipment was $1.7 million.

          As of December 31, 2019, other contracted capital commitments entered into as part of normal course of business for supply of certain equipment, including improvement to our corporate office building, was $2.7 million.

          The Company enters into purchase agreements with its sand suppliers (the “Sand suppliers”) to secure supply of sand as part of its normal course of business. The agreements with the Sand suppliers require that the Company purchase a minimum volume of sand, constituting substantially all of its sand requirements, from the Sand suppliers, otherwise certain penalties may be charged. Under certain of the purchase agreements, a shortfall fee applies if the Company purchases less than the minimum volume of sand. The shortfall fee represents liquidated damages and is either a fixed percentage of the purchase price for the minimum volumes or a fixed price per ton of unpurchased volumes. Under one of the purchase agreements, the Company is obligated to purchase a specified percentage of its overall sand requirements, or it must pay the supplier the difference between the purchase price of the minimum volumes under the purchase agreement and the purchase price of the volumes actually purchased. Our minimum volume commitments under the purchase agreements are either based on a percentage of our total usage or fixed minimum quantity. Our agreements with the Sand suppliers expire at different times prior to April 30, 2022. During the years ended December 31, 2019, 2018 and 2017, no shortfall fees have been recorded. One of the Sand suppliers (“SandCo”) we entered into an agreement with to purchase sand (“Texas sand”) has an indirect relationship with a former executive officer of the Company, because beginning in 2018, the Texas sand was sourced from a mine located on land owned by an entity (“LandCo”) in which the former executive officer has a 44% noncontrolling equity interest in the LandCo. The total sand purchased from SandCo during the year ended December 31, 2019 and 2018 was approximately $44.3 million and $10.3 million, respectively, and the estimated indirect benefit to the former executive officer of the Company was approximately $1.5 million and $0.4 million, respectively.

          As of December 31, 2019 and 2018, the Company had issued letters of credit of $1.5 million and $1.8 million, respectively, under the Company's ABL Credit Facility relating to the Company's casualty insurance policy.

          During the year ended December 31, 2019, we recorded severance expense of approximately $2.0 million relating to the resignation of two former executive officers, which was included as part of our general and

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administrative expense in our statement of operations and the outstanding balance included in accrued liabilities and other current liabilities in our consolidated balance sheet at December 31, 2019.

Contingent Liabilities

          In September 2019, a complaint, captioned Richard Logan, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. ProPetro Holding Corp., et al., (the “Logan Lawsuit”), was filed against the Company and certain of its current and former officers and directors in the U.S. District Court for the Western District of Texas.

          In April 2020, Lead Plaintiffs Nykredit Portefølje Administration A/S, Oklahoma Firefighters Pension and Retirement System, Oklahoma Law Enforcement Retirement System, Oklahoma Police Pension and Retirement System, and Oklahoma City Employee Retirement System, and additional named plaintiff Police and Fire Retirement System of the City of Detroit, individually and on behalf of a putative class of shareholders who purchased the Company’s common stock between March 17, 2017 and March 13, 2020, filed a second amended class action complaint in the U.S. District Court for the Western District of Texas in the Logan Lawsuit, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, as amended, and Rule l0b-5 promulgated thereunder, and Sections 11 and 15 of the Securities Act, as amended, based on allegedly inaccurate or misleading statements, or omissions of material facts, about the Company’s business, operations and prospects.

          In January 2020, Boca Raton Firefighters’ and Police Pension Fund (“Boca Raton”) filed a shareholder derivative suit in the U.S. District Court for the Western District of Texas (the “Boca Raton Lawsuit”) against certain of the Company’s current and former officers and directors (the “Boca Raton Defendants”). The Company was named as a nominal defendant only. The claims include (i) breaches of fiduciary duties, (ii) unjust enrichment and (iii) contribution. Boca Raton did not quantify any alleged damages in its complaint but, in addition to attorneys’ fees and costs, Boca Raton seeks various forms of relief, including (i) damages sustained by the Company as a result of the Boca Raton Defendants’ alleged misconduct, (ii) punitive damages and (iii) equitable relief in the form of improvements to the Company’s governance and controls.

          In April 2020, Jye-Chun Chang filed a shareholder derivative suit in the U.S. District Court for the Western District of Texas (the “Chang Lawsuit”) against certain of the Company’s current and former officers and directors (the “Chang Defendants”). The Company was named as a nominal defendant only. The claims include (i) violations of section 14(a) of the Exchange Act, (ii) breach of fiduciary duties, (iii) unjust enrichment, (iv) abuse of control, (v) gross mismanagement and (vi) waste of corporate assets. Chang did not quantify any alleged damages in its complaint but, in addition to attorneys’ fees and costs, Chang seeks various forms of relief, including (i) declaring that Chang may sustain the action on behalf of the Company, (ii) declaring that the Chang Defendants breached their fiduciary duties to the Company, (iii) damages sustained by the Company as a result of the Chang Defendants’ alleged misconduct, (iv) equitable relief in the form of improvements to the Company’s governance and controls and (v) restitution.

          In October 2019, the Company received a letter from the SEC indicating that the SEC had opened an investigation into the Company and requesting that the Company provide certain information and documents, including documents related to the Company’s expanded audit committee review and related events. The Company has cooperated and expects to continue to cooperate with the SEC’s investigation.

          We are presently unable to predict the duration, scope or result of the Logan Lawsuit, the Boca Raton Lawsuit, the Chang Lawsuit, the SEC investigation, or any other related lawsuit or investigation. As of December 31, 2019, no provision was made by the Company in connection with these pending lawsuits and the SEC investigation as they are still at early stages and the final outcomes cannot be reasonably estimated.

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Environmental

          The Company is subject to various federal, state and local environmental laws and regulations that establish standards and requirements for protection of the environment. The Company cannot predict the future impact of such standards and requirements, which are subject to change and can have retroactive effectiveness. The Company continues to monitor the status of these laws and regulations. Currently, the Company has not been fined, cited or notified of any environmental violations that would have a material adverse effect upon its financial position, liquidity or capital resources. However, management does recognize that by the very nature of the Company's business, material costs could be incurred in the near term to maintain compliance. The amount of such future expenditures is not determinable due to several factors, including the unknown magnitude of possible regulation or liabilities, the unknown timing and extent of the corrective actions which may be required, the determination of the Company's liability in proportion to other responsible parties and the extent to which such expenditures are recoverable from insurance or indemnification.

Regulatory Audits

          In 2019, the Texas Comptroller of Public Accounts commenced a routine audit of the Company's gross receipts and sales, excise and use taxes for the periods of July 2015 through December 2018. As of December 31, 2019, the audit is still at an early stage and the final outcome cannot be reasonably estimated.

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          The following table sets forth our unaudited quarterly results for each of the last four quarters for the years ended December 31, 2019 and 2018. This unaudited quarterly information has been prepared on the same basis as our annual audited financial statements and includes all adjustments, consisting only of normal recurring adjustments that are necessary to present fairly the financial information for the fiscal quarters presented.

(In thousands, except for per share data)
	2019
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenue - Service revenue	$	546,179			$	529,494			$	541,847			$	434,794
Gross profit	$	164,656			$	143,276			$	144,925			$	129,101
Net income	$	69,805			$	36,133			$	34,397			$	22,675
Net income per common share:
Basic	$	0.70			$	0.36			$	0.34			$	0.23
Diluted	$	0.67			$	0.35			$	0.33			$	0.22
Weighted average common shares outstanding:
Basic	100,232				100,425				100,606				100,618
Diluted	104,123				104,379				103,652				103,055
	2018
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
Revenue - Service revenue	$	385,219			$	459,888			$	434,041			$	425,414
Gross profit	$	87,097			$	108,000			$	113,895			$	124,993
Net income	$	36,708			$	39,091			$	46,285			$	51,778
Net income per common share:
Basic	$	0.44			$	0.47			$	0.55			$	0.62
Diluted	$	0.42			$	0.45			$	0.53			$	0.59
Weighted average common shares outstanding:
Basic	83,081				83,447				83,544				83,758
Diluted	86,848				86,878				86,878				87,218

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Stockholder Rights Plan

          On April 10, 2020, the board of directors of the Company adopted a short-term stockholder rights plan (the “Rights Plan”). The Rights Plan provides for the issuance of one right for each outstanding share of the Company’s common stock held by stockholders of record on April 24, 2020. In general, the rights will become exercisable only if a person or group acquires beneficial ownership of 10% (or 20% in the case of certain passive investors) or more of the Company’s outstanding common stock or announces a tender or exchange offer that would result in such ownership. If the rights become exercisable, all holders of rights (other than any triggering person) will be entitled to acquire shares of common stock at a 50% discount, or the Company may exchange each right held by such holders for one share of common stock.

          The Rights Plan will expire on March 31, 2021. The Rights Plan may also be terminated, or the rights may be redeemed, prior to the scheduled expiration of the Rights Plan under certain other circumstances.

Impairments

          During the first quarter of 2020, management determined the reductions in commodity prices driven by the potential impact of the novel COVID-19 virus and global supply and demand dynamics coupled with the sustained decrease in the Company’s share price were triggering events for goodwill and asset impairment. As a result of the triggering events, we performed an interim goodwill impairment test on the hydraulic fracturing reporting unit and a recoverability tests on each of the assets groups. As a result, we expect to recognize impairments and charges in the first quarter of 2020 as follows:

•	goodwill impairment of approximately $9.4 million;

•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

          If the depressed oil prices and the current economic conditions continue for a longer period of time, actual results may differ from estimates and future assumptions may change resulting in additional impairment charges in the future.

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•	Appointed new executive officers with extensive public company experience to improve the tone at the top, communication with the Board and compliance with policies within the Company.

•	Enhanced certain of the Company’s policies, including the Code of Ethics and Conduct, Expense Reimbursement, Travel and Entertainment, and Delegation of Responsibilities and Authority. Additionally, the Company enhanced or implemented control activities to monitor compliance with such policies.

•	Designed and implemented control activities related to the identification of, approval of, and disclosure of related party transactions.

•	Designed and implemented control activities related to the identification and approval of potential conflicts of interest.

•	Designed and implemented control activities related to the evaluation of whistleblower allegations.

•	Formed a disclosure committee and appointed a Chief Disclosure Officer to provide improved corporate governance related to disclosures the Company provides to the public and other external parties.

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(1)	Mr. Gobe was appointed to the Board as a director and Chairman of the Board on July 11, 2019 and was subsequently appointed to the role of Executive Chairman and principal executive officer on October 3, 2019. On March 13, 2020, Mr. Gobe assumed role of Chief Executive Officer and Chairman of the Board.

(2)	On March 13, 2020, Mr. S. Sledge and Mr. Muñoz were promoted to the positions of Chief Strategy and Administrative Officer and Senior Vice President of Operations, respectively.

(3)	Mr. Armour resigned as Chairman of the Board effective July 11, 2019, but remains a member of the Board.

(4)	Member of the Audit Committee.

(5)	Member of the Compensation Committee.

(6)	Member of the Nominating and Corporate Governance Committee.

(7)	Lead Independent Director of the Board, effective October 3, 2019.

(8)	Chairman of the Audit Committee.

(9)	Chairman of the Compensation Committee.

(10)	Chairman of the Nominating and Corporate Governance Committee.

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•	Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors.

•	Approve Board meeting schedules and agendas.

•	Act as the liaison between the independent directors and the Chief Executive Officer and Chairman of the Board.

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(1)

Reflects annual cash retainer payments made pursuant to the Amended Director Compensation Policy. With respect to Mr. Armour, this amount includes pro-rated payments associated with his service as Chairman of the Board during 2019. With respect to Messrs. Best and Beal, this amount includes pro-rated payments associated with each director’s service as Chairman of the Audit Committee during 2019. Mr. Best’s payment also includes a pro-rated payment made to him in 2020 for his service as Lead Independent Director of the Board during the fourth quarter of 2019. The amount for Mr. Mitchell is similarly pro-rated for his service during the first through third quarters of 2019.

(2)	Reflects the grant date fair value of RSU awards on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 14 to the Consolidated Financial Statements included in this Form 10-K.

(a)	Messrs. Beal and Mitchell forfeited all outstanding and unvested equity awards (7,878 RSUs each) upon their resignations from the Board on July 11, 2019 and July 28, 2019, respectively.

(3)	Mr. Berg has elected not to be compensated for his service as a director.

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(1)	Mr. Gobe was appointed as Executive Chairman and principal executive officer, effective as of October 3, 2019. He served in that position until his appointment as Chief Executive Officer, effective as of March 13, 2020.

(2)	Mr. Redman ceased to serve as principal executive officer on October 3, 2019 and resigned as Chief Executive Officer and a member of the Board on March 13, 2020.

(3)	Mr. Holderness was appointed to serve as Interim Chief Financial Officer as of October 3, 2019. The interim title was removed and he was appointed Chief Financial Officer effective April 10, 2020.

(4)	Mr. Smith served as Chief Financial Officer in 2019 until his appointment as Chief Administrative Officer on October 3, 2019. Mr. Smith was appointed as a Special Advisor to the Chief Executive Officer on March 13, 2020 and ceased serving as Chief Administrative Officer as of that date.

(5)	Mr. Wilson was appointed as General Counsel and Corporate Secretary, effective as of September 30, 2019.

(6)	Mr. Howell resigned as General Counsel and Corporate Secretary, effective as of September 29, 2019.

(7)	Mr. Denholm resigned as Chief Accounting Officer, effective as of October 3, 2019.

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(1)	On October 31, 2019, Keane Group, Inc. merged with C&J Energy Services, Inc. and changed its name to Nextier Oilfield Solutions Inc.

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(1)	These amounts have been rounded to the nearest whole number.

(2)

We define EBITDA as earnings before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock based compensation, and (iv) other unusual or non‑recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees.

(3)	We define Net Debt as our total debt less our cash and cash equivalents.

(4)	Varies by executive. See the narrative immediately below for additional information.

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(1)	On October 31, 2019, Keane Group, Inc. merged with C&J Energy Services, Inc. and changed its name to Nextier Oilfield Solutions Inc.

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(1)	Does not include 12,182 RSUs that Mr. Gobe received while he was a non-employee director.

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•	We pay a mix of compensation which includes short-term cash and long-term equity-based compensation.

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•	We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others.

•	We believe that our performance metrics are reasonably challenging, yet should not require inappropriate risk-taking to achieve.

•	The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy and other aspects of our business and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan as appropriate.

•	The performance periods under our PSUs overlap, and our time-vested restricted stock units generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others.

•	Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines.

•	We have instituted a clawback policy, which allows us to clawback compensation in the event of a financial restatement or certain misconduct.

•	We believe that we have an effective management process for developing and executing our short- and long-term business plans.

•	Our compensation policies and programs are overseen by the Compensation Committee.

•	The Compensation Committee retains an independent compensation consultant.

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an extension of the exercise period applicable to the stock options granted under the Stock Option Plan that are vested and outstanding as of the date of Mr. Smith’s “Termination of Employment” (as defined in the Stock Option Plan) (the “Smith Extended Options”) such that the Smith Extended Options remain exercisable until the one-year anniversary of the date of Mr. Smith’s Termination of Employment; and

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“cashless exercise” of the stock options granted under the both the Stock Option Plan and Incentive Plan that are outstanding as of March 13, 2020 (the “Smith Vested Options”) within the exercise periods described in the applicable award agreements and plans (as modified by the 2020 Smith Letter Agreement for the Smith Extended Options) such that Mr. Smith does not have to deliver any cash to exercise the Smith Vested Options but the number of shares of Stock delivered by the Company upon the exercise of the Smith Vested Options shall be reduced by the number of shares of Stock equal in value to the applicable exercise price and the associated tax withholding.

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•	20% salary reduction for Mr. Gobe;

•	15% salary reduction for Messrs. Holderness, Sledge and Wilson; and

•	10% salary reduction for Mr. Smith.

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(1)

Amounts in this column for Messrs. Gobe and Holderness represent a discretionary increase to the short-term cash incentive awards paid to such Named Executive Officers pursuant to the Company’s Senior Executive Incentive Bonus Plan (the “Bonus Plan”), in each case, based upon such Named Executive Officer’s performance during 2019. See Note 3 below and “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional

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(2)

Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2019 under the Incentive Plan, calculated in accordance with FASB ASC Topic 718. For Mr. Denholm, the amount also reflects the incremental fair value of the modified awards of RSUs, PSUs and stock options as described below in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement.” The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements included in this Form 10-K. If the grant date value of the 2019 PSU awards was calculated based on the maximum possible payout, the grant date fair value for such awards for Messrs. Gobe, Redman, Holderness, Smith, Sledge, Wilson, Howell and Denholm would have been equal to $205,393, $6,144,685, $322,181, $2,048,252, and $1,843,440, $322,181, $1,300,597 and $358,437, respectively. The actual amount realized upon settlement of PSU and RSU awards will depend upon the market price of the Company’s stock on the settlement date.

(3)

Amounts in this column represent the short-term cash incentive awards for performance during the 2019 fiscal year pursuant to the Bonus Plan, determined based on achievement of the applicable performance metrics. Based upon performance during 2019, the Board exercised its discretion under the Bonus Plan not to pay an annual bonus to either Mr. Redman or Mr. Smith. See “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional informational regarding these awards.

(4)

As shown in the table below, amounts in this column for 2019 include the cost of the Company’s vehicle allowance program for Messrs. Redman, Smith, and Sledge, and for Mr. Holderness, the amount in this column includes the value of the Company vehicle provided to him for his use while in Midland, Texas, which was determined by multiplying the number of miles Mr. Holderness drove the vehicle in 2019 by $0.58, which is the Internal Revenue Service’s mileage reimbursement rate for business travel in 2019. For Mr. Redman, the amount reported for 2019 also includes the cost of certain other perquisites, including club dues and membership fees, charitable donations made on behalf of Mr. Redman and the cost of certain sporting event tickets purchased by the Company for Mr. Redman’s use. For Mr. Holderness, the amount reported for 2019 also includes reimbursements for travel to and from Midland, Texas (excluding any travel expenses incurred while serving as a consultant to the Company) and payment of his housing expenses in Midland, Texas. Many of the Named Executive Officers had spouses accompany them on business trips at no additional incremental cost to the Company. For Mr. Howell, the amount in this column reported for 2019 includes (i) 401(k) contributions made by ProPetro Services, Inc. (ii) cash severance and (iii) the cost of continued health coverage following his termination of employment pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), in each case of clauses (ii) and (iii), paid pursuant to the Howell Separation Agreement (as defined and described below in “Potential Payments upon Termination or Change in Control—Howell Separation Agreement”). Finally, for Mr. Denholm, the amount in this column reported for 2019 includes payment of his accrued but unused paid time off upon the Denholm Separation Date (as defined below) and cash severance paid pursuant to the Denholm Separation Agreement (as defined and described below in “Potential Payments upon Termination or Change in Control—Denholm Separation Agreement”).

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Mr. Redman’s 2017 perquisites have been increased to include $31,606 in plane maintenance expenses associated with personal use of his plane (which was frequently used for business travel), as well as the cost of personal travel and associated expenses, charitable donations made on behalf of Mr. Redman, medical costs and insurance, retail expenditures, sporting, movie and event tickets, subscription services, dry cleaning, meals, groceries and other supplies, which equal $38,160 in total.

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Mr. Redman’s 2018 perquisites have been increased to include $97,269 in personal travel and associated expenses, $60,273 in plane maintenance expenses associated with personal use of his plane (which was frequently used for business travel), as well as the cost of charitable donations made on behalf of Mr. Redman, medical costs, retail expenditures, sporting, movie and event tickets, subscription services, dry cleaning, meals, groceries and other supplies, which equal $60,188 in total.

•	Mr. Smith’s 2017 and 2018 perquisite amounts have been increased to reflect the cost of his personal travel and associated expenses, retail expenditures and meals totaling $9,301 and $5,845 respectively.

•	Mr. Redman’s 2017 perquisites have been increased to include the value of sporting and event ticket purchases, charitable donations made on behalf of Mr. Redman, and $52,665, which reflects the cost of the pilots provided by the Company for Mr. Redman’s personal use of his plane.

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•	Mr. Redman’s 2018 perquisites have been increased to include the value of ticket purchases, $26,680 in charitable donations made on behalf of Mr. Redman, and $40,433, which reflects the cost of the pilots provided by the Company for Mr. Redman’s personal use of his plane.

•	Mr. Sledge’s 2018 perquisites have been increased to include the cost of charitable donations made on behalf of Mr. Sledge.

(5)

On October 3, 2019, the Board appointed Messrs. Gobe, Holderness and Smith to the positions of Executive Chairman, Interim Chief Financial Officer and Chief Administrative Officer, respectively. Effective as of such date, Mr. Smith ceased to serve as the Chief Financial Officer . On April 10, 2020, Mr. Holderness was appointed Chief Financial Officer, removing the previous interim title. In addition, effective October 3, 2019, Mr. Denholm resigned from his role as Chief Accounting Officer and served as an employee of the Company until December 8, 2019.

(6)	Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020, and Mr. Gobe was appointed Chief Executive Officer as of such date. Effective as of the same date, Mr. Smith was appointed Senior Advisor to the Chief Executive Officer and ceased to serve as Chief Administrative Officer.

(7)	On August 30, 2019, Mr. Howell gave the Board notice of his intent to resign from his position as General Counsel and Corporate Secretary, effective September 29, 2019, and on September 30, 2019, the Board appointed Mr. Wilson to the office of General Counsel and Corporate Secretary.

(8)

This amount includes (i) $98,654 that Mr. Gobe received for his service as an executive officer and (ii) $43,424 that Mr. Gobe received for his service as Chairman of the Board prior to appointment as an executive officer . Mr. Gobe stopped receiving compensation for his service as a member of the Board upon his appointment to Executive Chairman and principal executive officer, effective October 3, 2019.

(9)	This amount includes the value of (i) 12,182 RSUs that Mr. Gobe received for his service on the Board in 2019, (ii) 9,277 RSUs that Mr. Gobe received for his service as an executive officer of the Company and (iii) 9,277 target PSUs that Mr. Gobe received for his service as an executive officer of the Company. For additional information, see “Grants of Plan-Based Awards” below.

(10)	This amount includes (i) $109,615 that Mr. Holderness received in 2019 for his service as Interim Chief Financial Officer and (ii) $49,420 that Mr. Holderness received for consulting services provided to the Company from July 2019 until his appointment as Interim Chief Financial Officer on October 3, 2019.

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(1)

Amounts in these columns represent the estimated payouts for annual cash incentive awards for 2019 assuming threshold, target and maximum performance achievement. For Messrs. Gobe, Holderness and Wilson, these columns represent the pro-rata portion of their annual cash incentive awards for the portion of 2019 following their respective appointments. For Mr. Smith, these columns have been adjusted to take into account the value of his potential annual cash incentive calculated based on the portion of the year he served as each of Chief Financial Officer and Chief Administrative Officer. Mr. Howell and Mr. Denholm each forfeited their annual cash incentive awards in connection with their respective terminations of employment. The actual amounts paid to our Named Executive Officers for 2019 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional information regarding these awards.

(2)

These amounts represent the threshold, target and maximum number of PSUs granted to the Named Executive Officers during 2019. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during the three-year performance period ending on December 31, 2021, subject to the Named Executive Officer’s continued employment through such date. The PSUs granted in 2019 were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant.

(3)	Other than as described in Note 5 below, amounts in this column reflect RSUs granted to the Named Executive Officers during 2019, which vest as to one-third on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date.

(4)

These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2019 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in this Form 10-K.

(5)

Mr. Gobe’s award of 12,182 RSUs on July 11, 2019 was granted to Mr. Gobe pursuant to the Amended Director Compensation Policy in connection with his appointment as a member of the Board and as Chairman of the Board and will vest in full on the earliest to occur of (i) July 11, 2020, (ii) the day immediately preceding our 2020 annual meeting of stockholders and (iii) the occurrence of a Change in Control (as defined in the Incentive Plan and described below under

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(6)	Pursuant to the terms of the Incentive Plan, Mr. Howell forfeited all of his unvested RSUs and PSUs in connection with his September 29, 2019 separation, as described below in “Outstanding Equity Awards for Fiscal Year Ended December 31, 2019” and “Potential Payments Upon Termination or Change in Control—Howell Separation Agreement.”

(7)

Pursuant to the terms of the Denholm Separation Agreement (as defined and described in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement), Mr. Denholm forfeited all of the unvested RSUs and PSUs that did not become vested in connection with his December 8, 2019 separation, as describe below in “Outstanding Equity Awards for Fiscal Year Ended December 31, 2019.”

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(1)

On June 14, 2013, Messrs. Redman, Smith and Sledge were each granted 699,852 options to purchase our common stock that vested in equal annual installments on June 14, 2014, June 14, 2015, June 14, 2016 and June 14, 2017. Mr. Sledge exercised a portion of such options on March 16, 2017 via “cashless exercise” such that Mr. Sledge did not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options was reduced by the number of shares equal to the value of the exercise price and the applicable tax withholding.

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(2)

On July 19, 2016, Messrs. Redman, Smith and Sledge were granted 501,540, 310,971 and 231,019 options to purchase our common stock, respectively, that were originally scheduled to vest in equal installments December 31, 2016, June 30, 2017, December 31, 2017, June 30, 2018, and December 30, 2018. However, in connection with our IPO, we fully accelerated the vesting of the unvested portions of these options.

(3)

These amounts reflect option awards granted under the Incentive Plan in connection with our IPO on March 16, 2017. Such awards vest in four substantially equal annual installments commencing on the first anniversary of the grant date. In connection with Mr. Denholm’s separation and pursuant to the terms of the Denholm Separation Agreement (as defined and described below in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement”), a pro-rata portion of the stock options granted under the Incentive Plan to Mr. Denholm vested on December 8, 2019, based on months of service during the applicable vesting period, and the exercise period for the vested stock options granted to Mr. Denholm under the Incentive Plan was extended until October 3, 2020. The remainder of Mr. Denholm’s unvested stock options were forfeited upon his separation, pursuant to the terms of the Incentive Plan and the applicable award agreement thereunder.

(4)	The amounts in this column represent RSU awards held by each Named Executive Officer which, other than as described for Mr. Gobe, vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment:

(a)	For Mr. Gobe, these amounts include a grant of RSUs made pursuant to the Amended Director Compensation Policy in connection with his appointment as a member of the Board and as Chairman of the Board on July 11, 2019. See “Director Compensation” for more information.

(5)	The amounts in this column were calculated by multiplying $11.25, the closing price of our common stock on December 31, 2019, by the number of awards reported.

(6)

Pursuant to the applicable SEC rules, the amounts in this column and in the table below reflect the maximum number of PSUs held by each Named Executive Officer which may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 100% of the amount below. All outstanding PSUs, including PSUs granted in 2018 and 2019, were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of the Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant.

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(a)

Any unvested PSUs held by Mr. Howell were forfeited and cancelled in accordance with the terms of such award agreements in connection with his September 29, 2019 separation, as described below in “Potential Payments Upon Termination or Change in Control—Howell Separation Agreement.” In connection with Mr. Denholm’s separation and pursuant to the terms of the Denholm Separation Agreement (described below under “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement”), a pro-rata portion of the PSUs granted to Mr. Denholm during the 2019 calendar year were vested on December 8, 2019, based on target performance and months of service during the applicable performance period.

(1)

This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2019, except as noted below for Mr. Denholm. The target number of PSUs granted to the Named Executive Officers in 2017 vested. For Messrs. Howell and Denholm, this column reflects the RSUs held each Named Executive Officer that vested in accordance with their applicable vesting schedules prior to their respective separations. For Mr. Denholm, this amount also includes the accelerated vesting of certain of his outstanding RSUs and PSUs, based up target performance, as provided for in the Denholm Separation Agreement and as described below under “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement.”

(2)	This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date.

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•	Lump sum payment equal to the amount of earned but unpaid base salary, reimbursement for all incurred but unreimbursed expenses and the value of all accrued but unused vacation (the “Standard Accrued Amounts”);

•	One times the sum of (i) the Named Executive Officer’s current annualized base salary and (ii) the amount of the Named Executive Officer’s annual bonus paid for the year prior to the year of termination, payable in equal installments in accordance with normal payroll practices for the 12 months following the termination date;

•	Payment of any earned but unpaid annual bonus for the year prior to the year of the termination, payable at the time such bonuses are paid to other executives; and

•	Reimbursement for the excess of the premiums for continued health coverage for the Named Executive Officer, his spouse and his eligible dependents under the Company’s group health plans in accordance with COBRA over the current employee rates for up to 12 months, or if earlier, the date that the Named Executive Officer becomes covered under another employer’s group health plans.

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“Cause” generally means the Named Executive Officer’s (i) willful failure or refusal (other than due to Disability) to perform obligations or any lawful directive from the Board, subject to a 30-day cure period, (ii) commission, conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, (iii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (iv) fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty or (v) material breach of the employment agreement or any agreement with the Company or its affiliates, subject to a 30-day cure period.

•

“Good Reason” generally means (i) the material diminution in the Named Executive Officer’s base salary, authority, duties, or responsibilities or (ii) the material breach by the Company of any of its obligations under the employment agreement, in each case, subject to a 90-day notice period, 30-day cure period and the Named Executive Officer’s resignation within six months of the end of the cure period.

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•	“Disability” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for at least 12 continuous months.

•	Lump sum payment equal to the amount of earned but unpaid base salary (the “Wilson Accrued Amounts”); and

•

One times (or, if such termination or resignation, as applicable, occurs within 12 months following a “Change in Control” (as defined in the Incentive Plan and as described below), one and one half times) the sum of (i) the Mr. Wilson’s then-current annualized base salary and (ii) the target amount of Mr. Wilson’s annual bonus for the year of the termination, payable in equal installments in accordance with normal payroll practices for the 12 months following the termination date.

•

“Cause” generally means Mr. Wilson’s (i) material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, (ii) material breach of the Company’s or its affiliates’ policies or code of conduct applicable to Mr. Wilson, subject to a 30-day notice and 15-day cure period, (iii) material breach of any law applicable to the workplace or employment relationship, subject to a 30-day notice and 15-day cure period, (iv) gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, (v) conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, (vi) material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or the Company’s principal executive officer, subject to a 30-day notice and 15-day cure period, (vii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (viii) failure to exercise the degree of care, skill and diligence as lawyers of ordinary skill and knowledge commonly possess and exercise or failure to act with undivided loyalty to the Company and its affiliates, subject to a 30-day notice and 15-day cure period, or (ix) failure to maintain a license to practice law in the state of Texas or failure to maintain good standing with the State Bar of Texas.

•

“Good Reason” generally means (i) the material diminution in Mr. Wilson’s base salary, authority, duties, or responsibilities (provided that his removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), (ii) the material breach by the Company of any of its obligations under the employment agreement or (iii) Mr. Wilson’s relocation by more than 50 miles from his current place of business, in each case, subject to a 30-day notice period, 15-day cure period and Mr. Wilson’s resignation within 75 days of the end of the cure period.

•	“Disability” generally means Mr. Wilson’s inability to perform the essential functions of his job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board.

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•	Accelerated vesting of a pro-rata number of RSUs, calculated based on the number of days Mr. Holderness was employed by the Company during the applicable vesting period; and

•	Deemed satisfaction of the applicable service requirement with respect to a pro-rata number of PSUs, calculated based on the number of days employed by the Company during the applicable performance period, which remain outstanding and eligible to vest subject to satisfaction of the applicable performance metrics through the end of the applicable performance period.

•	“Cause” generally means the Named Executive Officer’s (i) willful failure to substantially perform his duties, (ii) willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, (iii) commission at

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•

“Change of Control” generally means (i) any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, (ii) the current members of the Board cease to constitute a majority of the Board for any reason, (iii) the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless (a) the Company controls the successor entity, (b) no person owns 50% or more of the combined voting power of the successor entity or (c) the current members of the Board represent the majority of the successor entity’s board or (iv) the tenth day following the complete dissolution of the Company.

•	“Disability” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment.

•	“Retirement” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates.

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(1)

Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” For Mr. Gobe, such quoted terms are as defined in the applicable award agreement, and for Messrs. Redman, Smith, Sledge and Wilson, such quoted terms are as defined in his employment agreement, in each case, as described above. For purposes of this table, we are equating a termination without “Cause” or resignation for “Good Reason” with Mr. Holderness’s “good leaver” resignation and have included payments he would receive upon his separation as a “good leaver” in this column only.

(2)

Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death, “Disability” or “Retirement.” For Messrs. Gobe and Holderness, such quoted terms are as defined in the applicable award agreement, and for Messrs. Redman, Smith, Sledge and Wilson, “Disability” is as defined in his employment agreement and “Retirement” is defined in the applicable award agreement, in each case, as described above. Currently, only Messrs. Smith and Sledge are Retirement eligible.

(3)

Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control.” As described above under “—Incentive Plan Awards,” RSUs, stock options and PSUs granted under the Incentive Plan are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control. For purposes of this table, we are including the value of the 12,182 RSUs Mr. Gobe was granted as a director in these columns. However,

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(4)

Pursuant to the employment agreements, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer with an employment agreement will receive the sum of his then current annual base salary and the amount of his annual bonus paid to him for the immediately preceding calendar year (or, for Mr. Wilson, the target amount of his annual bonus for the current calendar year), payable in 12 equal installments over the year following termination. Messrs. Gobe and Holderness are not party to an employment agreement and are not entitled to any cash severance.

(5)

Pursuant to the terms of the Holderness Letter Agreement, Mr. Holderness is the only Named Executive Officer eligible to receive a pro-rata bonus, based upon the number of days Mr. Holderness was employed by the Company during the applicable calendar year, upon his separation as a “good leaver,” as described above under “—Holderness Agreements.” The full bonus paid to Mr. Holderness for performance during 2019 is included in the table because it was prorated based upon his service from October 3, 2019 to December 31, 2019 prior to payment. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Letter Agreements with Messrs. Gobe and Holderness.”

(6)

Pursuant to the employment agreements with Messrs. Redman, Smith and Sledge, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, whether or not within 12 months following a Change in Control, the Company will reimburse the Named Executive Officer for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 12 months following such termination. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2019 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. Messrs. Gobe and Holderness are not party to an employment agreement and are not entitled to such benefit, and Mr. Wilson’s employment agreement does not provide for this benefit.

(7)

For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $11.25, the closing price of our common stock on December 31, 2019. The unvested stock options have an exercise price of $14.00, which is $2.75 more than the market value of our common stock on December 31, 2019, so the value of any accelerated stock options has not been included in this table. These amounts are calculated for the PSUs by multiplying the number of PSUs that would become vested upon the applicable event by $11.25, the closing price of our common stock on December 31, 2019. The number of PSUs used in such calculation reflects actual performance as of December 31, 2019, which was at target for all outstanding PSUs. However, PSUs that vest as a result of (i) a Named Executive Officer’s death, Disability or Retirement and (ii) Mr. Holderness’ separation from service as a “good leaver” will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs.

•	Lump-sum cash payment equal to $725,000, payable shortly following the Howell Separation Date;

•	Cash severance equal to $725,000, payable in equal installments during the one-year period following the Howell Separation Date; and

•	Partially subsidized continuation coverage for Mr. Howell, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months following the Howell Separation Date, or if earlier, the date Mr. Howell becomes covered under the group health plan of another employer.

(1)	The COBRA reimbursement amount is based on the premium in effect on the Howell Separation Date and Mr. Howell’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 12-month period for which the COBRA reimbursement would be available.

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•	Cash severance equal to $490,000, payable in equal installments during the one-year period following the Howell Separation Date;

•	Partially subsidized continuation coverage for Mr. Denholm, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months following the Denholm Separation Date, or if earlier, the date Mr. Denholm becomes covered under the group health plan of another employer;

•	Accelerated vesting of 2,995 stock options granted under the Incentive Plan;

•	Accelerated vesting of 2,151 RSUs granted under the Incentive Plan;

•	Deemed satisfaction of the applicable service requirement with respect to and accelerated vesting of 4,257 PSUs, based on target performance; and

•	Extension of the exercise period of Mr. Denholm’s stock options granted under the Incentive Plan that have become vested and are outstanding as of the Denholm Separation Date such that they shall not be forfeited on the 91st day following the Denholm Separation Date pursuant to the terms of the Incentive Plan but instead shall remain outstanding and eligible to vest until October 3, 2020.

(1)	The COBRA reimbursement amount is based on the premium in effect on the Denholm Separation Date and Mr. Denholm’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 12-month period for which the COBRA reimbursement would be available.

(2)

For the RSUs and PSUs, these amounts are calculated by multiplying the number of RSUs and PSUs that were vested on the Denholm Separation Date by $9.44, the closing price of our common stock on the last trading day prior to the Denholm Separation Date. The unvested stock options have an exercise price of $14.00, which is $4.56 more than the market value of our common stock on the Denholm Separation Date, so the value of any accelerated stock options has not been included in this table.

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•	Lump-sum cash payment equal to $38,217 for his accrued but unused vacation days;

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Extension of the exercise period of Mr. Redman’s stock options granted under the Stock Option Plan and the Incentive Plan that have become vested and are outstanding as of the Redman Separation Date such that they shall not be forfeited on the 91st day following the Redman Separation Date pursuant to the terms of the applicable plans but instead shall remain outstanding and eligible to vest until the one-year anniversary of the Redman Separation Date;

•

The ability to exercise his vested and unexercised stock options using a “cashless exercise” during the extended exercise period such that Mr. Redman does not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options shall be reduced by the number of shares equal to the value of the exercise price and the applicable tax withholding; and

•	Full reimbursement of the cost of continuation coverage for Mr. Redman, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 18 months following the Redman Separation Date, or if earlier, the date Mr. Redman becomes covered under the group health plan of another employer.

(1)	The value of the stock option extension is equal to the incremental fair value of the modification of such awards, calculated in accordance with FASB ASC Topic 718.

(2)	The COBRA reimbursement amount is based on the premium in effect on the Redman Separation Date and Mr. Redman’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 18-month period for which the COBRA reimbursement would be available.

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•	A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred;

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and

•	Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Amended Executive Severance Plan.

•	A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control;

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives;

•	A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year; and

•	Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Amended Executive Severance Plan.

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and

•	A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year.

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•

“Cause” generally means the Named Executive Officer’s (i) material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, (ii) material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, (iii) violation of any law applicable to the workplace or employment relationship, (iv) gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, (v) conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, (vi) material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, (vii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (viii) failure to exercise the degree of care, skill and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or (ix) failure to act with undivided loyalty to the Company and its affiliates.

•	“Change in Control” has the meaning given to it under the Incentive Plan.

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“Good Reason” generally means (i) the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, (ii) material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), (iii) the material breach by the Company of any of its obligations under the agreement or (iv) the Named Executive Officer’s relocation by more than 50 miles from his current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period.

•	“Disability” generally means the Named Executive Officer’s inability to perform the essential functions of his job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board.

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•	each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock,

(1)	Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Midland, Texas 79701.

(2)

Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. The address of Pioneer and its subsidiaries is 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039‑3746.

(3)	Based on a Schedule 13G filed on February 4, 2020. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 12,819,233 shares and sole dispositive power over 13,105,996 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055.

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(4)	Based on a Schedule 13G Filed on April 3, 2020. Represents (i) 10,000,000 shares over which THRC Holdings, LP has shared voting power, and has shared dispositive power over 10,000,000 shares. The address for THRC Holdings, LP is 17018 IH 20, Cisco, Texas 76437.

(5)

Based on a Schedule 13G Filed on February 12, 2020. Represents (i) 132,418 shares over which The Vanguard Group has sole voting power (ii) 12,081 shares over which The Vanguard Group has shared voting power, (iii) 8,742,895 over which The Vanguard Group has sole dispositive power, and (iv) 132,092 over which The Vanguard Group has shared dispositive power. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 120,011 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 24,488 shares as a result of its serving as investment manager of Australian investment offerings. The address for these entities is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(6)	For each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within 60 days, and RSUs that are eligible to vest within 60 days.

(7)

Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020. On January 18, 2017, Mr. Redman signed a pledge agreement for 371,200 shares (538,240 shares after the March 2017 stock split) of the Company’s common stock to secure a personal loan. On March 28, 2017, Mr. Redman sold 370,370 shares of the Company’s common stock, as part of the overallotment option exercised by the underwriters in the Company’s initial public offering in March 2017, which brought Mr. Redman’s stock ownership, at that time, to 167,870 shares of the Company’s common stock covered by the pledge agreement, which we believe remains in effect.

(8)	Mr. Smith ceased serving as an executive officer on March 13, 2020, but serves as a Special Advisor to the Chief Executive Officer.

(9)	Mr Denholm resigned from his position as Chief Accounting Officer on October 3, 2019. Based on information set forth in a Form 4 filed with the SEC on June 11, 2019.

(10)	Mr Howell resigned from his position as General Counsel and Corporate Secretary on August 30, 2019. Based on information set forth in a Form 4 filed with the SEC on June 11, 2019.

(1)

Includes 3,622,763 option awards under the Stock Option Plan, and 677,325 option awards, 613,217 restricted share unit awards and 522,621 performance stock unit awards (assuming achievement of target payout of 100%) that have been granted under the 2017 Incentive Award Plan. The weighted average exercise price in column (b) does not take the restricted share unit awards or performance stock unit awards into account.

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(1)

Audit Fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out‑of‑pocket expenses.

(2)	Audit-Related Fees include fees billed for professional services rendered in connection with the Expanded Audit Committee Review, and related out‑of‑pocket expenses.

(3)	All Other fees consisted principally of fees for tax compliance and tax advice.

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