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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐ 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒  No  ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

The number of the registrant’s common shares, par value $0.001 per share, outstanding at May 3, 2021, was 102,280,331.

•the severity and duration of world health events, including the 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;

•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;

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

•competitive conditions in our industry;

•changes in the long-term supply of, and demand for, oil and natural gas;

•actions taken by our customers, suppliers, competitors and third-party operators;

•technological changes, including lower emissions oilfield services equipment and similar advancements;

•changes in the availability and cost of capital;

•our ability to successfully implement our business plan;

•large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

•the effects of consolidation on our customers or competitors;

•the price and availability of debt and equity financing (including changes in interest rates);

•our ability to complete growth projects on time and on budget;

•operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;

•changes in our tax status;

•our ability to successfully implement technological developments and enhancements, including the new DuraStim® hydraulic fracturing equipment 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;

•the effects of current and future litigation, including the Logan Lawsuit and the Shareholder Derivative Lawsuit (each defined herein);

•the timing and outcome of, including potential expense associated with, the pending U.S. Securities and Exchange Commission (the "SEC") investigation;

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

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

(1)Other general and administrative expense, (net) relates to nonrecurring professional fees paid to external consultants in connection with the Company's pending SEC investigation and shareholder litigation, net of insurance recoveries.

          The total stock-based compensation expense for the three months ended March 31, 2021 and 2020 for all stock awards was $2.5 million and $0.5 million, respectively. The total unrecognized stock-based compensation expense as of March 31, 2021 was approximately $22.9 million, and is expected to be recognized over a weighted average period of approximately 2.4 years.

          As of March 31, 2021, the total accounts receivable due from Pioneer, including estimated unbilled receivable for services (including idle fees) we provided, amounted to approximately $61.2 million and the amount due to Pioneer was $0. As of December 31, 2020, the balance due from Pioneer for services (including idle fees) we provided amounted to approximately $41.7 million and the amount due to Pioneer was $0.

          Our total available HHP as of March 31, 2021 was 1,388,000 HHP, which was comprised of 15,000 HHP of our new Tier IV Dynamic Gas Blending ("DGB") equipment, 1,265,000 HHP of conventional Tier II equipment and 108,000 HHP of our new DuraStim® hydraulic fracturing equipment. During the second quarter of 2021, we expect to take delivery of our remaining committed 35,000 HHP of new DGB equipment. On average, a fleet consists of approximately 50,000 HHP but could vary significantly depending on the job design and customer demand at the wellsite. With the industry transition to lower emissions equipment and simultaneous fracturing, in addition to several other changes to our customers' job designs, we believe that our available fleet capacity could decline if we decide to reconfigure our fleets to increase active HHP and back up HHP at the wellsites based on our customers' and operational needs or as we retire and replace conventional Tier II equipment.

          In 2019, we entered into a purchase commitment for 108,000 HHP of DuraStim® electric powered hydraulic fracturing equipment. Our DuraStim® equipment is still being tested and has only been deployed to our customers' wellsites on a limited scale. As we continue with our testing of the equipment, the number of DuraStim® pumps that constitute a fleet will depend on a combination of factors, including the ultimate operating performance of DuraStim® pumps following the completion of testing, the particular shale formation where a well is completed, customer service requirements and job design. The Company has set a goal to commercialize its first DuraStim® fleet to our customer wellsites in the second half of 2021. We also have an option to purchase up to an additional 108,000 HHP of DuraStim® hydraulic fracturing equipment in the future through July 31, 2022. We currently have gas turbines, to provide electrical power to our DuraStim® fleet. The electrical power sources for future DuraStim® fleets are still being evaluated and could be supplied by the Company, customers or a third-party supplier.

          In 2020, the combined effect of COVID-19 and the energy industry disruptions led to a significant decline in WTI crude oil prices to approximately $21 per barrel at the end of March 2020. With OPEC+ managing production levels, the development and administration of COVID-19 vaccines and the lifting of COVID-19 restrictions in certain areas (both in the United States and internationally), there has been a gradual recovery in the energy industry and overall economic activities from its lowest point in 2020. However, there is still some level of uncertainty in the global market resulting from the COVID-19 pandemic and the risk of an outbreak of a new virus, which could result in continued depressed global energy demand and declining crude oil prices. As of May 3, 2021, the WTI price for a barrel of crude oil was approximately $65.

          In light of the COVID-19 pandemic and the energy industry disruptions, the Permian Basin rig count decreased significantly from approximately 403 at the beginning of January 2020 to approximately 175 at the end of December 2020, according to Baker Hughes. However, the rig count slowly increased exiting 2020 and is currently at 224 rigs at the end of March 2021. If the rig count and market conditions do not continue to improve, the Company expects a material adverse impact on its business, results of operations and cash flows, resulting from a decrease in our customer activity and pricing pressure from its customers.

          Government regulations and investors are demanding the oil and gas industry transition to a lower emissions operating environment, including the E&P and oilfield service companies. As a result, we are working with our customers and equipment manufacturers to transition to a lower emissions profile. Currently, a number of lower emission solutions for pumping equipment, including Tier IV DGB, electric, direct drive gas turbine and other technologies have been developed, and we expect additional lower emission solutions will be developed in the future. We are continually evaluating these technologies and other investment and acquisition opportunities that would support our existing and new customer relationships. The transition to lower emissions equipment is quickly evolving and will be capital intensive. Over time we may be required to convert substantially all of our conventional Tier II equipment to lower emissions equipment. If we are unable to quickly transition to lower emissions equipment and meet our and our customers’ emissions goals, the demand for our services could be adversely impacted.

◦Capital Expenditures: our 2021 capital expenditures will be driven by customer activity levels and demand for our pressure pumping services. Our objective is to remain capital disciplined.

◦Other Expenditures: we will continue to seek competitive pricing and cost saving measures for our expendable items, logistics, materials used in day-to-day operations and our large component replacement parts.

◦Labor Force: we will continue to make appropriate adjustments to our workforce to reflect outlook related to our customers' activity levels. We will continue to explore strategic options to improve our customers' efficiencies and prioritize safe operations, while maintaining the most efficient headcount.

◦Working Capital: we will continue to monitor our payment terms with certain of our larger vendors and continue to increase our diligence in collecting and managing our portfolio of accounts receivables.          

How We Evaluate Our Operations 

(1)Other general and administrative expense, (net) relates to nonrecurring professional fees paid to external consultants in connection with the Company's pending SEC investigation and shareholder litigation, net of insurance recoveries.

          We conduct our business through three operating segments: hydraulic fracturing, cementing and coiled tubing. In March 2020, the Company shut down its flowback operating segment and subsequently disposed of the assets for approximately $1.6 million. In September 2020, the Company disposed of all of its drilling rigs and ancillary assets for approximately $0.5 million and shut down its drilling operations. For reporting purposes, the hydraulic fracturing and cementing operating segments are aggregated into our one reportable segment—pressure pumping. The coiled tubing operating segment and corporate administrative expenses (inclusive of our total income tax expense (benefit) and interest expense) are included in the ‘‘all other’’ category. Total corporate administrative expense for the three months ended March 31, 2021 and 2020 was $5.0 million and $10.3 million, respectively.

          Our hydraulic fracturing operating segment revenue approximated 93.3% and 94.8% of our pressure pumping revenue during the three months ended March 31, 2021 and 2020, respectively.

(1)Exclusive of depreciation and amortization.

(2)Inclusive of stock-based compensation.

(3)For definitions of the non-GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA to our most directly comparable financial measures calculated in accordance with GAAP, please read "How We Evaluate Our Operations". Included in our Adjusted EBITDA is idle fees of $4.3 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.

(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 revenue for the pressure pumping segment.

          Revenue.    Revenue decreased 59.1%, or $233.6 million, to $161.5 million during the three months ended March 31, 2021, as compared to $395.1 million during the three months ended March 31, 2020. Our pressure pumping segment revenues decreased 59.1%, or $228.7 million, for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The decreases were primarily attributable to the significant decrease in demand for pressure pumping services, as well as pricing discounts we provided to our customers following the depressed oil prices and slowdown in economic activity resulting from the COVID-19 pandemic. The decrease in demand for our pressure pumping services resulted in a significant decrease in our average effectively utilized fleet count to approximately 10.3 active fleets during the three months ended March 31, 2021 from approximately 18.6 active fleets for the three months ended March 31, 2020. In addition, our revenue for the three months ended March 31, 2021 was negatively impacted by the severe weather conditions experienced in February 2021, resulting in approximately eight days of lost revenue. Included in our revenue for the three months ended March 31, 2021 and 2020 was revenue generated from idle fees charged to our customer of approximately $4.3 million and $1.5 million, respectively.

          Cost of Services.    Cost of services decreased 59.0%, or $177.5 million, to $123.4 million for the three months ended March 31, 2021, as compared to $300.8 million during the three months ended March 31, 2020. Cost of services in our pressure pumping segment decreased $174.5 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. These decreases were primarily attributable to the significantly lower activity levels following the depressed oil prices and economic slowdown caused by the COVID-19 pandemic that negatively impacted E&P completions activity. As a percentage of pressure pumping segment revenues (including idle fees), pressure pumping cost of services was 75.7% for the three months ended March 31, 2021, as compared to 76.0% for the three months ended March 31, 2020. Excluding idle fees revenue of $4.3 million and $1.5 million recorded during the three months ended March 31, 2021 and 2020, respectively, our pressure pumping cost of services as a percentage of pressure pumping revenues for the three months ended March 31, 2021 and 2020, was approximately 77.8% and 76.3%, respectively. Furthermore, during the three months ended March 31, 2021 the company absorbed certain cost of services during the eight days of severe weather conditions experienced in February 2021, which negatively impacted our profitability.

          General and Administrative Expenses.    General and administrative expenses decreased 19.0%, or $4.7 million, to $20.2 million for the three months ended March 31, 2021, as compared to $24.9 million for the three months ended March 31, 2020. The net decrease was primarily attributable to a decrease during 2021 in nonrecurring professional fees of $6.1 million, which was primarily attributable to the Company's expanded audit committee internal review, pending SEC investigation and shareholder litigation, which was offset by a net increase of approximately $1.4 million in our other remaining general and administrative expenses.

          Impairment Expense.  There was no impairment expense recorded during the three months ended March 31, 2021, as compared to $16.7 million of goodwill and equipment impairment expense recorded during the three months ended March 31, 2020 in connection with the then depressed market conditions and utilization of our equipment.

          Depreciation and Amortization.    Depreciation and amortization decreased of 16.7%, or $6.7 million, to $33.5 million for the three months ended March 31, 2021, as compared to $40.2 million for the three months ended March 31, 2020. The decrease was primarily attributable to the decrease in our fixed asset base, part of which was attributable to the impairment of certain fixed assets in 2020.

          Loss on Disposal of Assets.    Loss on the disposal of assets decreased 34.3%, or $6.8 million, to $13.1 million for the three months ended March 31, 2021, as compared to $19.9 million for the three months ended March 31, 2020. The decrease was primarily attributable to the decrease in equipment utilization. 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 is recognized as loss on disposal of assets.

          Interest Expense.    Interest expense decreased 86.3%, or $1.1 million, to $0.2 million for the three months ended March 31, 2021, as compared to $1.3 million for the three months ended March 31, 2020. The decrease in interest expense was primarily attributable to the decrease in our average debt balance during the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The Company repaid all of its borrowings under the ABL Credit Facility in 2020, and

          Other (Income)/Expense.    Other income increased to $1.8 million for the three months ended March 31, 2021. The increase in other income is primarily attributable to the net refund of approximately $2.1 million to the Company from the sales and excise and use tax audit and partially offset by an expense related to our lender's commitment fees during the three months ended March 31, 2021.

          Income Taxes.    Total income tax benefit was $6.7 million resulting in an effective tax rate of 24.6% for the three months ended March 31, 2021, as compared to income tax benefit of $0.9 million or an effective tax rate of 10.4% for the three months ended March 31, 2020. The income tax benefit recorded in the three months ended March 31, 2021 is primarily attributable to the higher pre-tax loss in 2021 as compared to 2020. Furthermore, the change in the effective tax rate from 10.4% to 24.6% in the three months ended March 31, 2021 was primarily attributable to nondeductible expenses and discrete items such as stock compensation, reducing the benefit recorded for the pre-tax loss during the three months ended March 31, 2020.

          As of March 31, 2021, we had no borrowings under our ABL Credit Facility, and our total liquidity was approximately $113.7 million, consisting of cash and cash equivalents of $55.9 million and $57.8 million of availability under our ABL Credit Facility.

          As of May 3, 2021, our total liquidity was approximately $110.9 million, consisting of cash and cash equivalents of $51.1 million and $59.8 million of availability under our ABL Credit Facility.    

          Our ABL Credit Facility, as amended, has a total borrowing capacity of $300 million (subject to the Borrowing Base limit), with a maturity date of December 19, 2023. The ABL Credit Facility has a borrowing base of 85% of monthly eligible accounts receivable less customary reserves (the "Borrowing Base"). The Borrowing Base as of March 31, 2021 was approximately $61.5 million and was approximately $63.5 million as of May 3, 2021. 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. There were no borrowings under the ABL Credit Facility for the three months ended March 31, 2021. As of March 31, 2020, our outstanding borrowings under the ABL Credit Facility were $110 million, which was subsequently fully repaid before the end of 2020.

         In addition, we have option agreements with our equipment manufacturer to purchase additional 108,000 HHP of DuraStim® hydraulic fracturing equipment through July 31, 2022. We believe the cost to acquire the DuraStim® hydraulic fracturing equipment will be comparable to our previously purchased DuraStim® hydraulic fracturing equipment. In the current economic environment, it is not probable that we will exercise these options before they expire.

          Net cash provided by operating activities was $17.0 million for the three months ended March 31, 2021, compared to $61.7 million for the three months ended March 31, 2020. The net decrease of $44.7 million was primarily due to the decrease in our activity levels resulting from the decrease in the demand for our services, driven by the depressed crude oil prices and economic impact of the COVID-19 pandemic on our industry, and partially offset with the timing of collections of our receivables from customers and payments to vendors. Our effectively utilized fleet count decreased to approximately 10.3 active fleets during the three months ended March 31, 2021 from approximately 18.6 active fleets for the three months ended March 31, 2020.

          Disclosure concerning recently issued accounting standards is incorporated by reference to Note 2 of our Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.

           In May 2020, the U.S. District Court for the Western District of Texas consolidated two shareholder derivative lawsuits previously filed against the Company and certain of its current and former officers and directors into a single lawsuit captioned In re ProPetro Holding Corp. Derivative Litigation (the “Shareholder Derivative Lawsuit”). In August 2020, the plaintiffs in the Shareholder Derivative Lawsuit filed a consolidated complaint alleging (i) breaches of fiduciary duties, (ii) unjust enrichment and (iii) contribution. The plaintiffs did not quantify any alleged damages in their complaint but, in addition to attorneys’ fees and costs, they seek various forms of relief, including (i) damages sustained by the Company as a result of the alleged misconduct, (ii) punitive damages and (iii) equitable relief in the form of improvements to the Company’s governance and controls. In October 2020, the Company and other defendants filed motions to dismiss the Shareholder Derivative Lawsuit and in December 2020, the plaintiffs filed their opposition. In January 2021, the Company and other defendants filed reply briefs in support of the motions to dismiss.