August 1, 2024 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________

FORM 10-Q

______________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38035

______________________________

ProPetro Holding Corp.

(Exact name of registrant as specified in its charter)

______________________________


Delaware						26-3685382
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

303 W. Wall Street, Suite 102 Midland, Texas 79701

(Address of principal executive offices) (Zip Code)

(432) 688-0012

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	PUMP	New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

The number of the registrant’s common shares, par value $0.001 per share, outstanding at July 26, 2024, was 104,162,177.

PROPETRO HOLDING CORP.

TABLE OF CONTENTS


		Page
	Cautionary Note Regarding Forward-Looking Statements	ii

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 3 0 , 2024 and 2023	2
	Condensed Consolidated Statements of Shareholders' Equity for the three and six months ended June 30 , 2024 and 2023	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2024 and 2023	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
	Signatures	46

-i-

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this "Form 10-Q") contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than statements of historical facts contained in this Form 10-Q are forward-looking statements. Forward-looking statements are all statements other than statements of historical fact, and given our expectations or forecasts of future events as of the effective date of this Form 10-Q. Words such as "may," "could," "plan," "project," "budget," "predict," "target," "seek," "believe," "expect," "anticipate," "intend," "estimate," "will," "should" and similar expressions are generally used to identify forward-looking statements. These statements include, but are not limited to statements about our business strategy, industry, future profitability, future capital expenditures, our fleet conversion strategy and our share repurchase program. Such statements are subject to risks and uncertainties, many of which are difficult to predict and generally beyond our control, that could cause actual results to differ materially from those implied or projected by the forward-looking statements. Factors that could cause our actual results to differ materially from those contemplated by such forward-looking statements include:

•changes in general economic and geopolitical conditions, including as a result of 2024 presidential election, higher interest rates, the rate of inflation and a potential economic recession;

•central bank policy actions, bank failures and associated liquidity risks and other factors;

•the severity and duration of any world events and armed conflict, including the Russian-Ukraine war, conflicts in the Israel-Gaza region and continued hostilities in the Middle East, including rising tensions with Iran, and associated repercussions to supply and demand for oil and gas and the economy generally;

•the actions taken by the members of the Organization of the Petroleum Exporting Countries ("OPEC") and Russia (together with OPEC and other allied producing countries, "OPEC+") with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;

•actions taken by the current government, such as executive orders or new regulations, including climate-related regulations, that may negatively impact the future production of oil and natural gas in the United States and may adversely affect our future operations;

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

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

•cost increases and supply chain constraints related to our services, including any delays and/or supply chain disruptions due to increased hostilities in the Middle East;

•competitive conditions in our industry;

•our ability to attract and retain employees;

•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 and the possible loss of customers or work to our competitors;

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

•changes in the availability and cost of capital;

•our ability to successfully implement our business plan, including execution of potential mergers and acquisitions;

•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 higher interest rates) for us and our customers;

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

•increases in tax rates or types of taxes enacted that specifically impact exploration and production ("E&P") and related operations resulting in changes in the amount of taxes owed by us;

-ii-

•regulatory and related policy actions intended by federal, state and/or local governments to reduce fossil fuel use and associated carbon emissions, or to drive the substitution of renewable forms of energy for oil and gas, may over time reduce demand for oil and gas and therefore the demand for our services;

•new or expanded regulations that materially limit our customers’ access to federal and state lands for oil and gas development, thereby reducing demand for our services in the affected areas;

•growing demand for electric vehicles that result in reduced demand for gasoline and therefore the demand for our services;

•our ability to successfully implement technological developments and enhancements, including our new Tier IV Dynamic Gas Blending ("DGB") dual-fuel and FORCESM electric-powered hydraulic fracturing equipment, and other lower-emissions equipment we may acquire or that may be sought by our customers;

•the projected timing, purchase price and number of shares purchased under our share repurchase program, the sources of funds under the repurchase program and the impacts of the repurchase program;

•operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control, such as fires, which risks may be self-insured, or may not be fully covered under our insurance programs;

•exposure to cyber-security events which could cause operational disruptions or reputational harm;

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

•the effects of current and future litigation.

Whether actual results and developments will conform with our expectations and predictions contained in forward-looking statements is subject to a number of risks and uncertainties which could cause actual results to differ materially from such expectations and predictions, including, without limitation, in addition to those specified in the text surrounding such statements, the risks described under Part II, Item 1A, "Risk Factors" in this Form 10-Q and elsewhere throughout this report, the risks described under Part I, Item 1A, "Risk Factors" in our Form 10-K for the year ended December 31, 2023 (the "Form 10-K"), filed with the U.S. Securities and Exchange Commission (the "SEC") and elsewhere throughout that report, and other risks, many of which are beyond our control.

Readers are cautioned not to place undue reliance on our forward-looking statements, which are made as of the date of this Form 10-Q. We do not undertake, and expressly disclaim, any duty to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable securities laws. Investors are also advised to carefully review and consider the various risks and other disclosures discussed in our SEC reports, including the risk factors described in the Form 10-K.

-iii-

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(Unaudited)


	June 30, 2024		December 31, 2023
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	66,886	$	33,354
Accounts receivable - net of allowance for credit losses of $236 and $236, respectively	220,699		237,012
Inventories	18,742		17,705
Prepaid expenses	11,870		14,640
Short-term investment, net	7,797		7,745
Other current assets	1,153		353
Total current assets	327,147		310,809
PROPERTY AND EQUIPMENT - net of accumulated depreciation	923,213		967,116
OPERATING LEASE RIGHT-OF-USE ASSETS	125,546		78,583
FINANCE LEASE RIGHT-OF-USE ASSETS	40,411		47,449
OTHER NONCURRENT ASSETS:
Goodwill	26,754		23,624
Intangible assets - net of amortization	67,384		50,615
Other noncurrent assets	1,872		2,116
Total other noncurrent assets	96,010		76,355
TOTAL ASSETS	$	1,512,327	$	1,480,312

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	158,907	$	161,441
Accrued and other current liabilities	87,663		75,616
Operating lease liabilities	30,349		17,029
Finance lease liabilities	18,625		17,063
Total current liabilities	295,544		271,149
DEFERRED INCOME TAXES	103,462		93,105
LONG-TERM DEBT	45,000		45,000
NONCURRENT OPERATING LEASE LIABILITIES	58,560		38,600
NONCURRENT FINANCE LEASE LIABILITIES	23,013		30,886
OTHER LONG-TERM LIABILITIES	10,900		3,180
Total liabilities	536,479		481,920
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value, 30,000,000 shares authorized, none issued, respectively	—		—
Common stock, $0.001 par value, 200,000,000 shares authorized, 104,524,320 and 109,483,281 shares issued, respectively	105		109
Additional paid-in capital	890,439		929,249
Retained earnings	85,304		69,034
Total shareholders’ equity	975,848		998,392
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,512,327	$	1,480,312

See notes to condensed consolidated financial statements.

-1-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
REVENUE - Service revenue	$	357,021	$	435,249	$	762,864	$	858,819
COSTS AND EXPENSES
Cost of services (exclusive of depreciation and amortization)	265,845		297,791		554,486		578,277
General and administrative expenses (inclusive of stock-based compensation)	30,910		29,021		59,136		57,767
Depreciation and amortization	57,522		41,118		109,728		79,389
Loss on disposal of assets	3,277		14,836		9,735		49,443
Total costs and expenses	357,554		382,766		733,085		764,876
OPERATING (LOSS) INCOME	(533)		52,483		29,779		93,943
OTHER (EXPENSE) INCOME:
Interest expense	(1,965)		(1,180)		(3,994)		(1,847)
Other income (expense), net	2,403		72		3,809		(3,632)
Total other (expense) income, net	438		(1,108)		(185)		(5,479)
INCOME (LOSS) BEFORE INCOME TAXES	(95)		51,375		29,594		88,464
INCOME TAX EXPENSE	(3,565)		(12,118)		(13,324)		(20,474)
NET (LOSS) INCOME	$	(3,660)	$	39,257	$	16,270	$	67,990

NET (LOSS) INCOME PER COMMON SHARE:
Basic	$	(0.03)	$	0.34	$	0.15	$	0.59
Diluted	$	(0.03)	$	0.34	$	0.15	$	0.59

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic	106,303		114,737		107,421		114,809
Diluted	106,303		114,796		108,123		115,102

See notes to condensed consolidated financial statements.

-2-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(In thousands)

(Unaudited)


	Six Months Ended June 30, 2024
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings		Total
BALANCE - January 1, 2024	109,483	$	109	$	929,249	$	69,034	$	998,392
Stock-based compensation cost	—	—		3,742		—		3,742
Issuance of equity awards, net	376	1		(1)		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(1,209)		—		(1,209)
Share repurchases	(2,968)	(3)		(22,505)		—		(22,508)
Excise tax on share repurchases	—	—		(193)		—		(193)
Net income	—	—		—		19,930		19,930
BALANCE - March 31, 2024	106,891	$	107	$	909,083	$	88,964	$	998,154
Stock-based compensation cost	—	—		4,618		—		4,618
Issuance of equity awards, net	168	—		—		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(61)		—		(61)
Share repurchases	(2,535)	(2)		(22,986)		—		(22,988)
Excise tax on share repurchases	—	—		(215)		—		(215)
Net loss	—	—		—		(3,660)		(3,660)
BALANCE - June 30, 2024	104,524	$	105	$	890,439	$	85,304	$	975,848


	Six Months Ended June 30, 2023
	Common Stock
	Shares	Amount		Additional Paid-In Capital		Retained Earnings (Accumulated Deficit)		Total
BALANCE - January 1, 2023	114,515	$	114	$	970,519	$	(16,600)	$	954,033
Stock-based compensation cost	—	—		3,536		—		3,536
Issuance of equity awards, net	656	1		(1)		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(3,379)		—		(3,379)
Net income	—	—		—		28,733		28,733
BALANCE - March 31, 2023	115,171	$	115	$	970,675	$	12,133	$	982,923
Stock-based compensation cost	—	—		3,758		—		3,758
Issuance of equity awards, net	76	—		—		—		—
Tax withholdings paid for net settlement of equity awards	—	—		(4)		—		(4)
Share repurchases	(2,289)	(2)		(17,468)		—		(17,470)
Excise tax on share repurchases	—	—		(105)		—		(105)
Net income	—	—		—		39,257		39,257
BALANCE - June 30, 2023	112,958	$	113	$	956,856	$	51,390	$	1,008,359

See notes to condensed consolidated financial statements.

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PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,270	$	67,990
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	109,728		79,389
Deferred income tax expense	10,357		18,897
Amortization of deferred debt issuance costs	217		140
Stock-based compensation	8,360		7,294
Loss on disposal of assets	9,735		49,443
Unrealized (gain) loss on short-term investment	(52)		3,846
Changes in operating assets and liabilities, net of effects of business acquisition:
Accounts receivable	26,641		(35,178)
Other current assets	(568)		(983)
Inventories	(1,036)		(6,792)
Prepaid expenses	2,797		(144)
Accounts payable	(5,254)		(3,160)
Accrued and other current liabilities	2,568		6,272
Net cash provided by operating activities	179,763		187,014
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(71,805)		(223,775)
Business acquisition, net of cash acquired	(21,038)		—
Proceeds from sale of assets	1,920		2,044
Net cash used in investing activities	(90,923)		(221,731)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings	—		30,000
Payment of debt issuance costs	—		(1,179)
Payments on finance lease obligations	(8,542)		—
Tax withholdings paid for net settlement of equity awards	(1,270)		(3,383)
Share repurchases	(45,496)		(17,470)
Net cash (used in) provided by financing activities	(55,308)		7,968
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	33,532		(26,749)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - Beginning of period	33,354		88,862
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - End of period	$	66,886	$	62,113

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures included in accounts payable and accrued liabilities	$	21,588	$	71,080
Business acquisition deferred cash consideration included in other current liabilities	$	4,201	$	—
Business acquisition contingent consideration included in other long-term liabilities	$	10,900	$	—

See notes to condensed consolidated financial statements.

-4-

PROPETRO HOLDING CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(In thousands)

(Unaudited)

The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported within the condensed consolidated balance sheets:


	Six Months Ended June 30,
	2024		2023
Summary of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	66,886	$	49,890
Restricted cash	—		12,223
Total cash, cash equivalents and restricted cash — End of period	$	66,886	$	62,113

See notes to condensed consolidated financial statements.

-5-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - Basis of Presentation

The accompanying condensed consolidated financial statements of ProPetro Holding Corp. and its subsidiaries (the "Company," "we," "us" or "our") have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission ("SEC") for interim financial information and do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America ("GAAP") for annual financial statements. Those adjustments (which consisted of normal recurring accruals) that are, in the opinion of management, necessary for a fair presentation of the results of the interim periods have been made. Results of operations for such interim periods are not necessarily indicative of the results of operations for a full year due to changes in market conditions and other factors. The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, included in our Form 10-K filed with the SEC (our "Form 10-K").

Revenue Recognition

The Company’s services are sold based upon contracts with customers. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Hydraulic fracturing is an oil well completion technique, which is part of the overall well completion process. It is a well-stimulation technique intended to optimize hydrocarbon flow paths during the completion phase of shale wellbores. The process involves the injection of water, sand and chemicals under high pressure into shale formations. Our hydraulic fracturing contracts with our customers have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output, unit-of-work performed method, which is based on the agreed fixed transaction price and actual stages completed. We believe that recognizing revenue based on actual stages completed accurately depicts how our hydraulic fracturing services are transferred to our customers over time. In addition, certain of our hydraulic fracturing equipment may be entitled to reservation fee charges if a customer were to reserve committed hydraulic fracturing equipment. The Company recognizes revenue related to reservation fee charges on a daily basis as the performance obligations are met. We also deliver wet sand to customer oil well sites for use in the hydraulic fracturing process. The Company recognizes revenue related to its sale of sand and delivery service as it fulfills sand deliveries to the customer.

Acidizing, which is part of our hydraulic fracturing operating segment, involves a well-stimulation technique where acid or similar chemicals are injected under pressure into formations to form or expand fissures. Our acidizing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service or sale of the acid or chemical when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize acidizing revenue at a point-in-time, upon completion of the performance obligation.

Our cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole. Our cementing contracts have one performance obligation, satisfied at a point-in-time, upon completion of the contracted service when control is transferred to the customer. Jobs for these services are typically short term in nature, with most jobs completed in less than a day. We recognize cementing revenue at a point-in-time, upon completion of the performance obligation.

Wireline services (including pumpdown) are oil well completion techniques, which are part of the well completion process. Our wireline services utilize equipment with a drum of wireline to deploy perforating guns in the well to perforate the casing, cement, and formation. Once the well is perforated, the well can be fractured. Pumpdown utilizes pressure pumping equipment to pump water into the well to deploy perforating guns attached to wireline through the lateral section of a well. Our wireline contracts with our customers have one performance obligation, which is the contracted total stages, satisfied over time. We recognize revenue over time using a progress output, unit-of-work performed method, which is based on the agreed fixed transaction price and actual stages completed. We believe that recognizing revenue based on actual stages completed accurately depicts how our wireline services are transferred to our customers over time. In addition, certain of our wireline equipment is entitled to daily equipment charges while the equipment is on the customer’s locations. The Company recognizes revenue related to daily equipment charges on a daily basis as the performance obligations are met.

The transaction price for each performance obligation for all our completion services is fixed per our contracts with our customers.

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PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Restricted Cash and Customer Cash Advances

Our restricted cash relates to cash advances received from a customer in connection with our contract with the customer to provide FORCESM electric-powered hydraulic fracturing equipment and services. The restricted cash was used to pay for contractually agreed upon expenditures. We had no restricted cash as of June 30, 2024 and December 31, 2023.

The cash advances from the customer will be credited towards the customer’s invoice as our revenue performance obligations are met over the contract period. The cash advances received represent contract liabilities in connection with the performance of certain completion services. The cash advance (contract liability) balances, which are included in accrued and other current liabilities in our condensed consolidated balance sheets, were $16.3 million and $19.2 million as of June 30, 2024 and December 31, 2023, respectively. During the six months ended June 30, 2024 and 2023, we recognized revenue of $3.3 million and $2.7 million, respectively, from the cash advance amount outstanding at the beginning of the period.

Accounts Receivable

Accounts receivable are stated at the amount billed and billable to customers. At June 30, 2024 and December 31, 2023, accrued revenue (unbilled receivable) included as part of our accounts receivable was $57.9 million and $55.4 million, respectively. At June 30, 2024, the transaction price allocated to the remaining performance obligation for our partially completed hydraulic fracturing and wireline operations was $27.1 million, which is expected to be completed and recognized as revenue within one month following the current period balance sheet date.

Allowance for Credit Losses

As of June 30, 2024, the Company had $0.2 million allowance for credit losses. Our allowance for credit losses is based on the evaluation of both our historic collection experience and the economic outlook for the oil and gas industry. We evaluated the historic loss experience on our accounts receivable and also separately considered customers with receivable balances that may be negatively impacted by current or future economic developments and market conditions. While the Company has not experienced significant credit losses in the past and has not yet seen material adverse changes to the payment patterns of its customers, the Company cannot predict with any certainty the degree to which the impacts of depressed economic activities, including the potential impact of periodically adjusted borrowing base limits, level of hedged production, or unforeseen well shut-downs may affect the ability of its customers to timely pay receivables when due. Accordingly, in future periods, the Company may revise its estimates of expected credit losses.

The table below shows a summary of allowance for credit losses during the six months ended June 30, 2024:


(in thousands)

Balance - January 1, 2024	$	236
Provision for credit losses during the period	—
Write-off during the period	—
Balance - June 30, 2024	$	236

Reclassification of Prior Period Presentation

Certain reclassifications have been made to prior period segment information to conform to the current period presentation. These reclassifications had no effect on our balance sheet, operating and net income (loss) or cash flows from operating, investing and financing activities. The write-offs of remaining book value of prematurely failed power ends are recorded as loss on disposal of assets in 2024. In order to conform to current period presentation, we have reclassified the corresponding amount of $11.8 million and $24.3 million from depreciation to loss on disposal of assets for the three and six months ended June 30, 2023, respectively.

-7-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Depreciation and Amortization

Depreciation and amortization comprised the following:


(in thousands)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Depreciation and amortization related to cost of services	$	55,792	$	39,619	$	106,540	$	76,366
Depreciation and amortization related to general and administrative expenses	1,730		1,499		3,188		3,023
Total depreciation and amortization	$	57,522	$	41,118	$	109,728	$	79,389

Income Taxes

Total income tax expense was $13.3 million resulting in an effective tax rate of 45.0% for the six months ended June 30, 2024, as compared to income tax expense of $20.5 million or an effective tax rate of 23.1% for the six months ended June 30, 2023. The change in income tax expense recorded during the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, is primarily attributable to the difference in the impact of nondeductible expenses on the estimated pre-tax income for 2024, as compared to 2023.

Share Repurchases

All shares of common stock repurchased through the Company's share repurchase program are retired upon repurchase. The Company accounts for the purchase price of repurchased common stock in excess of par value ($0.001 per share of common stock) as a reduction of additional paid-in capital, and will continue to do so until additional paid-in capital is reduced to zero. Thereafter, any excess purchase price will be recorded as a reduction of retained earnings.

Note 2 - Recently Issued Accounting Standards

In October 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification” or "ASC"). The amendments in the ASU represent changes to clarify or improve disclosure and presentation requirements of a variety of Codification topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes. We do not expect ASU No. 2023-06 to have a material impact on our condensed consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose on an annual and interim basis, 1) significant segment expenses that are regularly provided to the Chief Operating Decision Maker (the “CODM”) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”) and 2) an amount for other segment items representing the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. This ASU also requires public entities to provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods, clarifies that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit or loss but at least one of the reported segment profit or loss measures (or the single reported measure, if only one is disclosed) should be the measure that is most consistent with the measurement principles under GAAP. This ASU also requires disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources, and requires a public entity that has a single reportable segment to provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. We do not expect to early adopt ASU No. 2023-07. We are currently evaluating the impact ASU No. 2023-07 will have on our segment disclosures.

-8-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregation of certain components included in the Company’s effective tax rate and income taxes paid disclosures. The guidance is effective for annual periods beginning after December 15, 2024. We are currently assessing the impact of ASU No. 2023-09 on our income tax disclosures.

Note 3 - Business Acquisitions

AquaPropSM Acquisition

On May 31, 2024, the Company completed the acquisition of all of the outstanding equity interests in Aqua Prop, LLC (“AquaPropSM”). Aqua PropSM is an oilfield service company based in Midland, Texas that provides wet sand solutions for hydraulic fracturing sand requirements at oil well sites. As a result of the acquisition, the Company expanded its operations into the wet sand service business unit.

The following table summarizes the consideration transferred to AquaPropSM:


(in thousands)
Fair value of purchase consideration:
Cash	$	21,216
Deferred cash consideration	4,201
Contingent consideration	10,900
Total consideration	$	36,317

Cash consideration includes $13.7 million paid to the seller, $7.2 million paid to settle the seller’s outstanding debt, and $0.3 million paid for the seller’s transaction expenses.

Included in the deferred cash consideration is a liability incurred to the seller of $1.8 million. In the purchase agreement as a post-closing transaction, AquaPropSM's seller agreed to purchase and then sell to the Company, and the Company agreed to purchase from the seller, two additional equipment spreads within 90 days of the closing at a purchase price equal to cost plus a 50% premium. The post-closing transaction was determined to be a transaction separate from the business combination, but the premium was determined to represent consideration transferred in the business combination as the above market terms of the arrangement would not have been agreed upon absent the business combination. Accordingly, the liability incurred to the seller was recognized as consideration in the business combination as cash was not paid at closing. The post-closing transaction for the Company’s purchase of the additional equipment occurred in July 2024 and the purchases were accounted for as additions to property and equipment in our condensed consolidated balance sheet and capital expenditures in our condensed consolidated statement of cash flows.

Also in the purchase agreement as an additional post-closing transaction, the seller agreed to purchase and then deliver to the Company up to five more additional equipment spreads at the request of the Company within a 30-month period following the delivery of the first additional spread at a purchase price equal to the lower of $4.8 million or cost. The additional post-closing transaction was determined to be a transaction separate from the business combination, and no portion of the transaction was determined to represent consideration transferred in the business combination as the terms were at market. The additional post-closing transaction for the Company’s purchase of the additional equipment will be accounted for as additions to property and equipment in our condensed consolidated balance sheet and capital expenditures in our condensed consolidated statement of cash flows.

The acquisition of AquaPropSM also included a contingent consideration arrangement that requires additional consideration to be paid by the Company to the seller based on the amount of wet sand delivered during a 30-month period following the delivery of the first additional spread, attributable to the five additional equipment spreads described above. Amounts are payable under the earnout arrangement if the Company reaches certain delivery thresholds (in tons) of wet sand using the specific equipment provided by the seller or by other parties. The range of the undiscounted amounts the Company could be obligated to pay under the contingent consideration agreement is between $0 and $12.5 million. The fair value of the contingent consideration for the business combination recognized at the acquisition date of $10.9 million was estimated by applying the probability-weighted expected return method for the different scenarios that may occur based on the amount of additional equipment delivered by the seller, at the request of the Company, and the amount of wet sand expected to be delivered by such equipment. The fair value measurement of the contingent consideration is based on significant inputs not observable in the

-9-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 - Business Acquisitions (Continued)

market, and thus represent Level 3 measurements. The contingent consideration payable will be adjusted to estimated fair value at the end of each subsequent reporting period until the contingencies are resolved and consideration payments are made. There was no adjustment to the contingent consideration payable between May 31, 2024 and June 30, 2024.

The following table summarizes the recognized preliminary amounts of identified assets, and liabilities assumed at the acquisition date:


(in thousands)
Recognized amounts of assets acquired and liabilities assumed:
Cash	$	178
Accounts receivable	10,551
Property and equipment	13,468
Intangible assets:
Trade name	1,300
Customer relationships	18,600
Accounts payable	(886)
Factored receivables	(10,024)
Total net assets acquired	33,187
Goodwill	3,130
Total consideration	$	36,317

Preliminary estimates of fair values of the assets acquired and the liabilities assumed are based on information provided by AquaPropSM's seller and available through the issuance of these condensed consolidated financial statements. The Company is continuing to evaluate the underlying inputs and assumptions used in the valuations and the completeness of assets and liabilities recognized as the AquaPropSM Acquisition closed on May 31, 2024. Amounts recorded for all assets acquired, other than cash, and liabilities assumed, and the completeness of assets and liabilities recognized, are provisional. Accordingly, these preliminary estimates are subject to change during the measurement period. The measurement period ends on the earlier of the Company obtaining all necessary information that existed as of the acquisition date or one year from the acquisition date. As we continue to integrate the acquired business, we may obtain additional information on the acquired accounts receivable, property and equipment, identifiable intangible assets, accounts payable and factoring receivables which if significant, may require revisions to preliminary valuation assumptions, estimates and resulting fair values. We expect to finalize these amounts within one year from the acquisition date.

The fair value of the assets acquired includes accounts receivable of $10.6 million. The gross amount due under contracts is $10.6 million, of which none is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of the acquisition of AquaPropSM.

The assets acquired include two intangible assets, the trademark/trade name for AquaPropSM and the customer relationships. The trademark was assigned a fair value of $1.3 million with zero residual value and will be amortized on a straight‑line basis over fifteen years. The customer relationships were assigned a fair value of $18.6 million with zero residual value and will be amortized on a straight‑line basis over six years. The fair value of the trademark was estimated using the relief-from-royalty method, which calculates the hypothetical royalty fees that would be saved by owning an intangible asset rather than licensing it from another owner. This method forecasts revenue over the estimated useful life of the asset and then applies the following: a royalty rate based on comparable royalty and/or licensing transactions, income tax rate and discount rate, to calculate the discounted cash flows to arrive at the value of the trademark. Key assumptions include revenue forecasted at historical trends with a 0% long-term growth rate, 1.0% royalty rate, 21.6% income tax rate and a 40.5% discount rate. The fair value of the customer relationships was estimated using the multi-period excess earnings method. This method is a specific application of the discounted cash flow method, in which revenue derived from the intangible asset is estimated using total business revenue as a proxy and subsequently adjusted for attrition. Then deductions are made for business expenses and required returns attributable to other assets in the business. The excess earnings after these deductions are discounted to present value at an appropriate rate of return to arrive at the intangible asset value. Key assumptions include revenue forecasted at historical trends with a 0% long-term growth rate, 20.0% attrition rate, 21.6% income tax rate and a 40.5% discount rate.

-10-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 - Business Acquisitions (Continued)

The goodwill is attributable to the acquired workforce and significant synergies. Goodwill is assigned 100% to the hydraulic fracturing operating segment of the Company. The goodwill recognized is deductible for income tax purposes.

The acquired business contributed revenues of $4.9 million and earnings of $0.7 million to the Company for the period from May 31, 2024, to June 30, 2024.

The following combined supplemental pro forma information assumes the AquaPropSM Acquisition occurred on January 1, 2023. The supplemental pro forma information presented below is for illustrative purposes only and does not reflect future events that occurred after June 30, 2024 or any operating efficiencies or inefficiencies that may result from the AquaPropSM Acquisition. The information is not necessarily indicative of results that would have been achieved had the Company controlled AquaPropSM during the periods presented.


(unaudited, in thousands)
	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue	$	372,725	$	436,939	$	805,354	$	860,722
Net (loss) income	(308)		39,612		27,054		67,216

For the three and six months ended June 30, 2024, the Company incurred $1.1 million of acquisition-related costs. These expenses are included in general and administrative expenses on the Company’s condensed consolidated statement of operations.

Par Five Acquisition

On December 1, 2023, the Company completed the acquisition of certain assets and certain liabilities of Par Five Energy Services LLC ("Par Five"), an oilfield service company based in Artesia, New Mexico that provides cementing and remediation services across the Permian Basin in Texas and New Mexico (the "Par Five Acquisition"). As a result of the Par Five Acquisition, the Company expanded its operations in the cementing service business unit.

The following table summarizes the consideration transferred to Par Five and the recognized amounts of identified assets acquired and liabilities assumed at the acquisition date:


(in thousands)
Total purchase consideration:
Cash	$	22,215
Deferred cash consideration	2,956
Total consideration	$	25,171


(in thousands)
Recognized amounts of assets acquired and liabilities assumed:
Accounts receivable	$	8,488
Inventory	321
Property, plant and equipment	17,175
Accrued liabilities	(813)
Total net assets acquired	$	25,171

The deferred cash consideration of $3.0 million will be used to cover the amount by which the estimated purchase price exceeds the final purchase price, if any. The unused amount is payable to Par Five or its beneficiary on June 1, 2025 and accrues interest at 4.0% per annum. This obligation is shown within other current liabilities in our condensed consolidated balance sheets. As of June 30, 2024, the outstanding amount for this obligation was $3.0 million.

The fair value of the assets acquired includes account receivables of $8.5 million. The gross amount due under contracts is $8.5 million, of which none is expected to be uncollectible. The Company did not acquire any other class of receivable as a result of

-11-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 - Business Acquisitions (Continued)

the acquisition of Par Five. The Company previously recognized a preliminary estimate of $8.7 million for accounts receivable acquired as part of the Par Five Acquisition. During the three months ended June 30, 2024, the Company made a measurement period adjustment to decrease accounts receivable by $0.2 million to reflect facts and circumstances in existence as of the acquisition date. The impact of this adjustment was a decrease in deferred cash consideration payable.

Note 4 - Fair Value Measurements

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.

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

The fair values of cash, cash equivalents and restricted cash, accounts receivable, accounts payable, accrued and other current liabilities, and long-term debt are estimated to be approximately equivalent to carrying amounts as of June 30, 2024 and December 31, 2023 and have been excluded from the table below.

Assets and liabilities measured at fair value on a recurring basis 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)
June 30, 2024:
Short-term investment	$	7,797	$	7,797	$	—	$	—	$	52
Business acquisition contingent consideration payable	$	10,900	$	—	$	—	$	10,900	$	—
December 31, 2023:
Short-term investment	$	7,745	$	7,745	$	—	$	—	$	(2,538)

-12-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 4 - Fair Value Measurements (Continued)

Short-term investment— On September 1, 2022, the Company received 2.6 million common shares of STEP Energy Services Ltd. ("STEP") with an estimated fair value of $11.8 million as part of the consideration for the sale of our coiled tubing assets to STEP. The shares were treated as an investment in equity securities measured at fair value using Level 1 inputs based on observable prices on the Toronto Stock Exchange and are shown under current assets in our condensed consolidated balance sheets. As of June 30, 2024, the fair value of the short-term investment was estimated at $7.8 million. The fluctuation in stock price resulted in an unrealized gain of $0.7 million and $0.1 million for the three and six months ended June 30, 2024, respectively. There was no unrealized gain or loss resulting from non-cash foreign currency translation during the three months ended June 30, 2024. Included in the unrealized gain for the six months ended June 30, 2024 was a loss of $0.2 million resulting from non-cash foreign currency translation. The fluctuation in stock price resulted in an unrealized loss of $0.1 million and $3.8 million for the three and six months ended June 30, 2023, respectively. Included in the unrealized loss was a gain of $0.1 million resulting from non-cash foreign currency translation during the three and six months ended June 30, 2023. The unrealized loss resulting from stock price fluctuation and the unrealized loss resulting from non-cash foreign currency translation are included in other income (expense) in our condensed consolidated statements of operations. The Company is restricted from selling, transferring or assigning more than 0.9 million shares in any one calendar month.

Business acquisition contingent consideration payable— On May 31, 2024, the Company completed the acquisition of all of the outstanding equity interests in AquaPropSM in exchange for $13.7 million of cash, $4.2 million of deferred cash consideration payable to AquaPropSM's seller by May 31, 2025, the payoff of $7.2 million of assumed debt, the payment of $0.3 million of certain transaction costs and estimated contingent consideration of $10.9 million. The contingent consideration payable was measured at fair value using Level 3 inputs based on the probability-weighted expected return method. The fair value of the contingent consideration payable is remeasured at the end of each reporting period. Any change in the fair value of the contingent consideration payable will be included in other income (expense) in our condensed consolidated statements of operations. As of June 30, 2024, the fair value of the contingent consideration payable was estimated at $10.9 million. There was no adjustment to the contingent consideration payable between May 31, 2024 and June 30, 2024.

Assets Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These items are not measured at fair value on an ongoing basis but may be subject to fair value adjustments in certain circumstances. These assets and liabilities include those acquired through the AquaPropSM and Par Five Acquisitions, which are required to be measured at fair value on the acquisition date according to the FASB ASC Topic 805, Business Combinations.

Whenever events or circumstances indicate that the carrying value of long-lived assets may not be recoverable, the Company reviews the carrying values 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 expense is recorded in the period. No impairment of property and equipment was recorded during the six months ended June 30, 2024 and 2023.

During the three and six months ended June 30, 2024, we added $3.1 million of goodwill to our hydraulic fracturing operating segment related to the acquisition of AquaPropSM. There were no additions to goodwill during the three and six months ended June 30, 2023. At June 30, 2024, our hydraulic fracturing operating segment and our wireline operating segment included goodwill amounting to $3.1 million and $23.6 million, respectively. The wireline operating segment was the only segment with goodwill at December 31, 2023. There were no goodwill impairment losses during the six months ended June 30, 2024 and 2023, respectively. We conducted our annual impairment test of goodwill in accordance with ASC 350, Intangibles—Goodwill and Other, as of December 31, 2023 and determined that no impairment to the carrying value of goodwill for our reporting unit (wireline operating segment) was required.

Note 5 - Intangible Assets

Intangible assets consist of customer relationships and trademark/trade names. Customer relationships are amortized on a straight‑line basis over useful lives of six and ten years. Trademark/trade names are amortized on a straight‑line basis over useful lives of ten and fifteen years. Amortization expense included in net (loss) income for the three and six months ended June 30, 2024 was $1.8 million and $3.2 million, respectively. Amortization expense included in net income for the three and six months ended June 30, 2023 was $1.4 million and $2.9 million, respectively. The Company’s intangible assets subject to amortization consisted of the following:

-13-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(in thousands)
	June 30, 2024		December 31, 2023
Intangible assets:
Trademark/trade names	$	12,100	$	10,800
Customer relationships	65,100		46,500
Total intangible assets	77,200		57,300

Accumulated amortization:
Trademark/trade name	(1,807)		(1,260)
Customer relationships	(8,009)		(5,425)
Total accumulated amortization	(9,816)		(6,685)

Intangible assets — net	$	67,384	$	50,615

Estimated remaining amortization expense for each of the subsequent fiscal years is expected to be as follows:


(in thousands)
Year	Estimated future amortization expense
2024	$	4,458
2025	8,917
2026	8,917
2027	8,917
2028 and beyond	36,175
Total	$	67,384

The average amortization period for our remaining intangible assets is approximately 7.8 years.

Note 6 - Long-Term Debt

Asset-Based Loan Credit Facility

Our revolving credit facility, as amended and restated in April 2022, prior to giving effect to the amendment to the revolving credit facility in June 2023, had a total borrowing capacity of $150.0 million. The revolving credit facility had a borrowing base of 85% to 90%, depending on the credit ratings of our accounts receivable counterparties, of monthly eligible accounts receivable less customary reserves. The revolving credit facility included a springing fixed charge coverage ratio to apply when excess availability was less than the greater of (i) 10% of the lesser of the facility size or the borrowing base or (ii) $10.0 million. Under the revolving credit facility we were 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.

Effective June 2, 2023, the Company entered into an amendment to its amended and restated revolving credit facility. The amendment increased the borrowing capacity under the revolving credit facility to $225.0 million (subject to the Borrowing Base (as defined below) limit), and extended the maturity date to June 2, 2028.

Effective June 26, 2024, the Company entered into an amendment to its amended and restated revolving credit facility (the revolving credit facility, as amended and restated in April 2022, as amended in June 2023, as amended in June 2024 and as may be amended further, "ABL Credit Facility"). The amendment increased the amount of non-cash consideration that may be considered cash pursuant to certain permitted dispositions. The ABL Credit Facility has a borrowing base of the sum of 85% to

-14-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 6 - Long-Term Debt (Continued)

90% of monthly eligible accounts receivable and 80% of eligible unbilled accounts (up to a maximum of 25% of the borrowing base), in each case, depending on the credit ratings of our accounts receivable counterparties, less customary reserves (the "Borrowing Base"), as redetermined monthly. The Borrowing Base as of June 30, 2024, was approximately $129.4 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) $15.0 million. Under the ABL Credit 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 or 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 the Secured Overnight Financing Rate ("SOFR") or the base rate, plus the applicable margin, which ranges from 1.75% to 2.25% for SOFR loans and 0.75% to 1.25% for base rate loans. For the three months ended June 30, 2024, the weighted average interest rate on our outstanding borrowings under the ABL Credit Facility was 7.19%.

The loan origination costs relating to the ABL Credit Facility are classified as an asset in the condensed consolidated balance sheets. As of June 30, 2024 and December 31, 2023, we had borrowings outstanding under our ABL Credit Facility of $45.0 million and $45.0 million, respectively. After borrowings outstanding and letters of credit of approximately $6.0 million under the ABL Credit Facility, we had approximately $78.4 million available for borrowing under our ABL Credit Facility as of June 30, 2024.

Note 7 - Reportable Segment Information

The Company currently has three operating segments for which discrete financial information is readily available: hydraulic fracturing (inclusive of acidizing), wireline and cementing. These operating segments represent how the CODM evaluates performance and allocates resources.

Prior to the fourth quarter of fiscal year 2023, our operating segments met the aggregation criteria in accordance with ASC 280—Segment Reporting and were aggregated into the “Completion Services” reportable segment. Effective as of the fourth quarter of fiscal year 2023, we revised our segment reporting as we determined that our three operating segments no longer met the criteria to be aggregated. Our Hydraulic Fracturing and Wireline operating segments meet the criteria of a reportable segment. Our cementing segment does not meet the reportable segment criteria and is included within the “All Other” category. Additionally, our corporate administrative activities do not involve business activities from which it may earn revenues and its results are not regularly reviewed by the Company’s CODM when making key operating and resource decisions. As a result, corporate administrative expenses and inter-segment revenue have been included under “Reconciling Items.” Prior period segment information has been revised to conform to our current presentation.

The Company manages and assesses the performance of the reportable segment by its adjusted EBITDA (earnings before interest expense, income taxes, depreciation and amortization, stock-based compensation expense, other income or expense, gain or loss on disposal of assets and other unusual or nonrecurring expenses or income such as impairment charges, retention bonuses, severance, costs related to asset acquisitions, insurance recoveries, one-time professional fees and legal settlements).

-15-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7 - Reportable Segment Information (Continued)

The following tables set forth certain financial information with respect to the Company’s reportable segments; inter-segment revenues are shown under "Reconciling Items" (in thousands):


	Three Months Ended June 30, 2024
	Hydraulic Fracturing		Wireline		All Other		Reconciling Items		Total
Service revenue	$	271,628	$	49,202	$	36,277	$	(86)	$	357,021
Adjusted EBITDA for reportable segments	$	63,623	$	10,793	$	6,583	$	—	$	80,999
Depreciation and amortization	$	50,082	$	5,129	$	2,279	$	32	$	57,522
Capital expenditures incurred	$	25,631	$	1,943	$	4,376	$	—	$	31,950
Goodwill	$	3,130	$	23,624	$	—	$	—	$	26,754
Total assets June 30, 2024	$	1,191,335	$	198,985	$	72,124	$	49,883	$	1,512,327


	Three Months Ended June 30, 2023
	Hydraulic Fracturing		Wireline		All Other		Reconciling Items		Total
Service revenue	$	343,545	$	63,846	$	27,858	$	—	$	435,249
Adjusted EBITDA for reportable segments	$	100,281	$	18,326	$	6,522	$	—	$	125,129
Depreciation and amortization (1)	$	35,077	$	4,593	$	1,381	$	67	$	41,118
Capital expenditures incurred	$	108,564	$	4,366	$	2,303	$	—	$	115,233
Goodwill	$	—	$	23,624	$	—	$	—	$	23,624
Total assets at December 31, 2023	$	1,189,526	$	198,957	$	78,475	$	13,354	$	1,480,312


	Six Months Ended June 30, 2024
	Hydraulic Fracturing		Wireline		All Other		Reconciling Items		Total
Service revenue	$	580,928	$	110,007	$	72,015	$	(86)	$	762,864
Adjusted EBITDA for reportable segments	$	149,742	$	27,579	$	11,444	$	—	$	188,765
Depreciation and amortization	$	95,076	$	10,044	$	4,550	$	58	$	109,728
Capital expenditures incurred	$	61,619	$	4,329	$	5,842	$	—	$	71,790
Goodwill	$	3,130	$	23,624	$	—	$	—	$	26,754
Total assets at June 30, 2024	$	1,191,335	$	198,985	$	72,124	$	49,883	$	1,512,327


	Six Months Ended June 30, 2023
	Hydraulic Fracturing		Wireline		All Other		Reconciling Items		Total
Service revenue	$	677,986	$	126,407	$	54,426	$	—	$	858,819
Adjusted EBITDA for reportable segments	$	208,862	$	36,656	$	10,486	$	—	$	256,004
Depreciation and amortization (1)	$	67,489	$	9,001	$	2,741	$	158	$	79,389
Capital expenditures incurred	$	203,637	$	5,399	$	3,367	$	—	$	212,403
Goodwill	$	—	$	23,624	$	—	$	—	$	23,624
Total assets at December 31, 2023	$	1,189,526	$	198,957	$	78,475	$	13,354	$	1,480,312

(1)The write-offs of remaining book value of prematurely failed power ends are recorded as loss on disposal of assets in 2024. In order to conform to current period presentation, we have reclassified the corresponding amounts of $11.8 million and $24.3 million from depreciation to loss on disposal of assets for the three and six months ended June 30, 2023, respectively.

-16-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 7 - Reportable Segment Information (Continued)

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Service Revenue
Hydraulic Fracturing	$	271,628	$	343,545	$	580,928	$	677,986
Wireline	49,202		63,846		110,007		126,407
All Other	36,277		27,858		72,015		54,426
Total service revenue for reportable segments	357,107		435,249		762,950		858,819
Elimination of inter-segment service revenue	(86)		—		(86)		—
Total consolidated service revenue	$	357,021	$	435,249	$	762,864	$	858,819

Adjusted EBITDA
Hydraulic Fracturing	$	63,623	$	100,281	$	149,742	$	208,862
Wireline	10,793		18,326		27,579		36,656
All Other	6,583		6,522		11,444		10,486
Total Adjusted EBITDA for reportable segments	80,999		125,129		188,765		256,004
Unallocated corporate administrative expenses	(14,937)		(12,316)		(29,309)		(24,026)
Depreciation and amortization (1)	(57,522)		(41,118)		(109,728)		(79,389)
Interest expense	(1,965)		(1,180)		(3,994)		(1,847)
Income tax expense	(3,565)		(12,118)		(13,324)		(20,474)
Loss on disposal of assets (1)	(3,277)		(14,836)		(9,735)		(49,443)
Stock-based compensation	(4,618)		(3,758)		(8,360)		(7,294)
Other income (expense), net (2)	2,403		72		3,809		(3,632)
Other general and administrative expense, net	(1,113)		(263)		(1,171)		(1,209)
Retention bonus and severance expense	(65)		(355)		(683)		(700)
Net (loss) income	$	(3,660)	$	39,257	$	16,270	$	67,990

(2)Other income for the three months ended June 30, 2024 is primarily comprised of tax refunds of $1.7 million and a $0.7 million unrealized gain on short-term investment. Other income for the six months ended June 30, 2024 is primarily comprised of insurance reimbursements of $2.0 million, tax refunds of $1.7 million and a $0.1 million unrealized gain on short-term investment. Other expense for the six months ended June 30, 2023 is primarily comprised of a $3.8 million unrealized loss on short-term investment.

Note 8 - Net (Loss) Income Per Share

Basic net (loss) income per common share is computed by dividing the net (loss) income relevant to the common stockholders by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per common share uses the same net (loss) 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 ("PSUs") and restricted stock units ("RSUs") outstanding during the period calculated using the treasury method and the potential dilutive effects of preferred stocks (if any) calculated using the if-converted method.

The table below shows the calculations for the three and six months ended June 30, 2024 and 2023 (in thousands, except for per share data):

-17-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8 - Net Income (Loss) Per Share (Continued)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator (both basic and diluted)
Net (loss) income relevant to common stockholders	$	(3,660)	$	39,257	$	16,270	$	67,990

Denominator
Denominator for basic income per share	106,303		114,737		107,421		114,809
Dilutive effect of stock options	—		—		—		—
Dilutive effect of performance share units	—		—		33		84
Dilutive effect of restricted stock units	—		59		669		209
Denominator for diluted income per share	106,303		114,796		108,123		115,102

Basic (loss) income per common share	$	(0.03)	$	0.34	$	0.15	$	0.59
Diluted (loss) income per common share	$	(0.03)	$	0.34	$	0.15	$	0.59

As shown in the table below, the following stock options, RSUs and PSUs have not been included in the calculation of diluted income per common share for the three and six months ended June 30, 2024 and 2023 because they will be anti-dilutive to the calculation of diluted net (loss) income per common share:


(in thousands)	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Stock options	179	341	179	383
Restricted stock units	143	2,007	6	1,317
Performance stock units	—	—	438	—
Total	322	2,348	623	1,700

Note 9 - Share Repurchase Program

On April 24, 2024, the Company's board of directors (the "Board") approved an increase and extension to the share repurchase program previously authorized on May 17, 2023. The program permits the repurchase of up to an additional $100 million of the Company's common stock for a total of $200 million and extends the expiration date by one year to May 31, 2025. The shares may be repurchased from time to time in open market transactions, block trades, accelerated share repurchases, privately negotiated transactions, derivative transactions or otherwise, certain of which may be made pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Exchange Act, in compliance with applicable state and federal securities laws. The timing, as well as the number and value of shares repurchased under the program, will be determined by the Company at its discretion and will depend on a variety of factors, including management's assessment of the intrinsic value of the Company's common stock, the market price of the Company's common stock, general market and economic conditions, available liquidity, compliance with the Company's debt and other agreements, applicable legal requirements, and other considerations. The Company is not obligated to purchase any shares under the repurchase program, and the program may be suspended, modified, or discontinued at any time without prior notice. The Company expects to fund the repurchases using cash on hand and expected free cash flow to be generated through May 2025. The 1% U.S. federal excise tax on certain repurchases of stock by publicly traded U.S. corporations applies to our share repurchase program.

All shares of common stock repurchased under the share repurchase program are canceled and retired upon repurchase. The Company accounts for the purchase price of repurchased shares of common stock in excess of par value ($0.001 per share of common stock) as a reduction of additional-paid-in capital, and will continue to do so until additional paid-in-capital is reduced to zero. Thereafter, any excess purchase price will be recorded as a reduction of retained earnings. During the three months ended June 30, 2024, the Company paid an aggregate of $23.0 million, an average price per share of $9.07 including

-18-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9 - Share Repurchase Program (Continued)

commissions, for share repurchases under the share repurchase program. The Company has accrued $0.9 million in respect of the repurchase excise tax as of June 30, 2024. As of June 30, 2024, $102.8 million remained authorized for future repurchases of common stock under the repurchase program.

Note 10 - Stock-Based Compensation

Stock Options

There were no new stock option grants during the six months ended June 30, 2024. As of June 30, 2024, there was no aggregate intrinsic value for our outstanding or exercisable stock options because the closing stock price as of June 30, 2024 was below the cost to exercise these options. No stock options were exercised during the six months ended June 30, 2024. The weighted average remaining contractual term for the outstanding and exercisable stock options as of June 30, 2024 was approximately 2.7 years.

A summary of the stock option activity for the six months ended June 30, 2024 is presented below (in thousands, except for weighted average price):


	Number of Shares	Weighted Average Exercise Price
Outstanding at January 1, 2024	180	$	14.00
Granted	—	$	—
Exercised	—	$	—
Forfeited	—	$	—
Expired	(1)	$	14.00
Outstanding at June 30, 2024	179	$	14.00
Exercisable at June 30, 2024	179	$	14.00

Restricted Stock Units

On May 11, 2023, the Company's stockholders approved the Amended and Restated ProPetro Holding Corp. 2020 Long Term Incentive Plan (the "A&R 2020 Incentive Plan"), which had been previously approved by the Board and replaced the ProPetro Holding Corp. 2020 Long Term Incentive Plan.

During the six months ended June 30, 2024, we granted 1,762,177 RSUs to employees, officers and directors pursuant to the A&R 2020 Incentive Plan, which generally vest ratably over a three-year vesting period or a two-year period at one-third after first year anniversary and two-thirds after the second year anniversary, in the case of awards to employees and officers, and generally vest in full after one year, in the case of awards to directors. RSUs are subject to restrictions on transfer and are generally subject to a risk of forfeiture if the award recipient ceases to be an employee or director of the Company prior to vesting of the award. Each RSU represents the right to receive one share of common stock. The grant date fair value of the RSUs is based on the closing share price of our common stock on the date of grant. As of June 30, 2024, the total unrecognized compensation expense for all RSUs was approximately $22.7 million, and is expected to be recognized over a weighted average period of approximately 2.0 years.

-19-

PROPETRO HOLDING CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 10 - Stock-Based Compensation (Continued)

The following table summarizes RSUs activity during the six months ended June 30, 2024 (in thousands, except for fair value):


	Number of Shares	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2024	2,264	$	9.81
Granted	1,762	$	7.42
Vested	(696)	$	9.65
Forfeited	(18)	$	8.78
Canceled	—	$	—
Outstanding at June 30, 2024	3,312	$	8.58

Performance Share Units

During the six months ended June 30, 2024, we granted 637,266 PSUs to certain key employees and officers as new awards under the A&R 2020 Incentive Plan. Each PSU earned represents the right to receive either one share of common stock or, as determined by the A&R 2020 Incentive Plan administrator in its sole discretion, a cash amount equal to fair market value of one share of common stock or amount of cash on the day immediately preceding the settlement date. The actual number of shares of common stock that may be issued under the PSUs ranges from 0% up to a maximum of 200% of the target number of PSUs granted to the participant, based on our total shareholder return ("TSR") relative to a designated peer group, generally at the end of a three year period. In addition to the TSR conditions, vesting of the PSUs is generally subject to the recipient’s continued employment through the end of the applicable performance period. Compensation expense is recorded ratably over the corresponding requisite service period. The grant date fair value of PSUs is determined using a Monte Carlo simulation. Grant recipients do not have any shareholder rights until performance relative to the peer group has been determined following the completion of the performance period and shares have been issued.

The following table summarizes information about PSUs activity during the six months ended June 30, 2024 (in thousands, except for weighted average fair value):


Period Granted	Target Shares Outstanding at January 1, 2024	Target Shares Granted	Target Shares Vested	Target Shares Forfeited	Target Shares Outstanding at June 30, 2024
2021	620	—	—	(620)	—
2022	306	—	—	—	306
2023	438	—	—	—	438
2024	—	637	—	—	637
Total	1,364	637	—	(620)	1,381
Weighted Average Fair Value Per Share	$

Form: 10-Q

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