Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ProPetro Holding Corp (PUMP, Financial) demonstrated resilience and effectiveness in its strategy despite a softer market environment.
- The company generated strong free cash flow, with a fifth consecutive quarter of impressive free cash flow, achieving $48 million.
- ProPetro Holding Corp (PUMP) successfully deployed its third force electric frac fleet and has plans for further expansion.
- The company completed the acquisition of Aqua, enhancing its innovation and integration capabilities.
- ProPetro Holding Corp (PUMP) has a strong balance sheet and liquidity, with total liquidity at the end of the quarter being $145 million.
Negative Points
- Revenues decreased by 12% versus the first quarter to $357 million.
- Net loss was $4 million, and adjusted EBITDA decreased 29% sequentially to $66 million.
- The company experienced unexpected activity disruptions and softness across its conventional diesel equipment and wireline offerings.
- Significant weather impacts in the Permian Basin affected operations during the quarter.
- Pricing pressures were noted in the Tier two diesel assets, making the market more competitive.
Q & A Highlights
Q: Can you provide more detail on the outlook for the second half of the year?
A: We expect a slight bump in Q3 followed by some seasonality in Q4. Activity is expected to remain relatively flat, but profitability should improve. We are confident that Q4 will be strong as well. (Sam Sledge, CEO)
Q: What led to the significant reduction in CapEx guidance?
A: The reduction is due to our transition from conventional equipment to more efficient electric fleets, which require less capital intensity. Additionally, our operations team has extended the life of our equipment, reducing the need for new investments. (David Schorlemer, CFO)
Q: What are the current pricing trends, especially for Tier 2 diesel assets?
A: Pricing remains strong for our next-gen assets like dual fuel and electric fleets. However, there is some pricing pressure in the diesel market due to a few irrational players. We are likely accelerating our transition away from diesel investments. (Sam Sledge, CEO)
Q: When do you expect to be at 100% natural gas-burning fleet?
A: The timeline depends on market demands. If the market remains flat, we might phase out diesel equipment sooner. However, we will likely still be running some diesel fleets next year to earn a return on those assets. (Sam Sledge, CEO)
Q: Can you provide a bridge to third-quarter profitability?
A: We expect Q3 profitability to improve due to better activity and fewer disruptions. Wireline and cementing businesses are also improving, which should contribute positively. (Sam Sledge, CEO; David Schorlemer, CFO)
Q: What is the status of your share repurchase program?
A: We have repurchased approximately 10% of outstanding common shares since May 2023. We will continue to opportunistically execute share repurchases under the increased and extended $200 million repurchase program. (David Schorlemer, CFO)
Q: Are you seeing any challenges in finding power for your new electric fleets?
A: To date, we have not faced significant challenges. We work closely with power providers to ensure we have the necessary resources. However, the supply chain for generators is full, so early decision-making is crucial. (Sam Sledge, CEO)
Q: How are you addressing the demand for CNG infrastructure?
A: We have not made direct investments in CNG infrastructure but are closely monitoring the market. We believe the key is to get gas in the right quality and quantity to the right places. (Sam Sledge, CEO)
Q: What is your target for free cash flow conversion as a percentage of EBITDA?
A: We are targeting a 50%+ EBITDA to free cash flow conversion. Year-to-date, we have exceeded this target, and we aim to maintain this level through our fleet conversion and M&A activities. (David Schorlemer, CFO)
Q: How are you managing the transition from Tier 2 diesel to electric fleets?
A: We are accelerating our transition to electric fleets due to their lower operating and maintenance costs. We are also extending the life of our existing equipment through focused operational improvements. (Sam Sledge, CEO; David Schorlemer, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
