Good day and welcome to the ProPetro Holding Corp. First Quarter 2025 Conference Call. Please note, this event is being recorded. I would now like to turn the call over to Matt Augustine, Director Corporate Development and Investor Relations for ProPetro Holding Corp. Please go ahead.

Thank you and good morning. We appreciate your participation in today's call. With me today are Chief Executive Officer, Sam Sledge, Chief Accounting Officer and Principal Financial Officer, Selena Davila, and President and Chief Operating Officer, Adam Munoz. This morning, we released our earnings results for the first quarter of 2025. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC. Also, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question and answer session. With that, I would like to turn the call over to Sam.

Thanks, Matt. Good morning, everyone. Thanks for joining us today. I'd like to start with an overview of our first quarter performance and some perspective on the current market dynamics. I will then turn it over to Selena Davila, our current Chief Accounting Officer, who is also serving as our Interim Principal Financial Officer until a new Chief Financial Officer is appointed. The first quarter was another great quarter for ProPetro, both operationally and financially. Our performance underscores our commitment to strong execution and demonstrates that our strategy is working and continues to yield solid results. This strength is even more notable in light of recent macroeconomic volatility. In particular, the impact of tariffs and the OPEC+ production increases have placed significant pressure on the energy market and crude oil prices, a dynamic that creates uncertainty for the entire energy value chain. Despite the industry stagnation over the past couple of years, our focus on more capital-efficient asset investments is generating resilient free cash flow, demonstrating the effectiveness of our industrialized model. The investments we have made over the last few years in disciplined M&A, our new Pro Power offering, and our Force Electric fleet transition ensure ProPetro is built to withstand market turbulence and deliver durable returns over time. We've created a strong company with low debt, first-class customers, a focused presence in the leading Permian Basin with hardworking and dedicated teammates, and we are confident that ProPetro will continue to perform in light of volatile market conditions. Demand for our next-generation services remained strong, as it encompasses 75% of our fleet through our Tier 4 DGB dual fuel and electric offerings. We currently operate seven Tier 4 DGB dual fuel fleets with industry-leading diesel displacement, two of which are now recently under long-term contracts. Additionally, we have four Force fleets in the field under long-term contracts, with a fifth Force fleet expected to be deployed under contract this year. In total, we now have six fleets under contract, which represents approximately 50% of our active hydraulic horsepower today. We plan to increase this number as we deploy more Force fleets over the next few years. Accordingly, we intend to continue to transition capital from legacy diesel equipment to Force electric equipment, which is in high demand and securing committed contracts that reduce our future earnings risk. Now to Pro Power. As a reminder, earlier this year, we reported an approximate total of 140 megawatts of mobile natural gas fuel power generation equipment on order. Since then, we have placed additional orders for approximately 80 megawatts of natural gas reciprocating generators, which are expected to be funded from our cash flow. With this, our equipment type is split relatively evenly between turbines and natural gas reciprocating generators. We anticipate full delivery of all ordered Pro Power equipment, approximately 220 megawatts, by midyear 2026. Moreover, we are encouraged by the sustained robust demand for these assets and have secured letters of intent on approximately 75 megawatts of long-term Pro Power service capacity with two separate operators in the Permian Basin to support their infield power needs, with final contract execution expected soon. We are encouraged by these early results but believe this is truly just the beginning for Pro Power. We've made significant progress in obtaining additional customer commitments and are actively negotiating long-term contracts beyond what we have announced today. We believe the demand for reliable, low-emission power solutions is vast and increasing, and we are positioning Pro Power to capitalize on this high-growth vertical. Now, I mentioned this earlier, but I want to touch on it once again given today's macro trends. We believe in a dynamic capital allocation strategy that allows us to pursue growth through M&A, our Pro Power offering, and our Force Electric fleet transition, all of which drive opportunities for shareholder returns. We expect to continue to execute on all of these moving forward. I'd like to underscore the fact that our financial improvements over the past two years are a result of the execution of this very strategy. Selena will review our first quarter results shortly, but I would like to highlight a few things. As I shared at the beginning of the call, despite market headwinds, we generated strong free cash flow as well as solid adjusted EBITDA and lower than expected capital expenditures relative to guidance. This is due to a variety of factors, including our higher utilization across all segments, stabilization of pricing, effective cost controls, operational excellence, and record efficiency. In addition to strong operational performance, we are benefiting from the resilience of our offering as both our Tier 4 DGB dual fuel and electric equipment remain highly utilized. Finally, in terms of our outlook and how our strategy will support us through current market uncertainty, we recognize that the near-term outlook is unclear due to the recent decline in oil prices influenced by tariffs and OPEC+ production increases. Along with our disciplined asset deployment strategy, we anticipate operating approximately between thirteen and fourteen fleets in the second quarter, a reduction from the 14 to 15 fleets we ran throughout the first quarter. I want to make it abundantly clear that we are committed to maintaining the health of our fleet and will not compromise it by operating assets at sub-economic levels. Our primary focus is on preserving our assets to be well-positioned once the broader market stabilizes and the cycle turns back around. That said, for all the reasons I've highlighted throughout these remarks, ProPetro's low debt, premier customer base, Permian focus, long-term service contracts, and flexible capital allocation program that safeguards free cash flow generation, along with the earnings growth potential of Pro Power, we are confident we will continue to maximize long-term value for our shareholders. With that, I'll turn it over to Selena to discuss our financial results.

Thanks, Sam, and good morning, everyone. I am pleased to be here. As you have just heard, we continue to advance our strategy in the first quarter of 2025, and in doing so, generated substantial free cash flow. In terms of results, financial performance for the quarter was strong and supported by our differentiated service offering, our loyal customer base, our Permian focus, and our operational excellence. ProPetro generated total revenue of $359 million, an increase of 12% as compared to the prior quarter. Net income totaled $10 million or $0.09 per diluted share, compared to a net loss of $17 million or $0.17 per diluted share for the fourth quarter of 2024. Net income for the first quarter of 2025 included a net loss on disposal of assets of $10 million, primarily related to the sale of certain Tier 2 hydraulic equipment. Adjusted EBITDA totaled $73 million, which was 20% of revenue and an increase of 38% as compared to the prior quarter. Additionally, we incurred a lease expense related to our electric fleet of $15 million for the quarter. Net cash provided by operating activities and free cash flow were $55 million and $22 million, respectively. Capital expenditures incurred for the first quarter were $39 million, most of which related to maintenance and our initial Pro Power orders. Net cash used in investing activities as shown on the statement of cash flows was $33 million for this quarter. We have demonstrated in the last few quarters that our lower CapEx is a strong tailwind for free cash flow generation. That rings true today and is a testament to our fleet transition and the industrialization of our business segments. As you are aware, we have already made significant investments in our assets and capabilities, and those investments are bearing fruit. In terms of CapEx guidance, we will continue to evaluate the market and scale CapEx with activity realizations. But as we sit here today, we anticipate our full year 2025 CapEx to be between $295 million and $345 million, down from the $300 million to $400 million of CapEx we discussed last quarter. This represents a 9% reduction at the midpoint from our prior guidance. Of this, the completion business is expected to account for $125 million to $175 million, a reduction from the original guidance, thanks to additional successful cost optimization efforts. Additionally, the company plans to allocate $170 million in 2025 and $60 million in 2026 to support current Pro Power equipment orders that Sam mentioned. As a reminder, $104 million of the Pro Power CapEx is financed. Importantly, cash and liquidity remain strong, which is very important in today's uncertain market. As of 03/31/2025, total cash was $63 million and our borrowings under the ABL credit facility were $45 million. Total liquidity at the end of the first quarter of 2025 was $197 million, including the cash, and $134 million of available capacity under the ABL credit facility. As for our share repurchase program, we have retired approximately 13 million shares, representing approximately 11% of our outstanding common stock since the inception of the program in May of 2023. We view share repurchases as an important part of our strategy, our conviction in the future of the company while creating value for shareholders. And it is a key pillar of our value proposition for investors. As such, we intend to extend the program for another year, subject to approval by the Board of Directors, to enable us to continue to be opportunistic in deploying excess cash flow to share repurchases. Finally, as we have underscored several times already, ProPetro's capital allocation strategy is balanced and key to maintaining flexibility and navigating uncertain conditions. Looking forward, we will remain focused on balancing investments between share repurchases, Force Electric fleet conversion, disciplined M&A, and Pro Power investments while maintaining a strong balance sheet and liquidity profile. We are fortunate to have a strong financial profile and free cash flow to pursue all these value-enhancing opportunities simultaneously. With that, Sam, back over to you.

Thanks, Selena. In closing, we believe ProPetro is a resilient company that is built to withstand market volatility and thrive over the long term. We're prepared for the uncertain market that lies ahead and are confident in our ability to execute because we have built a business that has proven profitable through various market cycles. Our investments in disciplined M&A, the Force Electric fleet conversion, and our Pro Power offering position our company for sustainable growth and success. And our low debt, blue-chip customers, contracted assets, and Permian Basin focus will all help us to keep moving forward even in the face of significant market volatility. I'm very proud of the work our team did to generate the strong performance in the first quarter. We have significant momentum that I am confident we will continue to build on. None of this would be possible without our ProPetro teammates, whose efforts and dedication to operating safely and responsibly give me and our management team that much more confidence in our ability to lead the company through this dynamic environment. Thank you for everything you do. With that, operator, we'd now like to open the call to questions.

Yes. Thank you. We will now begin the question and answer session. Anytime your question has been addressed and you would like to withdraw it, at this time, we will pause momentarily to assemble the roster. And the first question comes from John Daniel with Daniel Energy Partners.

Hey guys, thank you for including me. Sam, I've got two questions this morning. One is on power and one is on the traditional frac business. I'll start with power. The opportunities that you're seeing at Pro Power, I mean, you all are a Permian Basin company. Are you limiting or sounds not the right way to say it. Are you focused entirely on the Permian for the power side as well? Are you guys looking at opportunities outside the basin and just could you distinguish the opportunities that's both inside the basin, outside the basin?

Yeah, John. Good morning. Great question. I think originally when we set out to, you know, design the strategy for our Pro Power business, it was going to be very, very focused just on Permian oil and gas operations. It's still very much is so with these first two deals that we are, you know, very close to having contracts on. It's gonna be just that. Those are deals to support production operations. That said, the longer we're in the market, the more we see across different geographies and different industries. Part of our thesis was to get in the supply chain and to acquire power generators, gen to acquire power capacity that we know was gonna be needed just in this increasing demand environment that we see ourselves in. So I think our strategy and thesis is playing out that we're going to build a really strong foundation on Permian oil and gas, something we know very well, customers we know very well. But this is very soon going to create a platform that's gonna be able to service other potentially other areas and other industries. So, yes, we've sought some of those opportunities out ourselves. Some of those have come in the door unsolicitedly and we'll continue to hold an open ear to opportunities, you know, that are outside of oil and gas. All the meanwhile, we've got a very distinct focus plan to attack the Permian oil and gas operations. Pretty exciting but we know that to get this business off the ground and for it to hold true to what we're known for from an operational excellence standpoint, that these first couple of steps we need to stick to what we know.

Okay. Well, thank you for that. The second one is just on the traditional frac business. And recognizing a lot's in flux right now, and there's no shortage of uncertainty. But when you look at going from the 14 to 15 fleets down to say 13 to 14, is that a function of a customer reducing activity? Is that a or you choosing to walk away from you know, lower prices or just the consequence of continued efficiency gains. Just a little bit of color around the change would be appreciated.

Yeah. The simple answer is it's a little bit of both, John. As you and I both know, we all know that when oil prices take an aggressive dip, like it did after the OPEC and tariff announcements, you know, the customers maybe that have the most flexibility or the most hindered economics are some of the first ones you hear from. And you know, it's really thankfully been a very, very small part of our customer portfolio that we've had those inbound calls from. You know, the almost half of our frac capacity as we stated in the press release and in the scripted remarks is under what we call long-term contracts, contracts more than a year. So you call it the traditional frac business, and it is, but 75% of our capacity is burning natural gas is what we call next-generation equipment and almost all of that equipment is garnering long-term contracts and we think those are going to be very valuable and useful. Any market volatility or downside fluctuations and that's proving out as we sit here today.

Okay. Alright. That's all I got for now. I'll let others jump in. Thank you very much.

Thanks, Todd.

Thank you. And the next question comes from Alex Schielehofer with Stifel.

Hi, good morning everyone and thanks for taking my question.

Good morning.

Yes. So just to kick us off, following up on that last question there. I just want to maybe put a finer point on what you're seeing in terms of pricing for pressure pumping equipment in the market. Think you said about 50% of your active horsepower is contracted. Just curious to provide some context on like what spot versus contract is doing? And exiting 24 and exiting the first quarter. And naturally, I just assume that there's some benefits from your higher quality assets or newer assets. Just any color there would be appreciated.

Yeah, I'd say the benefits from the newer and high-quality assets namely, I'll point out our Force Electric offering. Efficiencies and economics, on those fleets continue to be very, very attractive and valuable for us. And as it pertains to pricing in the contracted market, I'd say it's very steady. When you're having those, you know, contracted fleet discussions, it's with a certain type of E&P, one that has a very long view of the future that's trying to create a lot of consistency, continuity, operationally and financially in kind of their approach to executing on their acreage. So we still feel very confident about our thesis to continue to evolve into more electric, more dual fuel fleet over time. As a portion of our portfolio because that market seems very sturdy from a pricing standpoint. It's also very sturdy from an activity standpoint. I mean, these are customers where the plan is the plan and, you know, a $5 dip or a $10 dip in oil prices out of nowhere we've seen here just recently, doesn't really make them blink. They just kind of continue on with their plan. On the other side of the market, you know, call it, diesel or spot, those aren't the same thing, but those markets overlap quite a bit. There's just a lot of it's very fluid right now. And so you're seeing a lot of price discipline, but you're seeing some very, very small areas where you know, there are some people willing to price enough under us where we would be willing to turn the work away. So we're seeing that happen on the fringes and you know, for a company like us that has the balance sheet that we do, and the scale and density that we do, when that happens, we're happy to allow that to happen. Many times because pricing that's significantly below where we are say, in the diesel or spot market is extremely unsustainable. You know, it's not uncommon to see competitors pricing in negative free cash flow. So from a consolidation standpoint, we're happy for that to be consolidation via attrition when those parts of the market are willing to go that low. Really, as we sit here today, I think it's very important for anybody especially if you're new to the space listening to this call or maybe you're coming back from a hiatus, that part of the market, which is diesel and spot, is a very small part of the market as compared to prior cycles. You might only, in the Permian Basin you might only be talking about twenty-ish percent of the market that is playing in that game. So it's changed quite a bit from both an equipment makeup and kind of a contracted dedicated situation. That's why we're making it clear, you know, calling out that 75% of our fleet is burning natural gas and 50% of our fleet is contracted. Almost 100% of our fleet is on dedicated agreements that's not contracted. So yes, can give you some fringe commentary. We're talking about a very small part of the market here today.

Got it. Appreciate it. That's excellent color there. And then kind of shifting gears a little bit here. I know you touched on this during the prepared remarks. But just maybe added color on your capital allocation framework when you're thinking about funding the power business versus buybacks? And any opportunities to maybe finance some of the spending like on the initial 110 megawatts with the incremental 80 or how you're thinking about that?

Sure. Yeah. We're I think we're really proud of what we've been able to do. From a capital allocation standpoint. Over the last couple of years, you've quite literally seen us do all the above without ever putting our balance sheet in question. At the top of the stack today, and hopefully this comes through clear in our communications is our power business and our Force Electric offering. Probably the main reason why those go to the top of the stack today is because of how known the returns are. With those things. In large part due to the contracts that we're able to obtain and the take-or-pay nature of those contracts. When you're making, when investing a dollar into one of those types of equipment or opportunities, you know, you're all but guaranteed at least in an oilfield services sense, you're all but guaranteed. A specific return that is very attractive and frankly transformational for a business like ours. And then maybe go one layer deeper on what we're seeing here recently. On the power side and the contracts that we're obtaining, there's one of these contracts that's as long as ten years. I can almost call them data center-like. So we're not just flippantly saying these contracts are good. They're like I said, they're transformational if we can continue to execute on that model in a large way and we think we can. The other capital allocation opportunities, look, you've seen us do M&A three bolt-on deals in the last couple of years. You've seen us buy back more than 10% of our market cap. Over the last say eighteen months or so. We've also kind of in the background continued to allocate capital to our smaller business lines like wireline and cementing that are two very well-positioned competitive businesses that have high free cash flow conversion. So that's, I mean that's quite literally five different categories that I just mentioned to you from a capital allocation standpoint, power, e-fleets, M&A, wirelines, cement, and buybacks and shareholder returns. And we will keep our optionality open to do all of those things moving forward. We have a framework that we move opportunities through that help us make that decision. But as we sit here today, the forces that exist in the market we really like the power and the e-fleet opportunities. All the meanwhile, we're going to allocate capital in a manner that also protects our balance sheet.

Got it. Got it. Appreciate the color there. And I'll turn it back. Congrats on the quarter.

Thanks.

Thank you. And the next question comes from Waqar Syed with ATV Capital Markets.

Thank you for taking my question. Good morning. Sam, given where commodity prices are today, how many crews do you expect to be working in by, let's say, June in the Permian versus where they are maybe today or where they were a month ago.

Yeah. I think June, Waqar will probably the for the Permian, is that your question of the Permian in general?

Right. Yeah.

I think you'll see a downtick in June. I don't think you've seen much come off in total yet here since you know, the tariff and the OPEC announcements. But I think you might see a little bit come off in June. Part of our fleet guidance being down kind of one whole fleet at the midpoint is us looking at June saying, Matt, there could be a little bit of activity come out of the system. For us in June. You might, this summer, be headed into a setup where the Permian's run 75 to 85 fleets. Something like that. So yeah.

So 75, 85 just to is it versus hundred today?

You're probably not running a hundred today. You might be closer to 85 to 90 today.

Yeah. Okay. Alright. So about 10 fleets or so come out. Now, just to be clear, so today, you're still working around 14, 15 fleets, correct?

Correct. Yeah. Of which I think I think interesting I think another thing interesting to note from an activity standpoint with cars that, you know, headed into May, we'll be running four single frac fleets. As well. So that's know we've traditionally given fleet guidance and things like that, but you know, in the background is some of these fleets are twice the size of a say a normal traditional fleet. Know that might create a lot of noise when you're trying to fine-tune a model. But these fleets on average continue to grow in size. I think that's not only true for us. I think that's true for the entire industry.

Okay. So, you know, your guidance regarding crews, that is being down. It's just an expectation. That come June, you don't have any know, any request from a customer of, you know, to release the rig?

Yeah. There's just some one or two very small spots where we're getting some pricing pressure. That we're probably not going to be willing to meet on the low side. So we're right now expecting to pull at least one fleet out of the mix in June if kind of the broader circumstances don't change from a macro standpoint.

Okay. Secondly, on your CapEx cuts for on the pumping side, is that mostly related to one fleet lower? Or you mentioned optimization. Is that optimization benefit mostly on the e-fleet side? Or are you seeing across the entire fleet, including the Tier 4 DGBs and others?

It's almost all optimization, Waqar. If you go back and look at our last several call scripts and what my team and I have been communicating about, the continued wins on the optimization front, i.e., extending the life of equipment and the large components on that equipment has just been phenomenal. Adam and his team and the work that they've been doing every quarter just seems to continue to surprise to the upside in different ways. So we've continued to issue the challenge to our operations and maintenance teams. And they've continued to raise the bar and knock it out of the park. So there's probably a very small bit of activity in that CapEx guide lower, but I'd say almost all of it is optimization. Matt, do you want to add to that?

Yeah. Waqar, this is Matt. I think you know, point on the activity is really indicative in the range we're providing. On the completion side, the 125 to 175. And that wider range is more an indication of our flexible CapEx program depending on how activity flushes out through the rest of the year.

Okay. Great. And then in terms of your mobile power, you mentioned there's a mix between turbines and reciprocating engines. Why are you deciding between one versus the other? Or is it all the recent orders have been all reciprocating engines and these turbines are mostly the some of the legacy equipment that you have?

No. These are all new. We have a team in our Pro Power leadership team that has vast experience in both. Our initial approach has also been one of flexibility and modularity. You know, we want to be able to open ourselves to many different types of opportunities. You know, these first couple of deals that we announced and communicated today are going to go to oil and gas production operations. But those assets will be usable across more than just that midstream frac industrial applications. That's a big part of our strategy. And then another part is just availability. Right? This is a crowded supply chain. That we're continuing to compete in. And try and carve out our spot in. So, you know, a very small part of this is what you can get your hands on. But what we've been able to get our hands on thus far has been very well fit to our strategy to be able to do many different things. So and we'll we will continue to evolve this portfolio over time. We're simply just getting started and we expect this power business to be a very meaningful part of the overall business moving forward. You know, we'll look to grow from here.

Okay. Great. Well, thank you very much for your answers.

Thanks, Waqar.

Thank you. And the next question comes from Arun Jayaram with JPMorgan.

Hey, Sam. How are you and team? I wanted to see if you could kind of elaborate on your longer-term ambitions on the force newbuilds as we think about capital allocation over the balance of the year and into 2026?

Yes. I think you've always heard us say that we think electric frac is the future. You know, if you just look long, long term, ten, twenty plus years, we fully expect North America shale to continue to industrialize. We think a huge part of that is electrification. So that's been the thesis for years, frankly. That said, you have to be able to carve out the right opportunities in the market. And we did that pretty aggressively with our first four fleets because the fleet market was frankly just growing. Very quickly at that time, and opportunities were vast. I'd say we're kind of starting to trend from growth to maturation in the e-fleet market. The first wave of e-fleets that were built even before ours are, you know, coming off their initial contracts. And you know, many of the largest E&P operators have gotten most of what they need. That doesn't mean that it's still growing. I think it's just growing at a slower rate. Why I say it's kind of trending on maturation. So I think you should look for us to continue to transition into more e-fleets, maybe at a rate of one to two a year in perpetuity. Because we think those opportunities are going to be there. We think it's the right thing to do for our financial returns. And the consistency in those returns. And we'll be very tactical and picky about how we choose to do that and who we choose to do that with. So as we said in our remarks earlier, we've got a fifth coming this year. Another thing that I think is interesting to note, we have four running today, one of which is a 200 barrel a minute charmeral frac. So basically two regular fleets. So however you want to slice and dice it, you could say we have technically a five worth of horsepower working today. You know, going on six, but that's five four real profit centers as it pertains to we're to stay in the market there. Look, I think I think we should expect the existing e-fleets we have, many of them to look to transition to simul in the future too. That's these e-fleets are really built for that type of work. And I think our customers that are running zipper e-fleets are starting to understand that. I think there's an interest to convert many existing e-fleets to Simul as well. So I'm sorry, was a long-winded answer. Hopefully, I answered your question.

No. That was super helpful. You mentioned a couple of LOIs for 75 megawatts of power generation. Can you help us think about what type of returns you're seeing on these types of opportunities? Versus maybe some opportunities you have of reinvesting in the frac side of the business? How the return is looking?

Yeah. So we're executing on exactly what we've said previously that you're looking for, you know, four-year paybacks, if not a little bit better. On those assets, cash on cash paybacks. Which in turn ends up generating, you know, in the ballpark if $300,000 of EBITDA per megawatt per year, that will equate to that four-year payback. Pretty closely. But I so those that that still holds true. We'll keep it pretty tight. You know, we'll hold our cards pretty tight in terms of other parts of those contracts because we think we're doing unique things. The market commercially. But we're super excited about this and the willingness and the openness of the E&Ps to contract with us is definitely there. This is not this is not kind of a new thing that we have to be worried about them taking us up on. This is we're doing things that are frankly right now on the production operations side. In PeaceBase that are just ensuring their operation. In general, while at the same time, we're helping them lower their OpEx. Significantly and lower their emissions significantly. So it's pretty exciting stuff. It's a real win-win opportunity.

Alright, great. Thanks a lot.

This does conclude the question and answer session. I would like to turn the conference back to Sam Sledge for any closing comments.

Thanks, everybody, for tuning in today. Thanks for your interest in the company. We look forward to talking to you again soon. Have a great day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.